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Watson
Investment: An estimated $900 million to $1.8 billion

Some famous IBM projects, like the chess-playing Deep Blue computer, are more about showing off what's possible than building a major revenue stream. But then there's Watson, perhaps IBM's most famous -- and expensive -- gamble.

Watson is an under-development computer program that understands normal human language so well that it can successfully play Jeopardy! The show's producers plan to feature Watson on TV soon, possibly as early as this fall.

IBM says this is no Garry Kasparov-beating gimmick. The company believes it has found the true Holy Grail of automated search: a computer that understands everyday human speech, and a system that it can sell to its clients.

"The future of Watson is to get it embedded in IBM's solutions and products to help customers deal effectively with unstructured content," says David Ferrucci, head of the Watson team at IBM.

If Watson can answer complex Jeopardy! questions, then perhaps it could help doctors treat patients, bankers mitigate risk or consumers plan a dinner menu at a grocery store, IBM theorizes.

IBM will not say how much it has spent on Watson and offers no timeline for when Watson-derived technology could be sold to businesses. But Richard Doherty, research director for the Envisioneering Group, which does some consulting for IBM, estimates that the project costs roughly 5% to 10% of IBM's entire $6 billion R&D budget each year. That puts Watson's three-year development price tag at roughly $900 million to $1.8 billion. He believes that Watson systems could start appearing in some businesses as early as next year.

But those buyers would need deep pockets: It takes a $1 million supercomputer simply to run Watson's software, before you even factor in the cost of licensing it.

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Last updated August 26 2010: 12:40 PM ET
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