However, Pochettino has revealed that a deal could still happen and Watson believes that Wanyama would compliment the Saints team perfectly.
"I've seen a lot of him and he's perfect," Watson told the Southern Daily Echo.
"Obviously, I heard that he couldn't agree terms, but he is the perfect player that we actually need at Southampton. He's big, strong, wins the ball, gives it, turns defence into attack and he gets on the end of things from set pieces.
"Having somebody like him in the middle of the park would probably free up Morgan [Schneiderlin] to do a bit more damage in the final third."
Wanyama scored nine goals in 49 appearances for the Bhoys last season.