Nuance Communications last month acquired Philips Speech Recognition Systems, a business unit of Royal Philips Electronics, for $96.1 million.

While not a large deal in terms of incremental revenue, the acquisition will help Nuance expand its healthcare business overseas, says Steve Cramoysan, Gartner research director. "In terms of revenue, this will provide Nuance with an extra $35 million, or about 10 percent more than the [previously projected for 2008] revenue of $350 million" for the company’s healthcare business, he says. "This acquisition will help them build better relationships in the healthcare industry in Europe."

According to Nuance, $15 billion is spent on medical transcription in North America and Europe each year, but the businesses tend to operate quite differently. Bob Wise, president of Nuance’s healthcare division, said the firm had little presence in Europe, while Philips has a strong presence and good relationships with software vendors and original equipment manufacturers there.

Those relationships are important, according to Cramoysan, because selling to the healthcare industry has as much to do with incorporating the technology into the workflow as it does with the actual speech capabilities. Wise agrees, saying that speech technology enables a healthcare worker to attach verbal information in addition to charts and check-off lists. The verbal information is more detailed and, therefore, more accurate.

According to Wise, demand should remain strong for Nuance’s healthcare business, even though firms are slowing down some of their planned technology spending given the current economic environment.