Thoughts on the Microsoft Nuance Acquisition

When a reporter asked me “Why do you think Microsoft would acquire Nuance?” my initial reaction was “Because they can.” Microsoft has the resources, and it makes sense to invest in an area such as AI and speech recognition.

There are other several reasons why Microsoft acquiring Nuance make sense:

• Staking a claim in AI and speech technology markets at this stage of the game is essential, and Nuance is one of the leaders in this area. Nuance has a mature product, as opposed to a start-up with unproven technology.
• Healthcare is the leading industry when it comes to digital transformation. Microsoft has been investing in the healthcare space and introduced the Microsoft Cloud for Healthcare offering, and acquiring a company that already has relationships with key healthcare providers and plays a vital role in the healthcare ecosystem will help further Microsoft’s efforts.
• Speech recognition is gaining momentum and will be used in every type of industry – from transcription to command-and-control types of applications. As more and more people are comfortable using speech assistants such as Cortana, Siri, Alexa, etc., and interacting with speech recognition systems in their personal lives, we’re also increasingly using speech technologies for work-related purposes. Nuance has market-leading speech technology products that can be used in many verticals.

According to Microsoft CEO Satya Nadella, the main rationale behind the acquisition is to further accelerate Microsoft’s efforts in the healthcare market, but I expect that there’s more to it than that. Healthcare is certainly at the forefront when it comes to digital transformation, and there’s no doubt that Nuance’s technologies will help Microsoft’s efforts in this growing market. With an aging population, finding ways to improve healthcare processes and reduce costs is essential. Healthcare organizations and workers (as well as insurance companies) are continually trying to find ways to reduce costs, which includes reducing the time it takes to do tasks and work processes. Nuance’s speech technologies and transcription tools, including clinical speech recognition software offerings such as Dragon Ambient eXperience, Dragon Medical One and PowerScribe, help healthcare providers be more efficient both during and after patient visits, helping to reduce costs.

Going forward I expect to see much of the Nuance technology used in other industries as well. Nuance’s speech recognition and text-to-speech capabilities have been powering contact center interactions for many years, and the company provides a number of voice-related AI technologies including conversational IVR, speech‑based self-service solutions, and chatbots. Nuance also offers an omni‑channel customer engagement platform to engage customers across a range of channels. While Microsoft is currently only tangentially in the contact center market, I keep expecting this to change. Nuance provides Microsoft with another path to the contact center industry.

While there are many companies and start-ups providing AI and speech technologies, Nuance has been a leader in this area for years. It has the technology, partnerships, customers, and expertise needed to further succeed and grow. Microsoft is one of the few companies with the resources to acquire a company like Nuance, so acquiring Nuance is a logical choice, and prevents a competitor from beating them to the punch. It will be interesting to see how Microsoft leverages Nuance’s technologies and talent base in the coming months.