If you want your company to be a global behemoth valued at one trillion dollars, like Microsoft, you have to play it smart when it comes to acquisitions. After all, with a valuation like that, Microsoft could buy up huge swaths of the tech world – but that’s not the path they’ve taken. Instead, they choose their acquisitions strategically, opting not to buy Discord, a growing chat platform with a valuation already at $15-18 billion, earlier this year. Still, this raises the question: what other companies will fuel their growth?
For those watching Microsoft’s moves, a recent acquisition worthy of close monitoring is their purchase of Nuance Communications, a major player in the cloud and AI software sectors. Why Nuance and not Discord, though? Ultimately, it’s all about what Nuance brings to the table.
Portfolio Growth: Playing The Long Game
Nuance Communications is an exciting company, and one that’s chosen to emphasize speech recognition, a complex technology, as a core service. This raises exciting prospects for Microsoft, since that technology is very flexible. By acquiring Nuance, not only can Microsoft offer Nuance’s existing services to their customers, but they have the ability to build these tools into their call centers and other services. Those are steps that can be taken fairly quickly, while other aspects will take longer to be obviously represented in their portfolio.
Obviously, compared to Nuance, Discord brings fairly little to Microsoft’s portfolio. Though popular with gamers and some other communities, Microsoft already had all the tools necessary to easily create an equivalent chat platform. Furthermore, they already offer one-on-one and group chat tools, making Discord redundant.
New Horizons: Breaking Into Healthcare
Microsoft already has a handful of partnerships and platforms that are used by the healthcare sector, but the company has demonstrated interest in expanding its reach in this area over the last few years. Acquiring Nuance helps them do just that. In fact, this purchase is an expansion of an earlier partnership between the two businesses, that focused on exam room technology. What we’ll see more immediately, however, is expanded use of tools like Dragon Medical One, a speech recognition program designed specifically for healthcare.
Dragon Medical One may deliver critical speech recognition tools to the healthcare sector, but it’s just one of their many speech recognition programs, and that’s also likely to have been one of the major motivations behind Microsoft’s acquisition. Speech recognition is a growth industry within the tech world, with a wide variety of applications. By buying Nuance, then, Microsoft has gained access to some of the top speech recognition software available today, and that will make for a serious competitive advantage.
Though it’s hard to know what other factors may have motivated Microsoft’s choice to purchase Nuance without having been at the negotiating table or in strategic communications, even the above insights suggest key concerns. Simply put, Nuance’s products both align with and augment Microsoft’s current offerings. That’s what makes it a good fit, while allowing it to avoid redundancy. Following on Nuance, other brands will have a high bar to overcome if they want to get on Microsoft’s radar.