This is how the Gartner Research Group sees it:
On 9 May 2005, the enterprise speech technology vendors ScanSoft and Nuance announced that ScanSoft plans to acquire the outstanding common stock of Nuance. The combined entity will be called Nuance. The deal is expected to close in September 2005.
Analysis
ScanSoft and Nuance together have 75 percent of the speech recognition market, so the proposed merger will be reviewed by antitrust regulators. Gartner expects regulatory approval to be granted, because IBM and Microsoft are now entering this market and the new Nuance will be better positioned to compete against these giants.
Nuance and ScanSoft have competing products in many areas, but customers shouldn't expect much immediate change. Gartner believes that in the longer term, the two product sets will be rationalized into a stronger set of speech products. However, we believe that long-term investment in Nuance Voice Platform (NVP) will not fit with the stated channel strategy, and that NVP users will be offered a migration path to alternative platforms.
Gartner expects the merger to result in lower discounting in the short term, but this will be mitigated as IBM and Microsoft gain traction in the speech market. The new Nuance will likely use tiered pricing for different-quality speech-recognition engines, so that it can compete with IBM and Microsoft on price but retain a premium product for the significant number of businesses that need it.
Integrating these two rivals will be challenging. The planned substantial cuts in head count will cause staff uncertainty until the merger is completed. The different cultures of the two companies will also have to be reconciled. But keeping the Nuance name is a smart move.
To succeed, the new Nuance will need a clear focus on its emerging competitors and on how to compete. Both companies have partnering relationships with IBM and Microsoft, and the merged company will have to rethink these relationships.
Recommendations
Current Nuance/ScanSoft customers: Verify contract terms, and ensure the new company provides a clear product road map with a smooth migration path. NVP users should urgently seek clarification of plans for NVP.
Businesses about to buy Nuance/ScanSoft products: Clarify the product road map, and ensure that the contract provides for smooth migration and penalty clauses if the merger is not completed.
Businesses looking for speech products: To ensure competitive bidding, seek bids from alternative providers, in addition to Nuance and ScanSoft.
Analytical Sources: Steve Cramoysan and Bernard Elliot, Gartner Research |
