Earlier this week, Microsoft announced its intent to acquire Nuance for $19.7 billion in its second-largest acquisition after LinkedIn. For the past 15 years, Nuance has been the largest independent speech recognition vendor servicing healthcare and enterprise customer service markets. With this acquisition, Microsoft gets serious healthcare chops, an arsenal of conversational AI assets (including voice biometrics), digital customer service technologies, and other assets like vehicle telematics and dictation.
For companies using Microsoft and/or Nuance, this acquisition will provide them with more depth and breadth in the healthcare provider space, enterprise customer care, and enterprise cloud services.
Microsoft Cloud for healthcare just got deputized
The acquisition is the latest and largest move in the arms race (across all of the public cloud vendors) to offer vertical solutions leveraging its AI and IaaS/PaaS capabilities. Microsoft has offered lightweight industry-specific editions for years, but these solutions have seen limited success. In October 2020, the vendor announced its more deeply verticalized Microsoft Cloud for Healthcare. This is well-aligned with the rise of industry-specific cloud solutions that are fast becoming a preferred deployment choice for CRM and DOP. Healthcare providers today use Microsoft Cloud for Healthcare for patient self-scheduling and virtual care (telehealth), automated patient triage, and outbound communication. With the addition of Nuance Microsoft's Health Cloud becomes more attractive for healthcare providers as it inherits:
- Nuance's crown jewel in healthcare -- DAX. Nuance Dragon Ambient eXperience (DAX) is designed to reduce physician burnout, improve patient experiences, and streamline efficiencies. The solution combines conversational AI, real-time transcription, process documentation, and interoperability in an elegant and sophisticated manner. Nuance projected cloud ARR for DAX to grow up to $250m in fiscal 2023 from a base of $10m to $21m this year. DAX already runs on Azure and Microsoft's Team product is integrated with the DAX system, enabling streamlined clinical documentation regardless of care setting. As providers shift across multiple care settings from in-person to virtual and back again, many have highly variable workflows, and the burden of documentation can be lightened by ambient clinical technology like Nuance's DAX system.
- Other Nuance healthcare technologies that complement and extend Microsoft's capabilities. Nuance offers digital front door solutions for patient engagement, as well as transcription and dictation for clinical workflows and diagnostics, and healthcare documentation and insights management -- capabilities that Microsoft does not currently offer. It also offers specific AI models tuned for Healthcare to power chatbots, extract insights and proactively engage.
- Nuance's relationships in healthcare, which take years to cultivate. Nuance has cultivated deep C-level relationships within targeted industries and as a result, Nuance's technology is used by 55% of physicians and 75% of radiologists in the United States. Microsoft has historically relied on a partner-first approach for sales. This move strengthens industry relationships, and Microsoft said the deal would double its potential healthcare market to nearly $500 billion.
Microsoft announced its industry editions for Financial Services, Retail, and Government in February 2021. These editions are built upon the same Microsoft Dynamics 365 solution as the Healthcare Cloud. These industries also align well with Nuance's core industries. For example, Nuance brings 20 years of experience in supporting government entities to the relationship; 15 of the largest banks use Nuance, and Nuance boasts customer successes and quantifiable ROI in these industries.
Is the third time a charm for Microsoft when it comes to enterprise speech?
Microsoft has had two unsuccessful turns at the crank when it comes to speech for the enterprise: Microsoft Speech Server (launched in 2004), which has since disappeared, and Tellme In 2007. Microsoft exited the IVR business and sold the enterprise IVR assets to 7.ai in 2012 while keeping the "Tellme" brand and speech IP (languages and models). Companies may wonder about the level of Microsoft's commitment to enterprise speech and other enterprise products over the long term if these don't latch onto Microsoft's larger enterprise portfolio, though a core contact center solution is not offered at this time. With the acquisition Microsoft inherits:
- Nuance's extensive ASR and TTS language support for global reach. Nuance supports 86 languages and 119 voices in TTS. Microsoft Cortana (at the time of this acquisition) supports only 13 languages.
- Nuance's contact center and digital-first customer service technology. Nuance has a cloud IVR deployed as a full speech solution powering NL or directed dialog applications on its cloud platform. It also has a robust (voice, facial, behavioral) biometric solution. On the digital front Nuance's platform has the best in class web chat/messaging platform, chatbot/virtual agent, and mobile for customer service. Microsoft Dynamics is a broad, and solid solution yet lacks the depth of digital engagement that Nuance offers. Nuance offers a best-in-class omnichannel customer engagement solution that could fill Microsoft's gaps. This solution would have broad appeal to the contact center and customer service decision-makers and improve Microsoft's value proposition against rivals like Salesforce and Oracle.
- Nuance's speech army. In 2019 the company had 2,000 language scientists, developers, and engineers.
How about AI? Microsoft looks to come over the top with a second-generation AI platform
Microsoft has set its eyes forth to take the lead in creating a second-generation AI application platform with cutting-edge Edge computer vision (Azure Percept), text-based NLP/NLG (GPT-3 licensed from OpenAI and its internally developed Turing-NLG), and now with Nuance, it has more speech capabilities beyond that of Cortana. This makes Microsoft more of a compelling offering as competition against Google and Amazon intensifies in cloud services. Microsoft just needs to boost its automated machine learning (on tabular data) capabilities.
Yet, this acquisition will have its challenges
Above the usual struggles to rationalize product portfolios and organizations, industry editions are still immature. They do however command much higher prices than horizontal solutions. In addition, many of Nuance's products in the enterprise require professional services for optimization and tuning. Microsoft will require mature partner management practices to allow partners to fill in roadmap and service delivery gaps and extend vendor solutions without cannibalizing its revenue.
This post was written by VP and Research Director Daniel Hong, and it originally appeared here.