#003 – Microsoft spends 19.7 billion USD for Nuance. Is it worth it?

As you probably know, Microsoft has spent almost 20 billion dollars on Nuance recognition solutions. Now, as the dust has settled, let’s see a bit if this acquisition was worth it.

This purchase is another tenth billion dollar acquisition in the world of big tech. We are now used to seeing such amounts being spent for technology companies, but I guess even for Nuance this is something out of this world. Especially for us, as industry insiders, we would have never thought this was possible.

I mean, for us, Nuance was always that standard and basic software bundled with low end devices. We would throw in their solutions just so we could say we have a software included. I must say, this really took me by surprise.

What does Nuance do

Nuance is more or less a software developer and manufacturer for recognition solutions. Their best known product is I would say the Nuance Omnipage OCR software solutions, which by the way has been sold to Kofax. More or less they developed a lot of scanning solutions, starting with scanning software, to image processing and other small tools to associate with document scanning.

Before selling to Kofax, the Omnipage product was the most developed solution they had. Their main focus relied on the engine of the product, the OCR engine to be more precise. From there on, everything they learned in the process, they used to integrate in other scanning solutions, as previously mentioned.

This practically works like a nucleus approach, and the research done on the nucleus is then spread on other solutions. Such an approach is both effective and very efficient, financially speaking. Therefore, their second market used to be integration of the software with really cheap scanners. They would not charge much for their solutions and the manufacturer did not have to develop software. A real win win situation.

Why would Microsoft buy Nuance

Seeing the noise surrounding this acquisition, I managed to find three things that I find interesting. These aspects should in theory help Microsoft, but I must say, it still makes me wonder why they spent so much.

First of all we have the technology. I would probably be unfair to say that the Nuance technology does not provide great added value, but I still feel it to be like this. But, and there is a big but, I can only refer to OCR engine and scanning solutions. My guess is that they probably have some research in other parts, such as text and voice, and probably also some AI. While Microsoft is the largest disaster in converting acquisitions into successful acquisitions, they are not dum dums. They have some plan with it, and I am expecting this to be clearer in the coming months.

Second of all, whatever Nuance has in the pipeline, technology wise, Microsoft can both market it and implement it better. It will definitely help their Azure solution, to allow more features, some comparable with Aws.

Third of all, Microsoft has to spend their money somewhere. The tax game in the US is quite strange for Non Us citizens. Some of the money spent will come back through tax returns or deductions. So I guess the 20 billion will be less in the end. And you don’t have to implement new teams and workflows to create new technology, or the technology you need.

Will this be successful ?

I must say I am not the most optimistic person when it comes to acquisitions made by Microsoft. We have seen them taking a huge brand, such as Nokia, and almost running it into the ground. While Nuance is a much smaller brand, they have spent 3 times the amount on Nokia.

Yes, I do agree that the Azure OCR solution is probably the best cloud based solution on the market. Will this benefit from Nuance ? Yes, of course it will. But Azure OCR is way better than Omnipage ever was and ever will. So I don’t know what else Nuance can bring in this sense. And at 20 billion you have to bring more to the table than just¬† OCR, which is really a small market.

Microsoft is probably relying on some technology that Nuance is currently developing which might be ground breaking. Until proofs of such technology, Microsoft has to integrate the Nuance solutions into their cloud based solutions or improve their current solutions with Nuance experience. My personal opinion is that this was probably not the best acquisition, but I am happy to be wrong.

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