RESEARCH REPORT. Published 2Q BOB LOCKHART Principal Analyst. CLINT WHEELOCK Managing Director

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1 RESEARCH REPORT NOTE: This document is a free excerpt of a larger research report. If you are interested in purchasing the full report, please contact Tractica at sales@tractica.com. EXECUTIVE SUMMARY Voice and Speech Recognition Consumer, Call Center, Healthcare, Enterprise, Finance, Retail, Government, Law Enforcement, and Defense Applications: Market Analysis and Forecasts Published 2Q 2015 BOB LOCKHART Principal Analyst CLINT WHEELOCK Managing Director

2 SECTION 1 EXECUTIVE SUMMARY 1.1 A MARKET POISED FOR TAKEOFF Speech and voice recognition may be the poster child for the biometrics industry. Also referred to generically as speaker recognition, this market is small now, but poised for substantial growth, with an overall 10-year compound annual growth rate (CAGR) of 32%. This reflects the biometrics market as a whole: strong technology, a market finally emerging, and opportunity for continuous double-digit growth. Strong sales and delivery execution are a must. This report treats speaker recognition as a software-only market. While it is possible to purchase special microphones and processors for voice or speech recognition, vendors interviewed for this report were selling software only. All claimed that their products can work with any microphone being sold today with smartphones, tablets, or PCs. Therefore, the forecasts in the databook that accompanies this report are based on software licenses, not shipments of physical devices. Speaker recognition markets are driven by use cases, just as with other biometric modalities. Purchasers are looking for solutions, not cool technology. The largest use cases for speech and voice recognition are consumer-facing: mobile device authentication and management of wearable devices. These use cases tend to operate in massive volumes, but at a small unit price. Other markets poised for takeoff include healthcare, enterprise information technology (IT) protection, government IT protection, and call centers, where voice recognition is a natural fit. The specific use cases that drive speech and voice recognition in each of these industries are discussed in detail in this report. Tractica analyzes and then forecasts 20 separate use cases, each of which is forecast by geographic region. Whenever possible, Tractica has used country-by-country data to create forecasts, so that the income level of each country can be considered in building the forecasts. For example, voice control of wearable devices may have a bright future in welldeveloped economies, but may be a negligible market in developing economies. One advantage that both speech and voice recognition hold is that they are natural activities that most people do on a daily basis. Speaking is natural, like eating or walking. Therefore, integrating speaker recognition into a user interface does not require the user to learn any new skill or remember any key data, such as yet another password. With vendors selling biometrics as low-friction add-ons to existing systems, voice and speech may be the lowest friction of all. Most likely, the ultimate winners in this market are already successful, if on a small scale today. Organic development of a new voice or speech capability may require up to 5 years, by which time the train will have long since left the station. Still, as the following section shows, this market shows no indication of commoditizing at any point in the next decade. 2

3 1.2 MARKET FORECAST As illustrated in Chart 1.1, Tractica forecasts that revenue for voice and speech recognition technology will increase from $600 million in 2015 to $7.1 billion in 2024, a vigorous CAGR of 23% and total revenue of $28.1 billion for the 10-year forecast period. While the revenue per region roughly tracks the level of economic development in each region, there are bright spots even in developing economies due to the democratic nature of biometrics: everybody has them. Use cases may differ between well-developed economies and those with lower rates of literacy, but biometrics has something for everyone. Consumer-facing applications are a significant component of this revenue and most of those applications require smartphones, which are likely to exist in much larger numbers in developed economies. Chart 1.1 Annual Voice and Speech Biometrics Revenue by Region, World Markets: $8,000 ($ Millions) $7,000 $6,000 $5,000 $4,000 $3,000 North America Europe Asia Pacific Latin America Middle East and Africa $2,000 $1,000 $ (Source: Tractica) As is clearly evident from the detailed forecasts that accompany this report, voice and speech recognition represents a relatively new opportunity with use cases that are likely to grow substantially throughout the forecast period. Year-on-year revenue increases are forecast to still exceed 20% in all global regions in

