I want the timeframe until similar capability is available from my web browser. I'd guess at perhaps 20% in 5 years, 90% in 10. I'm sure significant engineering would have to be performed to maintain performance while downsizing the hardware requirements.
I'd say that the challenge depends on the business model. Making it efficient enough to be profitable as a free web service will be quite tough, so your estimates are probably appropriate. On the other hand, if they can charge $200/month for it, then those estimates are very conservative...
http://blog.reddit.com/2011/02/ibm-watson-research-team-answers-your.html