Heard the News Today? Oh Boy!

Competition in the market for Conversational Access Technologies (CAT) has certainly started to heat up. Acquisitions. Consolidation. Lawsuits. Contention. Competition. The CAT domain is anything but boring. In terms of core technology, Nuance established primacy, but not monopoly, as evidenced by the United States Department of Justice's (DoJ's) abandonment of any anti-trust considerations at the core technology level.

Noting no real resistance, Nuance continued its acquisitive ways with the purchase of automated transcription specialist Dictaphone. The price Nuance paid, $357 million, provides evidence that the value of dictation software to streamline creation and management of patient records has true value among health care service providers. Dictaphone's price tag is more than $125 million higher than what Scansoft paid for the so-called "Blue Nuance," referring to the pre-merger company headquartered in Menlo Park.

Vertical Knowledge Carries a Premium

Bringing automated speech to a vertical, like health care, is not merely transcending a doctor's illegible handwriting or obviating the need for off-shore transcription services. The opportunity lies in rendering well-understood, repetitive activities as XML-based scripts in a way that leverages an installed base of processors, applications and databases. For example, applications in travel and hospitality encapsulate common components of a reservation system (city pairs, time of day and the like).

Each vertical engenders its own library of off-the-shelf code snippets or reusable components which continues to grow over time. Examples in financial services and retail banking include balance queries and funds transfers while retail catalog sales include order capture and shipment status. The list goes on and on.

On the buy side, enterprise customers are finding several alternative engine providers. On an international basis, Loquendo, telisma, Aculab, Infocom and several others have both ASR and TTS resources available in several languages. Each is well advised to build a battery of horizontal solutions with "hooks" into specific verticals. Speech automation is poised to have major impact in the vertical arenas that already have mature underpinnings in Web-based self service. It's not a matter of providing Web sites that talk. Instead, it's all about extending the convenience and familiarity engendered in a well-designed, personalized Web site to support access over the telephone.

Reducing Cost Must Be the Next Big Step

Just as important, a number of solution providers, typified by Voxeo as part of their hosted offering, offer low-cost, home-grown, limited vocabulary ASR alternatives that are perfectly well-suited for tasks that require little or no customization. Off-the-shelf, low-cost solutions are one of the keys to expanding CAT's market by appealing to small- and medium-sized businesses (SMBs). The other, of course, is multi-tenancy in the form of hosted or managed services. If a small business wants to take advantage of enhanced routing, speech processing and application processing capabilities offered to larger firms by vendors such as Genesys Telecommunications Laboratories, Avaya or Cisco Systems, each have partners ready, willing and able to offer capabilities "on demand" as a service or hosted capability.

As for lawsuits, my read of Nuance's court case against Tellme is that it reflects the intrinsic value that must be attached to deep understanding of the requirements of vertical markets. In terms of contact center automation, "Whisper Transfer" is older than the hills. It was baked into customer care solutions from the likes of Rockwell, Nortel and AT&T in the early days of CTI. Apparently, Nuance's positioning is that it is totally unique and patented in the context of handling an automated directory assistance query.

The business of Conversational Access Technology is like one of those 3D chess games that takes place on multiple platforms. There's heightened activity in patent courts. There's acceleration in the issuance of RFPs that require speech.  It all serves to highlight the importance of protecting and promoting 'vertical knowledge' for competitive advantage. Nuance's claims against Tellme are meant to start a process of discovery surrounding the underlying value of the intellectual property resulting from years of internal development, but mostly through acquisition. To an increasing degree, in all verticals, intellectual property's (a.k.a. "the other IP's") inherent value is derived from deep vertical knowledge that is the basis for tuning solutions necessary for CAT to succeed in specific opportunity areas.

Dan Miller is a senior analyst for Opus Research. He founded Opus Research, Inc. and published Telemedia News & Views, a monthly newsletter regarding developments in voice processing and intelligent network services.  He can be reached at dmiller@opusresearch.net.

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