Cloud, AI software, and voice recognition firm Nuance is Microsoft’s latest strategic acquisition aimed at putting the tech giant in a strong position to shape healthcare and workplace applications of the future. Microsoft has agreed to acquire Nuance for around $19bn and the deal is expected to close before the end of 2021.

First Focus on Healthcare

The acquisition has the potential to put Microsoft at the forefront of workplace innovation due to Nuance’s AI software expertise focusing on voice recognition, stemming from core algorithms developed in the early 1980s by the founders of Dragon Systems.

It comes as no surprise that Microsoft plans to use the acquisition to deepen its support for the healthcare industry, given Nuance’s experience in this sector and the fact that Nuance’s Dragon speech to text systems have specialized in healthcare to cater for the scope and accuracy needed to cope with medical terminology. Nuance's clinical speech recognition offerings include the Dragon Ambient eXperience, Dragon Medical One, and PowerScribe One for radiology reporting.

Microsoft introduced Microsoft Cloud for Healthcare in 2020 as part of its industry-specific cloud strategy, and the acquisition of Nuance means that it can now add voice recognition technologies to support the growing electronic healthcare records (EHR) market.

The healthcare sector is ripe for the application of AI technologies because of its position in a complex landscape of highly innovative research on patient care and treatments, continually streamlined business operations, social and economic pressures, and current events.

AI in Healthcare

In recent research, fellow KuppingerCole analyst Anne Bailey notes that AI-based products can be found in four categories: Community Health Initiatives, Image Classification-Assisted Diagnosis, AI-Powered Analytics for Improving Clinical Workflows, and AI-Powered Analytics for Hospital Management.

“AI can be highly suitable in products that improve patient care and improve hospital workflows and can be a strong data processing tool to leverage data-driven insights across the sector,” she says.

The research also notes that trends in the healthcare industry that include precision healthcare, AI-powered diagnostics, and data interoperability will be disruptive to both patient care and to business operations.

Use cases for artificial intelligence in the healthcare industry include chatbots, assistance for adherence to treatment plans, image-classification for diagnosis, AI-powered analytics for improving hospital workflows, and voice recognition, of course, for improved patient experience and security.

According to Microsoft, the acquisition is expected to double its total addressable market (TAM) among healthcare, taking the company’s TAM in healthcare to nearly $500bn.

Beyond Healthcare

The acquisition, however, has a much wider focus than healthcare alone, particularly in terms of combining cloud, voice recognition, and other AI technologies. Microsoft undoubtedly sees the potential of expanding Nuance’s capabilities in healthcare to other industry sectors.

Microsoft recognizes Nuance as a pioneer in the real-world application of enterprise AI, and plans to integrate Nuance voice recognition software with its enterprise and collaboration software, which has the potential to change the way people work.

Microsoft also has plans to integrate Nuance with its AI technologies, which again has the potential of changing the way people work by enabling conversations to be converted into machine-readable text, which can then be analyzed using AI, giving healthcare providers and other professionals more time to focus on more important things.

Microsoft also sees the potential for changing the way people work by combining Nuance’s interactive voice response (IVR) software with Microsoft cloud. This can be applied across any industry to augment Dynamics 365 enterprise software and Teams collaboration with new AI capabilities and voice biometrics features to improve security and reduce fraud.

For more information about adopting emerging technologies, see related KuppingCole research focusing on the utilities and energy, and the finance industries.

Conversational AI

Microsoft has long recognized the importance of voice recognition, investing in developing its own Cortana voice recognition technology in the early 2000s and in acquiring conversational AI startup Semantic Machines in 2018, but the acquisition of Nuance will take its voice recognition capabilities to an even higher level.

From its origins at Dragon Systems, Nuance has been a voice recognition expert. What sets it apart is the combination of mature voice recognition technology with conversational AI, which is very valuable with enormous potential for future enterprise applications. Microsoft hopes to capitalize on Nuance’s long legacy in conversational AI to compete with the likes of Amazon, Apple, IBM, and others developing consumer and business applications based on the technology.

Conversation AI technology is expected to grow, and could potentially revolutionize the way humans interact with technology and hence fundamentally alter the way they work. Conversational AI is yet another example of how AI technologies are able to augment human capabilities to boost efficiency, increase productivity, and free up time for more important and strategic activities.

For more information on Conversational AI, see this Market Compass on Conversational AI Building Platforms.

Given that some conversational AI technologies are already available in the market and the likelihood of a lot more appearing on the market in the wake of Microsoft’s acquisition of Nuance, organizations should start thinking about how these technologies could be best used to benefit their businesses. As with all emerging technologies, the best and logical place to start is by identifying the most beneficial use cases for your business and work from there.