BUSINESS:                                                            24 Oct 98
 #57  Word perfected: Voice recognition: Can machines talk? From next month
          they will.

IEPER, BELGIUM
IN A muddy field near Ieper in Flanders, a stone's throw from the
first-world-war cemeteries that interrupt the undulating landscape, that
unusual thing, a European software powerhouse, is being created. Although
Lernout & Hauspie (L&H) was founded just over a decade ago, it is only in
the past few years that the aristocracy of high-tech has started beating a
path to the door of its modest headquarters.
A listing on the Nasdaq stockmarket in 1995 raised the company's profile.
But what really got it noticed was a Dollars 45m investment made by
Microsoft just over a year ago, which gave the American software giant 8% of
L&H. Microsoft was already devoting a large part of its massive R&D budget
to speech-recognition technology, but it hoped that L&H would offer a short
cut. Microsoft is all too aware that PCs have a remarkable ability to make
clever people feel stupid. Windows's graphical user interface was a big
improvement over DOS, but there is still a long way to go. And what would be
the most natural interface of all, whether for the operating system or for
most applications? The human voice: and the more natural the language the
better.
Speech technology is a big idea whose time may be coming-not only for
computing, but also for communications and consumer electronics. Next month
L&H will launch a product that, for the first time, enables machines to
speak like real people. In a sense the firm is a product of the
much-fought-over land that is its home. Flanders is one of the most
multilingual places around-Dutch, Spanish, French and German invaders have
all left their mark. The universities of Ghent and Leuven are famous for
their pioneering work on language; it was part of Jo Lernout's and Pol
Hauspie's vision to tap into their expertise.
Typically, engineers who come to L&H are fluent in at least three languages.
But culture and location have little to do with the forces that are hauling
voice technology out of the laboratory. These include advances in
information management, following breakthroughs in artificial intelligence;
increases in the power of the Intel-type processors that drive PCs; advances
in digital-signal processors in mobile phones; the looming abundance of both
fixed-line and wireless bandwidth; and the explosive growth of the Internet.
Gaston Bastiaens, a 20-year veteran of the consumer-electronics and software
industries who returned from Silicon Valley in 1996 to lead L&H, reckons
that it will be at least 2002 before Microsoft releases a Windows operating
system with a language-based user interface. Mr Bastiaens has a slightly
checkered record-he was partly responsible for Newton, Apple's failed
hand-held computer-but he is convinced that speech applications will change
the way that people live and work before then.
In common with such rivals as IBM and Dragon, L&H is producing software that
can take continuous dictation both for the office market and for
specialists, such as doctors and lawyers. Where Mr Bastiaens claims an edge
is in the size of L&H's database, its understanding of what doctors and
other specialist customers want and its pioneering use of natural-language
technology to control applications. That advantage comes from the firm's
background in translating by computer (known as 'machine translation' in the
argot). Understanding is crucial not only to accurate translation, but also
for dictation and rendering text as speech. If a computer cannot understand
the context of a remark it will produce gibberish.
Whereas specialist products are a high-margin business, Mr Bastiaens thinks
of Voice Express as more about building a brand and publicising the
technology. Profits will be an unbudgeted bonus. The slightly alarming
prospect of Microsoft folding speech-recognition into its products does not
worry him, so long as L&H gets its due from licence income. The way the firm
manages the relationship will be crucial to its success.
Dictation is only one of L&H's divisions. Others include machine translation
and a linguistic services business, which-horrors-employs real people to do
the translating. At the heart of the company is a 'speech-technologies'
division, which licenses a range of products, including 'language-user
interfaces', to some of the world's biggest companies. These include
telecoms firms such as Nortel, Ericsson, Motorola and Deutsche Telekom.
Computing is represented by Microsoft, Acer, Novell and Samsung. Ford,
Delco, Pioneer and Clarion are involved in car electronics. And Hitachi,
Casio and Seiko are using L&H's technology in consumer electronics.
The number and range of applications that L&H is working on seems almost
limitless. The telephone-equipment companies want voice dialling (useful in
cars), automatic call-centres, computerised operator-services and messaging
that allows users to pick up and send e-mails and faxes on an ordinary
telephone anywhere in the world. Car firms are replacing ill-tempered human
map-readers with 'speech-driven navigation devices'. Demand for palmtop
computers, organisers and smart telephones is currently held back by the
need to enter data using awkward symbols and a clumsy stylus or cramped
keyboard. But soon they will have the processing power, memory and battery
life to use speech.
Various machine-translation services are already available on the Internet,
but L&H is licensing technology to web-sites that will allow users to gain
access to them in a variety of languages. As Asian business takes to the
Internet, English may even lose its place as the unchallenged lingua franca
of the web. E-mails might be translated automatically into the language of
the recipient. Without accurate, real-time translation, the Internet will
fall short of its potential to be the first universal communications medium.
The spoken command
At home and at work, central heating, lighting, burglar alarms, cookers and
video recorders will all be controlled with speech commands that can be
delivered remotely. If you return from holiday early, just ring the house
and it will be warm and well-lit on your arrival. Because every human voice
is different, speech is also secure. It will increasingly be used for home
banking, transactions on the web and even as security for hole-in-the-wall
cash machines.
Although the theoretical list is endless, the reality is still more
potential than actual. The translation-services market is worth only Dollars
3 billion today, although it is growing by 15% a year. The market for
advanced speech products, which Mr Bastiaens believes is growing at a rate
of nearly 60% a year, is still worth less than Dollars 1 billion a year.
After a painfully slow start, L&H's revenues reflect the speed at which its
business is achieving critical mass. Two years ago, when the firm first
became profitable, second-quarter revenues were Dollars 5m. This year they
were Dollars 45m; the firm's market value has climbed to about Dollars 1.7
billion.
Can L&H become another SAP, the successful German business-software company?
It is possible. L&H, like SAP, has toiled for years to make the building
blocks for its products. Also like SAP, it is devoted to being the best at
one thing. While nobody should underestimate IBM, probably L&H's main rival,
speech is only a tiny part of its empire. What is more, L&H claims to have
three times as many engineers as IBM's speech division. And 15 other
high-tech start-ups, all specialising in language technology, have joined
L&H on its site to create something called 'the Flanders Language Valley'.
There is room for about 100 more: the idea is to combine a Dollars 125m
venture-capital fund with the presence of L&H as a magnet to attract
entrepreneurial and engineering talent.
It may not be easy for others to catch up. L&H has the software to bring new
languages to market quickly. The huge phonetic databases that sit beneath
its speech engines would take a competitor many years to compile. As
language becomes a vital interface, firms will want to license the best
speech technology on the market. The dangers of commoditisation are small.

The Economist
Copyright (C) The Economist Newspaper Ltd, 1981-1997


Bud Kennedy
email: [log in to unmask]


List Archives	http://maelstrom.stjohns.edu/archives/vicug-l.html
Index of Vicugs	http://trfn.clpgh.org/vipace/vicug/vicugs.html
Subscription Form	http://trfn.clpgh.org/vipace/vicug/subscribe.html
Mail Contact	[log in to unmask]