How Microsoft's $20-bn AI deal may change the way we work

Imagine the workplace of the future, where computers powered by artificial intelligence take care of the most tedious administrative tasks, making employees happier and more productive. Microsoft Corp wants to be at the forefront of that future - and its deal for voice-recognition and AI specialist Nuance Communications Inc shows it's willing to spend a lot of money to do it.

Microsoft said on Monday that had agreed to buy Nuance Communications Inc for about $56 a share, or almost $20 billion including debt. At first glance, it may seem like a strange candidate for what would become Microsoft's second-largest acquisition after its $26 billion deal for LinkedIn Corp. For much of the last decade, Nuance's sales have stagnated as the early pioneer of speech-recognition products wasn't able to innovate fast enough. But that has changed. Given the impressive technology and potential inside its latest AI solution for health care, a purchase of Nuance makes sense.

The game-changing product is the Nuance Dragon Ambient eXperience, or DAX, which was released in February 2020. While prior offerings forced doctors to use devices to transcribe notes and then spend hours at the end of the day to file paperwork, DAX takes the administrative burden off their plate. During each visit, the system records voice conversations between doctors and patients, then leverages AI to find the proper context for the discussions and automatically creates detailed clinical documentation for review. All the doctor has to do is sign off. At least for physicians, it seems as if the AI-powered panacea is now here.

Hospitals love it. They get happier doctors, who can see more patients, and there's a reduced risk of clinical mistakes. Citing a survey, Nuance notes the percentage of doctors feeling burnout and fatigue dropped to 17 per cent from 72 per cent with the use of DAX. Physicians say it also enables higher quality care because they can focus on treating patients instead of doing data entry. The excitement has reached investors. During Nuance's most recent earnings call, nearly every question from Wall Street touched upon DAX's prospects. While the use of DAX is still in the early stages, the financial future looks bright. Earlier this year, Nuance said revenue from DAX could rise to as much as $250 million by 2023 from an estimated $15 million or so this year, and it was seeing rising interest from current and new customers.

A Microsoft-Nuance combination increases the opportunity for growth, with Microsoft's heft allowing for a larger rollout. There are other synergies. DAX, which already uses Microsoft's cloud-computing service Azure and benefits from its AI technologies under a strategic partnership signed in 2019, can be further integrated into the technology giant's services to create an even more powerful offering.

Most critically, Microsoft will learn all the intimate details on how to best develop advanced AI solutions for the workplace that it can apply to other industries.

On one front, however, Microsoft should tread carefully. No other technology company has been as active shopping for large companies.(Bloomberg)