Changes ahead

Changes aheadCommon Sense Advisory’s estimates for this year for the language services industry show stable double-digit growth rates, even when the global economy took a tumble. Only in 2011, the growth rate dropped significantly to “just” 7.41%.

This growth, however, is due only to the growth in demand which, in turn, is not stimulated by the industry players or by product innovations. Since translation is a derivative product, innovation is possible only for new products requiring a major overhaul of a centuries-old process. It’s what happened, for example, in Nuremberg, with the birth of simultaneous interpretation as we know it today, or in the late eighties with the emergence of software localization.

This anomaly in demand seems to be confirmed by the decrease in total spending on language services in North America. In the private sector, businesses have been cautious with their spending, and many have attempted to slow or reduce their expenditures on translation. Only in Western and Northern Europe the spending keeps climbing, especially in  France, Germany, and the United Kingdom.

The demand is mainly due to the composition of the industry, mostly made up of micro businesses with a small turnover, and with no entry and exit barriers. This helps resource turnover but boosts the effects of Gresham’s law, making the quest for new qualified resources harder, as those existing are largely shared.

At the time of publication, Common Sense Advisory’s directory contained 26,104 LSP’s – that is, companies with two or more employees. Only 672 LSP’s (out of 1,119 respondents, 4.29% of the total, not exactly significant) provided Common Sense Advisory with their actual revenue data. In short, it is really hard to say that these estimates are reliable based on samples. The vast majority of providers (65.36%) has between 2 and 5 employees, and about a quarter of the total number of LSP’s (25.52%) has between 6 and 20 workers. A considerable number of LSP’s in this area shut their doors in 2012 – either because they were acquired by larger firms or because they went out of business entirely. In a market crowded with 26,104 LSP’s, many get stuck, never growing beyond the lowest tiers of revenue. Also, there are more LPS’s in more countries.

On the other hand, major players grew by leaps and bounds, and while most of them would be classified as “competitors,” in reality they do not actually engage in head-to-head competition with each other.

The size of LSP’s is one of the obstacles to technological and process innovation, negatively and heavily affecting productivity, and, consequently, the stimulation of demand. Because of their unstable situations, these LSP’s need to cash profits instead of reinvesting them, and to differentiate their offer, but still without qualifying it.

The main cause is in the structure of labor and the industry’s typical business model. Besides undermining productivity, this flaw encourages firms to remain micro-sized to avoid risks, constraints, and contingencies. Technological innovation and process efficiency, on the other hand, increase competitiveness by improving productivity, fostering a positive perception in customers, and stimulating demand.

Stagnant productivity is the cause of demand-supply mismatch, and translation buyers and suppliers should invest in human workforce, improve processes, and use technology more intelligently and efficiently.

The tangibility of a product is crucial for its appreciation. Translation buyers buy an end product, which can only be made through a service process, that is  complex and exposed to global competition. In addition, in the absence of rules and standards that allow customers to evaluate a product, a transparent offering is the last resort. But it is still missing.

To improve processes it’s not enough to automate the workflow management and to speed up execution by an order of magnitude. Processes are built around people. Technology alone cannot improve them. Taylorism applied to translation is ineffective and, in fact, has rapidly come to its end. The only way to improve processes is to (re-)design them around the human workforce and choose the technologies and tools it can effectively exploit. This requires education and training, with investments that go far beyond the acquisition and implementation of a software platform and cannot offer immediate return (even if we grant for the sake of argument that a software platform alone could).

In a service economy, excellence is crucial and should be cherished. But, in the translation industry, relations are pivotal, and the “clubs” (once LISA, now GALA, ELIA, etc.), together with the aforementioned reluctance to competition, are a clear proof of this.

The U.S. Bureau of Labor Statistics estimates that there will be 83,000 jobs for interpreters and translators by 2020 in the United States alone. This job market is expected to grow by 42% from 2010 to 2020, significantly higher than the average of 14% for all professions. Jobs in technical writing are expected to grow roughly as fast as average (17%), while writers and authors are expected to face problems, as jobs in their field increase slower than average (6%). Are these estimates laying on the same old wrong assumption that any bilingual can be a translator or an interpreter, and possibly that the ability to write makes anyone a writer?

A recent CSA study found that Fortune 500 companies that augmented their translation budget were 1.5 times more likely than their Fortune 500 peers to report an increase in total revenue. Yet no actual cause-effect relationship has been showed. Not always data does speak for themselves, despite the Latin saying (beloved by US lawyers). The original sentence in Cicero’s Pro Milone speech (53.) reads “Res loquitur ipsa, iudices, quae semper valet plurimum.” (Facts, judges, have always the greatest burden, and speak for themselves.)

