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Can Microsoft tame the Dragon with Nuance acquisition?

Peter Griffin, Contributor. 13 April 2021, 10:06 am

Microsoft's flurry of acquisitions continues this week with the US$19.7 billion purchase of natural language and AI speech leader Nuance.

In the legal and medical professions, Nuance's Dragon Naturally Speaking software has become the go-to package for busy people keen to get accurate notes and documents together without being tied to the keyboard.

Nuance's voice recognition is widely regarded as the most accurate in the industry - the only one that comes close in my book is Otter.ai, the online, subscription-based auto-transcription tool, which does a respectable job of dealing with Kiwi accents.

Dragon's mainstream opportunity

While Dragon dominates, including in the New Zealand market, as a rather expensive software tool for lucrative niches such as in hospitals, it hasn't gone mainstream in its own right, even as voice recognition has proliferated in apps, smartphones and digital assistants.

Nuance dropped support for Dragon on Mac computers in 2019, putting its entire focus on Windows. That plays into Microsoft's hands. The world's leading enterprise software maker could begin integrating Nuance's deep-learning-based voice recognition into everything from Microsoft 365 and Teams to Skype, Xbox and HoloLens. 

Nuance could also power natural language tools on its Azure cloud platform, allowing companies to effectively build Dragon-like capabilities into their own products. Indeed, Nuance has been active behind the scenes with industry players on the voice recognition front. It licensed its technology to Apple at one point for use in its Siri digital assistant. 

Focus on AI in healthcare

Those are obvious business opportunities to pursue in justifying the acquisition price, But Microsoft has signalled it will initially focus on extending Nuance's use in the healthcare industry.

"Nuance provides the AI layer at the healthcare point of delivery and is a pioneer in the real-world application of enterprise AI," Microsoft CEO Satya Nadella said of the purchase. 

"AI is technology's most important priority, and healthcare is its most urgent application." 

The logical delivery path for that is the Microsoft Cloud for Healthcare platform which tailors Microsoft's Azure services to the needs of health professionals and companies.

The purchase of Nuance continues a sustained run of large acquisitions for Microsoft as it seeks to cement its place in the enterprise space. It follows the US$26 billion LinkedIn acquisition in 2016, the purchase of software repository Github in 2018 for US$7.5 billion worth of Microsoft stock. It paid US$400 million for conversational AI company Semantic Machine in 2018.

Microsoft has been on the hunt for new buys outside of the enterprise space too. Last month in completed an acquisition of video games company ZeniMax for US$7.5 billion. It was also in talks to buy the US assets of TikTok and is rumoured to be interested in owning popular communications app Discord.


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