IBM (IBM.N) said it will invest more than $1 billion to establish a new business unit for Watson, as the tech giant hopes to get more revenue from the supercomputer system that beat humans on the television quiz show "Jeopardy".

The world's largest technology service provider said the IBM Watson Group will be headed by Michael Rhodin, who was previously senior vice president of IBM's software solutions group.

IBM said the investment includes a $100 million equity fund to boost innovation at its Watson Developers Cloud, which it opened up to external application developers last year.

The unit will have about 2,000 employees and will be based in New York City.

Watson, which beat expert "Jeopardy" quiz show contestants in 2011, is an artificial intelligence super computer system named after legendary International Business Machines President Thomas Watson.

Using natural language capabilities and analytics, Watson processes information akin to how people think, allowing it to quickly analyze and interpret large amounts of data.

IBM said it has shrunk Watson to the size of three stacked pizza boxes from its original size of a master bedroom.

Under the Watson Group, IBM will offer the technology, which is delivered over the cloud and can power new consumer and enterprise apps, to businesses and industries as well as to consumers.

IBM said it decided to establish the unit because of strong demand for cognitive computing.

"We have reached the inflection point where the interest is overwhelming and we recognized we need to move faster," said Stephen Gold, vice president of Watson Business.

Watson will be deployed on Softlayer, the cloud computing infrastructure business IBM bought last year.

Jamie Popkin, managing vice president at research firm Gartner, said IBM's technology significantly improved how information can be used and managed.

"I think they've developed something that takes us to the next step where information management needs to go," said Popkin.

According to Gartner, by next year there will likely be a large and growing market for Watson-derived smart advisors and it said that Crédit Agricole predicted that these systems will account for more than 12 percent of IBM's total revenue in 2018.

IBM's full year revenue in 2012 was $104.5 billion.

(Reporting by Nicola Leske in New York and Sruthi Ramakrishnan in Bangalore; Editing by Supriya Kurane)

(Source : Reuters)