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Microsoft Corp. announced on Monday that it is buying Nuance Communications for $19.7 billion and expects the deal to close this year. Nuance is an artificial intelligence company well known for its Dragon speech recognition software in the healthcare industry. Nuance’s products are used by more than 55% of physicians and 75% of radiologists in the U.S., and in 77% of U.S. hospitals, according to Microsoft’s press release.

According to Forrester Principal Analyst Kjell Carlsson, “This is the latest, largest move in an arms race across all of the public cloud vendors to offer vertical solutions leveraging their AI and IaaS/PaaS capabilities.”

In 2019, Microsoft partnered with the company to use Nuance’s products in the Microsoft Cloud for Healthcare. Carlsson said of Monday’s news, “This has been proceeded by a major shakeup internally in Microsoft when it comes to AI—both organizationally (key Azure Cognitive Services individuals are now at Oracle) and technically (the services are being rearchitected).”

As for what Microsoft will do with its new acquisition, it’s likely that Nuance has figured out the AI underpinnings for complex voice recognition and they’re about to move to other verticals outside of healthcare, such as with Interactive Voice Response technologies, said Gregg Pessin, senior director analyst for Gartner.

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Mike Gualtieri, vice president and principal analyst at Forrester, said, “Microsoft has significant technology prowess in speech and especially natural language understanding with its partnership with OpenAI. I suspect Microsoft is buying Nuance because it sees a 10x multiplier by combining Nuance’s technology with Microsoft’s superior NLP [Natural Language Processing] technology.

Microsoft said in a press release that it will use Nuance’s solution to augment the Microsoft Cloud for Healthcare, and the acquisition will double Microsoft’s total addressable market among healthcare providers, and the company’s TAM in healthcare will reach nearly $500 billion.

“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, in a press release. “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.”

SEE: Why Nuance? Microsoft is making a $19.7 billion bet on ambient digital healthcare (ZDNet)

Microsoft will likely apply Nuance’s speech recognition technologies to Microsoft Teams and Cortana and even Microsoft Azure.

“The underlying AI that drives Nuance’s capabilities is something that Microsoft knows it can apply to all sorts of voice processing and conversational systems,” Pessin said.

This could mean interacting with Microsoft Teams through voice commands and even having a meeting on Teams automatically transcribed.

At the market research firm International Data Corp., Ritu Jyoti, program vice president, said, “Microsoft has accelerated its efforts to provide industry-specific cloud offerings to support customers and partners as they respond to disruption and new opportunities. As per IDC, AI spending will reach $110.7B by 2024. Banking, retail, manufacturing and healthcare providers will approach close to more than half of global spend. So while initially, they may be focused in healthcare solutions, longer term it will be much broader. Beyond healthcare, Nuance provides AI expertise and customer engagement solutions across Interactive Voice Response, virtual assistants, and digital and biometric solutions to companies around the world 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.”