![](https://www.techmonitor.ai/wp-content/uploads/sites/29/2021/04/Nuance-1.jpg)
Microsoft has announced plans to purchase AI voice recognition company Nuance, which specialises in the healthcare sector. The $20bn deal is a further sign of MSFT’s desire to develop its industry-specific cloud offerings as enterprise customers start to demand more domain knowledge from their cloud providers.
Best known as the company that helped Apple develop Siri, its voice-enabled personal assistant, Nuance makes the Dragon suite of speech recognition software. It also provides tools specifically designed for healthcare professionals, Dragon Medical Cloud, which can be used in the clinic to quickly capture and document patient information.
The company’s solutions are currently used by more than 55% of doctors and 75% of radiologists in the US, and are deployed in 77% of the country’s hospitals. Nuance has enjoyed a strong 2020 as more businesses turned to the cloud, bringing in $386m from its cloud business, up 29% on 2019. Dragon Medical Cloud saw 38% year-on-year growth, contributing to a sharp increase in the company’s share price.
Microsoft launched a cloud for healthcare on its Azure cloud platform in October, and integrating Nuance’s technology will enable it to offer a wider array of tools and services to clients. “AI is technology’s most important priority, and healthcare is its most urgent application,” said Microsoft CEO Satya Nadella as he announced the deal. “We will put advanced AI solutions into the hands of professionals everywhere to drive better decision-making and create more meaningful connections.”
Healthcare: the new frontier for Big Tech?
Healthcare is seen as a potentially lucrative market for Big Tech, particularly in the wake of Covid-19 which has accelerated the sector’s digital transformation. “The pandemic has shown the power the correct application of technology can have against medical issues, says Gregg Pessin, senior research director at Gartner. “The tech giants know they have to be an active participant in the digital transformation healthcare is going through, and that there is a lot of money to be made. Nuance is a well-established product and by purchasing it Microsoft is getting a way into a new customer base.”
Pessin does not expect to see many changes for existing customers. “In terms of the industry, it doesn’t change much in the short term, other than the branding on the product. My guess is we might see some additional functions added to Teams and Office 365, because both would make logical sense, but that won’t be right away.”
Microsoft buying Nuance and the shift to vertical cloud
But the takeover, MSFT’s second-biggest acquisition after its 2016 purchase of LinkedIn, could have much broader implications. Microsoft has been building out its industry-specific cloud offerings in recent months, and alongside its cloud for healthcare, in February launched three new vertical products for manufacturing, financial services and non-profit organisations, with a retail cloud currently in public preview.
Nick McQuire, chief of research, enterprise, at research firm CCS Insight, says this reflects the evolving demands of clients. “The structural change brought on by the pandemic has meant that enterprises across the board are demanding more from the cloud giants, particularly when it comes domain expertise and industry solutions,” he says. “That is what has ultimately forced Microsoft’s hand here. We have long argued that 2021 would be the year that the cloud providers invest heavily in industries, and this is by far the biggest bet we have seen yet.”
We have long argued that 2021 would be the year that the cloud providers invest heavily in industries, and this is by far the biggest bet we have seen yet.
Nick McQuire, CCS Insight
Gartner’s Pessin says Nuance’s technology could become a central function of other vertical clouds, providing voice recognition services designed to work with specific industry vocabulary. “The key differentiator Nuance has is the engine that sits underneath its natural language processing, and Microsoft understands the power of that,” he says. “You could apply it in things like Teams, or for interactive voice response technology. There are all kinds of applications, because being able to listen to a human speaking in industry lingo, and understanding and responding to that correctly, is a very powerful thing.”
“It’s not just that Nuance trained its engine to understand medical jargon, it’s how they did it,” he adds. “By unravelling that process Microsoft could apply it to any industry.”
Will Nuance give Microsoft the edge?
Both Google Cloud and IBM have started to develop their own vertical clouds, but CCS Insights’ McQuire says Microsoft has so far made more progress in this area. “Nuance delivers Microsoft a more mature set of AI solutions in areas such as speech recognition, document processing, fraud detection and image recognition,” he adds. “This will ultimately prove key to differentiating Azure to healthcare customers against its largely horizontal competitors.”
Public cloud market leader Amazon has yet to build out a substantial vertical offering of its own, but McQuire adds that Microsoft’s activity in healthcare could prompt it to act. “[The Nuance deal] puts huge pressure on both Google and Amazon who are operating a similar playbook to Microsoft,” he says.
Home page photo of the Nuance logo on a smartphone screen by Rafapress/Shutterstock.