Microsoft wants to see through its ambitious plans to provide AI-based cloud offerings in the healthcare sector. This is why it has agreed to buy Massachusetts-based Nuance Communications for $19.7 billion. The acquisition is Microsoft’s second-biggest yet.
Microsoft on Monday announced its decision to acquire AI-driven speech-to-text player Nuance Communications in its bid to spread its wings in the healthcare sector. Valued at $19.7 billion, this deal is effectively Microsoft’s second-biggest acquisition since its 2016 take over of professional networking service LinkedIn for $26.2 billion.
The Redmond-based IT behemoth is clearly attempting to make strides in pursuit of growth acquisitions, efforts for which partly revolve around its aggressive foray into providing services for the healthcare sector. For example, Microsoft sought to accelerate efforts for the sector’s digital transformation by opening furnishing Microsoft Cloud for Healthcare in 2020.
Besides Nuance Communications, the company’s other high growth ventures include its acquisition of Zenimax Media last monthOpens a new window , as well as its attempt to onboard TikTok for a whopping $30 billion. According to BloombergOpens a new window , the IT giant is also hoping to acquire popular VoIP, digital distribution, and instant messaging platform Discord for $10 billion.
â€œNuance provides the AI layer at the healthcare point of delivery and is a pioneer in the real-world application of enterprise AI,â€ said Satya NadellaOpens a new window , CEO, Microsoft. â€œAI 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.â€
Microsoft’s deal comes at a time when IBM is planning to divest its AI-based Watson Health, citing customer (physician) apprehension in adopting the next-generation technology. As such, IBM is planning to sell it off to a private equity firm or industry player or merge it with a blank-check company.
With the acquisition, Microsoft expects to double its total addressable market to $500 billion, divided between private businesses and the government. The two companies have been partners since 2019, under which Microsoft leveraged Nuance’s technology to push for digitally-enabled services for its healthcare customers for clinical documentation and seamless patient services.
Now, it remains to be seen where Redmond deploys Nuance’s AI-based software and services, the scope for which is extensive in a company like Microsoft, which is rooted in multiple areas. At present, Nuance conversational AI solutions are currently in use by over 55% and 75% of U.S-based physicians and radiologists, respectively, and leveraged across 77% of U.S. hospitals.
Additionally, Nuance also serves 85% of Fortune 500 companies and over 10,00 organizations, including Acer, American Airlines, Turkcell, Deutsche Telecom, Kotak Mahindra Bank, etc.
Conversational AI is the technology that enables machines to interact with humans contextually using artificial intelligence algorithms and natural language processing (NLP). The technology â€” delivered over the cloud â€” has allowed the Massachusetts-headquartered company to grow its revenue by 37% year-over-year for the fiscal year ended September 2020. Revenue of Nuance, however, declined by 4% in the October-December 2020 quarter.
Its products include AI-based speech recognition and transcription tools for hospitals (and businesses), including Dragon Dictate, NLP & interactive voice response (IVR) services, and chatbots and virtual assistants. The company even helped Apple develop Siri, which uses Dragon Dictate. As such, the deep learning service can be considered one of Nuance’s most attractive offerings.
Besides healthcare, solutions by Nuance have possible applications across business meetings, educational activities, third-party teleconferences, independent cloud-based offerings, telecommunications, and more for greater customer engagement.
The deal to acquire Nuance is currently subject to shareholder approval, a few regulatory approvals, and customary closing conditions. The deal is expected to be closed by the end of this year. Upon closure, Nuance Communications will join Microsoft’s Intelligent Cloud division, while its CEO Mark BenjaminOpens a new window will continue to serve in his role and report to Scott Guthrie, EVP, Cloud & AI, Microsoft.
Benjamin said, â€œThe path forward is clearly with Microsoft, who brings intelligent cloud-based services at scale and who shares our passion for the ways technology can make a difference.â€