Microsoft Buys Nuance in $16B Health Care Cloud Bet

The acquisition of the provider of digital tools for health care processes advances Microsoft's industry-specific cloud strategy.
Matthew HellerApril 12, 2021

Microsoft said Monday it had agreed to acquire speech technology pioneer Nuance Communications for $16 billion in a major move to expand its cloud offerings to the health care industry.

The acquisition is Microsoft’s second-largest under CEO Satya Nadella after the $26 billion purchase of LinkedIn in 2016 and gives it access to technology that uses voice recognition, artificial intelligence, and natural language processing to streamline health care processes.

According to Microsoft, Nuance solutions are currently used by more than 55% of physicians and 75% of radiologists in the U.S and its health care cloud revenue grew 37% in fiscal 2020.

Microsoft previously partnered with Nuance in 2019 to automate clinical administrative work such as documentation. “This acquisition brings our technology directly into the physician and patient loop, which is central to all healthcare delivery,” Nadella said on an investor call.

As ZDNet reports, “Microsoft, like other cloud providers, is increasingly focused on building industry-specific clouds. This playbook was originally deployed by enterprise software giants SAP and Oracle and now have become a staple for Salesforce, ServiceNow, and Microsoft, too.”

Microsoft, which launched Microsoft Cloud for Healthcare in 2020, estimates that the Nuance acquisition will double its total addressable market in the health care provider space, bringing it to nearly $500 billion.

Nuance’s Dragon Ambient Experience (DAX) platform digitizes and records the conversation between doctor and patient, with the data it generates used to create clinical notes, diaries, and electronic health records. The company forecasts cloud annual recurring revenue for DAX will grow from $10 million to $21 million in 2021 to $100 million to $250 million in 2023.

“Nuance has been in the midst of an unprecedented strategic turnaround the last few years under the leadership of CEO Mark Benjamin and we believe the company represents a unique asset on the health care front for” Microsoft, Wedbush analyst Dan Ives wrote in a client note on Monday.

Nuance technology formed the basis of Apple’s Siri voice assistant before an in-house version was introduced.

“The path forward is clearly with Microsoft,” Benjamin said, noting that the company “brings intelligent cloud-based services at scale” and “shares our passion for the ways technology can make a difference.”