4 SECTION 8 TABLE OF CONTENTS SECTION Executive Summary A Market Poised for Takeoff Market Forecast... 3 SECTION Market Issues Market Overview Market Drivers Common Drivers of Biometric Modalities Authentication/Identification Business Use Personal Use Growing Consumer Acceptance Little or No Capital Expenditure Speaking Is a Natural Activity Does Not Require a Smartphone Easy to Revoke and Reissue Fraud Detection Capabilities Market Barriers Common Barriers in Biometrics Markets Other Biometrics Compete for Same Use Case Difficult to Participate in National ID, Biometric Passport, Voter Registration Ambient Noise Speaking Is a Public Activity Key Use Cases for Speech and Voice Recognition Automotive Controls Call Center Authentication Call Center Fraud Reduction Care Provider Access Consumer Device Authentication Enterprise IT Security Fraud Identification Financial Industry Fraud Investigation Retail Industry Government IT System Protection Identify Persons of Interest Mobile Banking - High Value Second Factor Patient Medical Record Access Personalized Hospitality/Entertainment Pharmacy Dispensing Point of Sale Payment Proof of Life Time and Attendance Unstaffed Bank Branches Vehicle Insurance Wearable Device Control Regulatory Issues Personal Data Privacy

5 2.5.2 Industry-Specific Privacy Legislation Regional Differences North America Europe Asia Pacific Latin America Middle East & Africa SECTION Technology Issues Technology Overview Voice Recognition versus Speech Recognition Software Only Hardware Requirements Accuracy Enrollment Rates False Reject Rates False Accept Rates Revocable Identities Response Times Continuous Voice Authentication Trusted Computing Zone SECTION Key Industry Players Agnitio Auraya Fulcrum Biometrics LaserLock M2SYS Biometrics Neurotechnology Nuance Pindrop Security Sensory SpeechFX Uniphore VoiceTrust VoiceVault SECTION Market Forecasts Introduction to Forecasts Forecast Methodology and Assumptions Forecasts by Region Total Voice and Speech Recognition Forecasts Speech Recognition Forecasts Voice Recognition Forecasts Forecasts by Industry Forecasts by Use Case Conclusions and Recommendations SECTION Company Directory SECTION Acronym and Abbreviation List SECTION Table of Contents

6 SECTION Table of Charts and Figures SECTION Scope of Study Sources and Methodology Notes

7 SECTION 9 TABLE OF CHARTS AND FIGURES Chart 1.1 Annual Voice and Speech Biometrics Revenue by Region, World Markets: Chart 5.1 Cumulative Voice and Speech Biometrics Revenue by Region, World Markets: Chart 5.2 Annual Voice and Speech Recognition Seats by Region, World Markets: Chart 5.3 Annual Speech Recognition Revenue by Region, World Markets: Chart 5.4 Annual Speech Recognition Seats by Region, World Markets: Chart 5.5 Annual Voice Recognition Revenue by Region, World Markets: Chart 5.6 Annual Voice Recognition Seats by Region, World Markets: Chart 5.7 Annual Voice and Speech Recognition Revenue by Industry, World Markets: Chart 5.8 Annual Voice and Speech Recognition Seats by Industry, World Markets: Chart 5.9 Annual Voice and Speech Recognition Revenue by Use Case, World Markets: Chart 5.10 Annual Voice and Speech Recognition Seats by Use Case, World Markets: Chart 10.1 Tractica Research Methodology Figure 3.1 Crossover Error Rate Compared to False Accept and False Reject Rates

