Published on the 16/04/2021 | Written by Heather Wright
US$19.7b doubles your healthcare TAM…
Microsoft has made an aggressive play for the healthcare market, buying Nuance Communications in a US$19.7 billion in a deal which will double Microsoft’s total addressable market in the healthcare provider space.
Microsoft has been focusing on expanding its healthcare footprint in recent years, launching its Cloud for Healthcare solution late last year. Meanwhile, Nuance – a pioneer in voice-based AI technology and best known for its digital transcription solutions, Dragon Medical One and PowerScribe One – has a strong global footprint in the healthcare industry with their clinical speech recognition, natural language processing and artificial intelligence offerings.
While the company may have started out with a more general focus, it’s honed in on the healthcare segment in recent years and its conversational AI tools are well-versed in medical speak, with the technology used by more than 55 percent of US physicians and 75 percent of radiologists.
AI is technology’s most important priority, and healthcare is its most urgent application.
The all-cash deal sees Microsoft’s total addressable market in the healthcare market soar to nearly $500 billion. It’s a market that is hot to trot right now, as healthcare organisations attempt to modernise, digitise and move to the cloud.
Sharon Hakkennes, Gartner senior director analyst and an analyst in healthcare, says the Nuance acquisition boosts Microsoft’s capabilities in natural language processing and conversational AI. “Embedding these capabilities within Microsoft’s Health Cloud solution will create new opportunities to improve both the clinician and patient experience and patient outcomes,” Hakkennes told iStart.
“In addition, the acquisition provides Microsoft with access to Nuance’s extensive global healthcare customer base and established integrations into core clinical information systems including the major global electronic health record solutions.”
The two companies have had a strong strategic relationship in recent years and collaborated to build their digital scribe solution, Dragon Ambient eXperience, available in the US embedded into the Teams communications software. Nuance’s core products are also hosted in Microsoft’s Azure cloud, Hakkennes notes.
She says for Nuance the acquisition will facilitate broader global reach of their product portfolio through Microsoft’s extensive distribution channels.
Satya Nadella, Microsoft CEO, tweeted that AI is technology’s most important priority, and healthcare is its most urgent application.
“Nuance provides the AI layer at the healthcare point of delivery and is a pioneer in the real-world application of enterprise AI,” Nadella says.
“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.”
While healthcare is the key focus of the deal, Microsoft will be keen to expand the technology in other industries as well.
Nuance – which created the backend for Apple’s Siri – already provides AI expertise and customer engagement solutions across interactive voice responses, virtual assistants and digital and biometric solutions to companies around the world, and across all industries.
“This expertise will come together with the breadth and depth of Microsoft’s cloud, including Azure, Teams and Dynamics 365, to deliver next-generation customer engagement and security solutions,” Microsoft says.
The deal is the second largest for Microsoft, behind the US$26 billion LinkedIn deal in 2016. Last September it paid US$7.5 billion for ZeniMax Media, parent company of Bethesda Softworks, creators of The Elder Scrolls and Fallout, among others.
Plenty of previous deals have featured billion dollar price tags. Among the headline acts, it paid $8.5 billion for Skype in 2011, $7.6 billion for Nokia’s mobile business in 2013, $7.5 billion for GitHub in 2018, $2.5 billion for Minecraft in 2014 and $1.2 billion for Yammer in 2012.
Mark Benjamin, Nuance CEO says the company has streamlined its portfolio over the past three years to focus on the healthcare and enterprise AI segments, where there has been accelerated demand for advanced conversational AI and ambient solutions.
That focus, coming after two years of shrinking revenues, saw Nuance clock a 37 percent revenue increase in FY2020.
“To seize this opportunity, we need the right platform to bring focus and global scale to our customers and partners to enable more personal, affordable and effective connections to people and care,” Benjamin says.
The deal is expected to close this year, subject to usual regulatory and shareholder approvals.
