Nuance To Acquire Part of IBM's Speech Technology
Speech recognition player Nuance has just recently gone public with regards to their acquisition of a percentage of IBM's speech technology. Having IBM's source code at their disposal will effectively enable Nuance to make much needed improvements to both its embedded and network-based speech recognition technologies. Inevitably, such an aggressive acquisition, together with the ensuing relationship has many people questioning Nuance's technology and IBM's motives.
Furthermore, Nuance has also announced that the source code it has acquired from IBM will dramatically improve its current speech capabilities in both network-based and embedded text-to-speech (TTS) and advanced speech recognition (ASR). Nuance's intention is to combine the IBM source code with its own over a period of approximately two years in order to enhance the performance of its present speech recognition engine.
While many have speculated that IBM will refrain from competing in this market, IBM on the other hand has made it clear that they'll continue developing their speech recognition capabilities independently. Interestingly enough, IBM has sold Nuance an earlier release of its code for WebSphere Voice Server middleware and ViaVoice software. According to IBM, the decision to follow through with the transaction was based primarily on the grounds of gaining some return on their investment. However, considering that IBM regularly sells patent licenses, this recent development seems to be nothing out of the ordinary.
Over the course of the last few years, Nuance has been expanding its portfolio in speech rapidly and has made numerous acquisitions. In September 2008 they acquired Philips Speech Recognition Systems (PSRS), followed by SNAPin Software the following month. Nuance has made their intention clear with regards to becoming the leading speech provider in all markets, whether PC-based, network-based or embedded. Furthermore, they can also be seen expanding into complementary areas such as transcription and mobile care.
Although combining IBM's source code with its own will be challenging, Nuance has long been integrating additional technologies with it's own so while it may prove challenging to combine the IBM code, they have all the experience they need in order to make it work. Of course, Nuance's fundamental aim is to develop cutting edge speech technology and purchasing of IBM's technology has simply highlighted this. It's hardly surprising that this recent acquisition has resulted in speculation that IBM's technology is superior to Nuance's, although if there's any truth in such speculation, then Nuance's decision was certainly a wise one.
However, Nuance's relentless acquisitions have come with a hefty price tag. Regardless of their huge revenue stream of more than $800 million in the 2008 financial year, Nuance has failed to be profitable for a number of years. Having said that, Nuance recently announced that Warburg Pincus, an international private equity company, has just invested $175m in Nuance stock; a move which is seen to be a clear indication of their continued support for Nuance.
Currently, Nuance and IBM will continue competing in the fields of both network and embedded speech technologies. While the additional code being added to its speech technology will inevitably help Nuance to acquire superior software, IBM still has a dominant cash flow and customer base as a result of their other business interests which include IBM Global Services. Admittedly, Nuance is however the most reputable speech solutions provider at present. In fact, they're the only competitor to offer PC-based, network based and embedded speech technologies. Of course, this carries with it, the advantage of being primarily focused on the speech industry. In all fairness, speech is a very small part of IBM's business, so Nuance looks set to maintain their lead.
Although there is presently much uncertainty with regards to whether or not there'll be a partnership between IBM and Nuance in order to develop speech recognition software, such a development would benefit Nuance in particular, as they stand to gain access to IBM's global customer base as well as their monumental reputation of being one of the world's largest systems integrators. Furthermore, if IBM does participate in a relationship with Nuance, many will interpret the move as being an indication to the market that they're backing off.
On the other hand, a partnership could also end up in a conflict of interest with regard to which of the two companies' would then provide services to speech customers. This may then in turn mean cannibalizing their revenues, a situation which suggests that such a close partnership is unlikely. Furthermore, considering that IBM recently sold some of its speech technology to its largest competitor, many marketing analysts are speculating that IBM many very well end up exiting the market in the nearby future, rather than compete.
Undeniably, Nuance will expand its speech technology and acquire a far stronger market position as a result of this acquisition but for its smaller competitors, there are still opportunities for growth in the network and embedded speech market. Furthermore, they'll still have the ability to compete with Nuance with regards to competitive pricing. While Nuance is without question the dominant player in North America, it's presence in Europe is far weaker for network and embedded speech.
Not including IBM, Loquendo and OnMobile in India, which just recently took Telisma over, are now Nuance's chief competitors in network-based speech. As far as the embedded speech side is concerned, SVOX and iFLYTEK are emerging competitors who like Nuance, have also been investing heavily in their speech technology: SVOX for example recently acquired Siemens' ASR in January 2009 in order to add ASR to its TTS solutions, while iFLYTEK has just completed ASR development for the Chinese market, thus resulting in them becoming more viable competitors.
In all probability, Nuance's acquisition of IBM's speech code will have little, if any, impact on the market, at least in near future. However, over the next couple of years, if Nuance successfully manages to incorporate the acquired IBM code, they will gain superior recognition accuracy in addition to an insight into IBM's relative position. Utilizing IBM's technology will certainly assist Nuance to further develop its speech recognition technology faster, with the potentially for restructuring its R&D resources. For the most part, Nuance's competitors should remain focused on their strengths in both language capabilities and pricing.
Considering to what extent Nuance's customers stand to benefit, with regards to improvements in technology, Nuance looks set once again to gain an optimum position for competing with IBM. As far as IBM is concerned, most will agree that's far too soon to predict just how the company will choose proceed, or even if they'll remain in the speech recognition market.