8 SECTION 10 SCOPE OF STUDY The scope of this study is the global market for speech recognition and voice recognition software (sometimes referred to as speaker recognition), for the forecast period from 2015 through The market analysis and use cases are based on approximately 50 research interviews and biometrics conference attendance. The examination of technology issues also draws from those interviews, plus additional secondary research. Forecasts are based on use cases for speech and voice recognition that were discovered during primary research interviews, secondary research, and industry conference participation. In other words, the forecasts are based on use cases known today and there is no attempt to speculate on future uses of biometrics that do not currently exist. This approach may produce forecasts below the actual value that the market ultimately achieves, as there is no forecast for to be determined or future use cases. The models only forecast what is known now. The forecasts cover all geographies and, whenever possible, data has been analyzed on a country-bycountry level for the 194 countries that Tractica defines in its geographic reference table. All industries were considered for the forecast, but only those with speech or voice recognition use cases that arose during research have been included. For example, biometric passports are specified to require fingerprint, facial recognition, and an IR iris image. Therefore, speech and voice recognition are unlikely to participate in that use case, so biometric passports were excluded from consideration in the forecasts, as were any other use cases where there is no role for speech or voice recognition. SOURCES AND METHODOLOGY Tractica is an independent market research firm that provides industry participants and stakeholders with an objective, unbiased view of market dynamics and business opportunities within its coverage areas. The firm s industry analysts are dedicated to presenting clear and actionable analysis to support business planning initiatives and go-to-market strategies, utilizing rigorous market research methodologies and without regard for technology hype or special interests including Tractica s own client relationships. Within its market analysis, Tractica strives to offer conclusions and recommendations that reflect the most likely path of industry development, even when those views may be contrarian. The basis of Tractica s analysis is primary research collected from a variety of sources including industry interviews, vendor briefings, product demonstrations, and quantitative and qualitative market research focused on consumer and business end-users. Industry analysts conduct interviews with representative groups of executives, technology practitioners, sales and marketing professionals, industry association personnel, government representatives, investors, consultants, and other industry stakeholders. Analysts are diligent in pursuing interviews with representatives from every part of the value chain in an effort to gain a comprehensive view of current market activity and future plans. Within the firm s surveys and focus groups, respondent samples are carefully selected to ensure that they provide the most accurate possible view of demand dynamics within consumer and business markets, utilizing balanced and representative samples where appropriate and careful screening and qualification criteria in cases where the research topic requires a more targeted group of respondents. Tractica s primary research is supplemented by the review and analysis of all secondary information available on the topic being studied, including company news and financial information, technology specifications, product attributes, government and economic data, industry reports and databases from third-party sources, case studies, and reference customers. As applicable, all secondary research sources 51

9 are appropriately cited within the firm s publications. All of Tractica s research reports and other publications are carefully reviewed and scrutinized by the firm s senior management team in an effort to ensure that research methodology is sound, all information provided is accurate, analyst assumptions are carefully documented, and conclusions are well-supported by facts. Tractica is highly responsive to feedback from industry participants and, in the event errors in the firm s research are identified and verified, such errors are corrected promptly. Chart 10.1 Tractica Research Methodology MARKET RESEARCH SUPPLY SIDE DEMAND SIDE PRIMARY RESEARCH Industry Interviews Vendor Briefings Product Evaluations End-User Surveys End-User Focus Groups SECONDARY RESEARCH Company News & Financials Technology & Product Specs Government & Economic Data Case Studies Reference Customers MARKET ANALYSIS QUALITATIVE ANALYSIS Company Analysis Business Models Competitive Landscape Technology Assessment Applications & Use Cases QUANTITATIVE ANALYSIS Market Sizing Market Segmentation Market Forecasts Market Share Analysis Scenario Analysis (Source: Tractica) NOTES CAGR refers to compound annual growth rate, using the formula: CAGR = (End Year Value Start Year Value) (1/steps) 1. CAGRs presented in the tables are for the entire timeframe in the title. Where data for fewer years are given, the CAGR is for the range presented. Where relevant, CAGRs for shorter timeframes may be given as well. Figures are based on the best estimates available at the time of calculation. Annual revenues, shipments, and sales are based on end-of-year figures unless otherwise noted. All values are expressed in year 2015 U.S. dollars unless otherwise noted. Percentages may not add up to 100 due to rounding. 52

10 Published 2Q Tractica LLC 1111 Pearl Street, Suite 201 Boulder, CO USA Tel: This publication is provided by Tractica LLC ( Tractica ). This publication may be used only as expressly permitted by license from Tractica and may not otherwise be reproduced, recorded, photocopied, distributed, displayed, modified, extracted, accessed or used without the express written permission of Tractica. Notwithstanding the foregoing, Tractica makes no claim to any Government data and other data obtained from public sources found in this publication (whether or not the owners of such data are noted in this publication). If you do not have a license from Tractica covering this publication, please refrain from accessing or using this publication. Please contact Tractica to obtain a license to this publication. 53