McDonald's revealed Wednesday that it's turning to IBM to accelerate growth of its automated voice-ordering technology.
As part of the agreement, IBM will acquire McD Tech Labs, which was formed following the burger chain's 2019 acquisition of Apprente, a leader in voice-based, conversational technology.
McDonald's CEO Chris Kempczinski said IBM's expertise in building customer-care solutions with artificial intelligence and natural language processing will ignite development and scale of the automated order-taking technology. For IBM, the purchase will complement its existing work with Watson, an AI computer system that's used by businesses across financial, health care, telecommunications, and retail sectors.
"Really the reason we're doing this with IBM is to be able to have someone that can take how far we've gotten right now with the solution and be able to finish the development, and then help us deploy this at scale," CFO Kevin Ozan said during the chain's Q3 earnings call. "We're going to use their expertise certainly in AI and everything they've learned from Watson, etc."
The move comes about five months after Kempczinski announced at Alliance Bernstein’s Strategic Decisions conference that McDonald's was testing automated voice-ordering solutions at 10 restaurants in the chain's home base of Chicago. The tech resulted in 85 percent accuracy, and employees only needed to step in roughly 20 percent of the time. Kempczinski cautioned that automated voice-ordering wouldn't be rolled out nationally anytime soon and emphasized the process will require a few more years.
Explaining his philosophy on whether to outsource or insource technology, the CEO said there are times where it makes more sense for McDonald's to acquire tech so that it can accelerate development and tailor the product to its needs. However, he added that at a certain point, the technology reaches a level that requires a partner with better resources and knowledge.
"I think what we did with Apprente is very much consistent with that philosophy, which is we've had it for a couple of years, I've been really pleased with how the team has progressed. The development of that, we're seeing some very encouraging results in the restaurants that we have it," Kempczinski said. "But there is still a lot of work that needs to go into introducing other languages, being able to do it across 14,000 restaurants with all the various menu permutations, etc., and that work is beyond the scale of our core competencies, if you will. And so I think in this case, IBM is a natural partner for us."
Financial details of the sale were not disclosed, although Ozan said there shouldn't be much of a financial impact.
"Maybe about less than 100 people I think were associated with that business, and so those folks will now go work with IBM," the CFO noted. " ... It isn't a big financial statement impact, plus or minus, I'll say, going forward."
The transaction is expected to close in December. Upon closing, the McD Tech Labs team will become part of the IBM Cloud & Cognitive Software division.