The former Saints forward claims the in-demand Celtic midfielder would be an ideal signing for Mauricio Pochettino's side and believes it would help Morgan Schneiderlin blossom
The club have previously had a bid accepted by the Scottish Premier League champions for the Kenya international, only for the deal to fall through on personal terms.
However, with Cardiff's interest in Wanyama apparently ending, Southampton manager Mauricio Pochettino may once again try to lure the 22-year-old to St Mary's.
And ex-forward Watson, who made over 50 appearances for the club in the 1990s, believes he is exactly the type of player his former club needs.
"I've seen a lot of him and he's perfect," he 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, who scored six goals in 31 appearances in the SPL last season, may still make the move to the south coast according to Pochettino.
"It could happen," the Argentine said. "We have certain positions that we want to reinforce. I'm confident our goals will be met."