Saturday, April 17, 2021

Why did Microsoft buy Nuance ?

I am taking this opportunity to restart my interest and passion on writing actively about tech industry trends. In the past, i was active in doing so when i was writing for, some of my prior work can be found here.

Tech acquisitions intrigue me a lot and hence my post today is about the new of recent news that Microsoft is buying Nuance for $19 billion or so. Microsoft's second largest acquisition deal after LinkedIn.

Lets peel some layers to understand this acquisition a little better.

What does Nuance do ?

Nuance is primarily in the space of Voice recognition tech and AI. It's voice recognition technology power’s Apple’s virtual assistant, Siri. Nuance also makes software for the healthcare and automotive sectors. 

What makes Microsoft interested in Nuance ?

Nuance's products are SaaS offerings and importantly, are built on Microsoft Azure. This certainly removes a major friction in Microsoft's decision (things would be different if they were on AWS) but Microsoft's real interest can be judged from it's CEO Satya Nadela's statement:

“Nuance provides the AI layer at the healthcare point of delivery and is a pioneer in the real-world application of enterprise AI,” said Satya Nadella, CEO, Microsoft. “AI is technology’s most important priority, and healthcare is its most urgent application. Together, with our partner ecosystem, we will put advanced AI solutions into the hands of professionals everywhere to drive better decision-making and create more meaningful connections, as we accelerate growth of Microsoft Cloud for Healthcare and Nuance.”

The segment of interest (for Microsoft) is Healthcare. Nuance is expected to power Microsoft Cloud for Healthcare. Nuance's SaaS offerings in this area are clinical speech recognition products like Dragon Ambient eXperience, Dragon Medical One, and PowerScribe One.

Nuance's Healthcare segment play:
Nuance solutions are currently used by more than 55% of physicians and 75% of radiologists in the U.S., and used in 77% of U.S. hospitals. Nuance’s Healthcare Cloud revenue experienced 37% year-over-year growth in Nuance’s fiscal year 2020 (ended September 2020).

Microsoft and Industry specific vertical cloud focus:
Microsoft has accelerated its efforts to provide industry-specific cloud offerings to support customers and partners as they respond to disruption and new opportunities. These efforts include the Microsoft Cloud for Healthcare, introduced in 2020, which aims to address the comprehensive needs of the rapidly transforming and growing healthcare industry. 

Any other potential focus areas:

This analysis suggests an interesting perspective, though it has to be left as a speculation.

Though Microsoft has not made any overtures, Nuance’s offerings could be potentially combined with GPT-3. Microsoft secured the exclusive license to GPT-3 (developed by OpenAI) in September 2020. During the time of acquisition, Microsoft said GPT-3 could aid in areas such as “writing and composition, describing and summarizing large blocks of long-form data (including code), converting natural language to another language”.

However, OpenAI has warned against GPT-3’s use in high-stake healthcare processes and listed medical and psychiatric diagnosis under the ‘unsupported use’ of the model. But there are many other areas where the cross-pollination of Nuance and GPT-3 could yield remarkable results, including medical documentation and transcription. 


Note to self:
Explore more and write on the real healthcare use cases that will get enhanced with this acquisition.

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