Microsoft Gains A New Voice With Acquisition Of Tellme Networks

Microsoft hopes you'll one day speak to your computer. On Wednesday, the company announced it will acquire Tellme Networks, a maker of voice recognition software, accelerating Microsoft's plans to voice-enable numerous applications and helping the company get a leg up on mobile search by allowing people to use speech to access information.

The purchase price was undisclosed, but if earlier reports of $800 million are correct, it would be the fourth-largest acquisition in Microsoft's history.

Microsoft chairman Bill Gates has spoken for years of the potential of voice as a user interface to access information and applications, and that's exactly Tellme's focus, with products used in directory assistance and by companies like FedEx and Domino's Pizza for customer service. The purchase should bolster plans to embed voice capabilities into Microsoft's own products by, for example, allowing people to use voice to navigate their Outlook in-boxes and make calls via Live Communicator or Windows Mobile users to search the Internet.

"This allows us to advance the state of the art in speech, which has all sorts of potential that is untapped," says Jeff Raikes, president of the Microsoft Business Division. "You're going to see a wide range of communications technology into the fundamental business application and business infrastructure." Longer-term plans include bringing more speech recognition capability into the Windows operating system and continued research into the possibilities of using voice as a method to verify speakers for security purposes.

Microsoft could find that Tellme gives it a competitive advantage in its battles with Google and others for mobile search, as Microsoft says Tellme already handles more mobile inquiries than Google and Yahoo combined. Voice also is a convenient end-around of the problem of small keypads and less time to type on them.

"People on the mobile phone are on the go, typically, they don't want to have to type," says Tellme CEO Mike McCue. "The phone should ask you what you want to do and you should tell it what to do." For example, users of Tellme's Java-enabled mobile platform can do things like ask a device to find "pizza," see a list of local pizza places pop up on the screen, and tell the device which one to call. Tellme is a hosted service, so the acquisition represents strong evidence of Microsoft's commitment to software as a service by demonstrating the company's willingness to invest in services it finds promising. Raikes didn't rule out the possibility additional acquisitions in voice technology. As Raikes notes, it also shows commitment to Microsoft's own "software plus services" strategy, which blends the worlds of client-side, server, and hosted software. Tellme already does this in some ways, offering a small client for mobile phones that accesses hosted directory services. And though these services are entirely hosted today, Janice Kapner, Microsoft's director of marketing for the Unified Communications Group, hints there's a possibility they could land on servers in the future.

Though this buy carries great promise, it isn't without numerous challenges. Microsoft's own Speech Server voice recognition software is being discontinued as standalone software and having its capabilities folded into the Office line, so the company could be on the spot to demonstrate both how Tellme will add different functionality and Microsoft's commitment to Tellme as a continued standalone platform.

There's also the matter of quality. Speech interfaces have been around for years, but they're often clumsy and don't recognize even the easiest of commands. Tellme's solution is to record utterances to the tune of 10 billion a year, match subsets of that data against what was actually said, and then use the acoustic information in the recorded speech to tune the system. "Speech and search are games of statistics and pattern matching," says Tellme VP of products Jeff Kunins.

Search relevancy is a harder and different beast in mobile devices than it is on the PC. Mobile device users are often looking for something very specific, and mobile search engines need to get it right in one shot instead of a broader range of results that someone sifts through, as is the case in typical Web searches. One of the things Tellme does is comb calls and search results to find, for instance, when a pizza parlor popularly called Joe's Pizza is actually named Giuseppe's Bar and Grill and then linking those two names.

With the large universe of devices Microsoft touches, Tellme CEO McCue sees the possibilities of voice as user interface extending beyond the PC and mobile phone to television, MP3 players, and the car. "Voice is a powerful interface that's not just great for the phone but lots of other devices," he says. "This is really the beginning of us being able to take our technology to billions of consumers across all sorts of devices."

Tellme also brings Microsoft some big-name customers for its own voice plans, which include the upcoming Office Communications Server unified communications platform that includes integrated voice calls, videoconferencing, and messaging, as well as the ability to initiate phone calls from within Office apps. Tellme says 40 million people use its pure software-as-a-service offerings every day, making up an estimated 40% of American directory assistance calls and providing customer service interactions with the voice response systems of companies such as American Airlines and Merrill Lynch.

In addition to directory assistance and interactive voice response systems for businesses, Tellme also offers business search, toll-free and voice-activated services to list things like scores and driving directions, and is beta testing an SMS directory assistance service. The profitable, cash-flow positive Tellme has raised a whopping $239 million in venture funding since its 1999 inception and has annual revenue of more than $100 million.