Nuance buys better EU, Lat Am coverage

OvumOn August 15, 2011 Nuance Communications announced an agreement to acquire Loquendo, a wholly-owned subsidiary of Telecom Italia, for €53m.
The acquisition will further solidify Nuance’s dominant market share in speech recognition and text-to-speech technologies and will give the vendor a stronger presence in Europe and Latin America. On the flipside, enterprises and partners will have fewer alternatives in the market when it comes to advanced speech recognition (ASR) and text-to-speech (TTS) engines, [which] will prevent any significant downward pricing pressure for speech recognition as competition will be limited.
Nuance’s acquisition of Loquendo comes as no surprise. Nuance has employed an aggressive acquisition strategy over the past several years, and Telecom Italia is shedding assets which it deems to be outside of its core competency as a carrier.
While Nuance will gain many assets (including an IVR platform and voice biometrics technology)…, there are two assets, above all else, which Ovum believes will directly benefit Nuance. These are a stronger presence in Latin America and Europe, and better ASR and TTS technologies for Latin based-languages (e.g. Spanish, Italian, and Portuguese).
For years, Nuance has had limited success in European countries (outside of the UK and Ireland) as it faced stiff competition from incumbents that had stronger proficiency in Latin languages. Loquendo and Telisma (now part of OnMobile) were either a cheaper/better alternative to Nuance or the only commercially viable ASR and TTS offering in that country. However, the markets for ASR and TTS in Spain, Italy, France, Portugal, and countries in LATAM are small when compared with opportunities in the English-speaking countries (US, Canada, UK, Ireland, Australia, and New Zealand) where Nuance has focused most of its resources in recent years.
With the acquisition of Loquendo, Nuance will expand its market presence in Latin America and Europe by inheriting a client base, local presence, channels, and a portfolio of ASR and TTS engines that Nuance did not previously support or support as well as that of Loquendo.
Over the past year, Loquendo began an aggressive campaign to target opportunities in English-speaking countries. The vendor was successful in forging partnerships with various IVR and contact center vendors and was viewed as a viable lower-cost alternative to Nuance’s ASR and TTS engines in the US, UK, and Australia. Contact center and IVR vendors liked the fact that their customers had more choice when it came to ASR and TTS and that if the customer chose speech recognition technology from a vendor other than Nuance, they may not have to compete with Nuance when it came to professional services for application development. For enterprises, having greater choice meant lower ASR and TTS costs as they had more leverage for negotiation.
Choices for ASR and TTS engines were limited even prior to this upcoming acquisition, as this market has consolidated significantly in the past decade. However, Loquendo was becoming the clear alternative to Nuance in English-speaking countries. Today, the primary vendors that provide ASR and TTS are Lumenvox and to a lesser extent AT&T and BBN, in addition to Nuance and Loquendo. Other vendors such as Microsoft-Tellme provide ASR and TTS as a cloud-based service bundled on a hosted IVR platform, while Voxeo provides basic directed dialog ASR and TTS engines (for free) on its Prophecy IVR platform. Increasingly, Ovum sees ASR and TTS to be delivered as a cloud-based service.
Over the next several years, the demand and application of ASR and TTS will begin to change as smartphones become pervasive in developed countries and feature phones continue to thrive in emerging countries. ASR and TTS will play different roles and Nuance (as well as other vendors) needs to capitalize on opportunities for speech-driven interactions and self-service in both market segments. In developed countries demand for natural language and voice search in the context of customer care on smartphones will increase. It is expected that ASR and TTS will increasingly be delivered as a cloud-based service. Towards this end, ASR and TTS will be used to power command & control and voice search on smart device platforms such as Android, iPhone and Windows – similar to how consumers use speech today but with the added capabilities of multimodal customer service.
In the context of emerging countries, especially those in Latin America, ASR- and TTS-powered IVR solutions will still experience growth as call volumes increase with the burgeoning middle class and customer-service culture evolves. Nuance’s upcoming acquisition of Loquendo will help create a foundation to target these opportunities in Latin America