Selling translation is a hard job. In certain markets, an extremely hard one. It’s enough to take a look at Antonello Guerrera’s profile (born in 1984, and yet, in his opinion, no longer young), of the online newspaper “il Post” (“in his leisure time he is a translator and flâneur”) to understand why.

It’s for this reason that competition in the industry has always been based on price: the system favors lower costs and loyalty, rather than excellence. This is also the reason that translations have always been sold “by the pound”: it is simply easier and customers have the illusion of knowing what they are buying and how much they are spending.

To some extent, this is also what most probably made Christian Springub, co-founder of Jimdo (a DIY website creator) state that “you don’t know anything about other countries.” Since his launch in 2007, Jimdo has grown into an international company fully supporting 11 languages and operating successfully from offices in Hamburg, San Francisco, Tokyo and Shanghai. Nevertheless, Christian Springub still thinks that “you still need a real local to understand a market and to be successful in it, that’s not replaceable,” and that this is not “about software internationalization, but things like customer service, marketing and how to approach people internationally. You cannot replace locals to do that.”

Apparently, like any other businessman who has been harshly confronted with the translation industry, Christian Springub has learnt more from it than many others.

In this context, Renato Beninatto’s defense of MLV’s sounds farfetched. To “guide companies around the most common pitfalls”, by offering, among other things, “expert guidance on how to write software code that is ready to handle specific regional and country-specific currency formats, language characters, and other standards”, far more costly resources than those all MLV’s are virtually willing to pay are needed.

Moreover, CSA’s 2011 report on the size of the translation industry shows that the geographical headquarters of a company don’t always relate directly to the languages it supplies; on the contrary, the best performing companies are those placed in countries with the (relative) lowest pays/cost of labor.

An article on the differences in the cost structure of India and China in effectively says what “lowest cost of labor” means.

Chinese minimum wages are two or three times the level of their Indian counterparts, and even higher when welfare payments are added on top. China now has the third highest employment costs in emerging Asia and population demographics now favor India.

In India, the development of a large, yet young labor force with an average age of 23 is showing itself in lower minimum salary levels, whereas in China, where the average age of a worker is now 37, the highest minimum wage and more expensive welfare to cater for that age is now having a significant effect on the labor cost gap. The translation industry is a labor-intensive industry, and the message for everyone is: keep establishing operations where labor costs less.

The Last Lingua Franca: the Rise and Fall of World LanguagesRecently, The Last Lingua Franca, a book by Nicholas Ostler published well over a year ago, has had considerable resonance. Ostler says that the greatest threat to the English language isn’t Mandarin or Spanish – but “machine translation” and that “everyone will speak and write in whatever language they choose and will understand.” The most plausible future for the English language is that it will continue to be spoken as a mother tongue [in English-speaking nations] but its position as lingua franca will be overtaken by technology, as more and more people live their lives electronically.”

The process will run faster for mainstream languages than for the peripheral smaller ones, but the development will unmistakably take place within one generation — probably by 2050. According to Ostler, machine translation will allow those minority language speakers to intervene — directly in wider issues up to now reserved to a wider audience” as their niche languages become easily translatable by gadgets. That does, of course, discourage people from learning foreign languages in the first place.

If Ostler is right (and this is more than likely), machine translation will become prominent also in the translation industry, affecting processes and people.

Unfortunately, the industry players, even the largest ones, are ready but not prepared to offer machine translation as part of their services. Too many of them have yet to resolve the ambiguity of a centuries-old legacy, starting from the role and profile of project managers. Solving this ambiguity is the first step in the actual process improvement of the translation workflow. “File sorterers” are not PM’s nor coordinators. Vendor managers are not HR managers nor PM’s. For “transactional translation” not to be just an empty phrase, in-house permanent (large) staffing is required, with true PM’s.

Not surprisingly, the number of project managers employed by an LSP’s is an indicator of the productivity level. The larger a company becomes, the more revenue its project managers must be capable of managing. Because most LSP’s are (very) small, the most common number of PM’s is between 1 and 2 (39.91%), followed by companies reporting 3 to 5 (26.30%).

On the other hand, when asking ten people to define project management, we get ten very different answers. Project management is the application of knowledge, skills, tools and techniques to project activities and meet project requirements. Project management involves planning, organizing, monitoring, and controlling the different project activities. It is far more than managing a project schedule. After all, the project schedule is just one of the many elements of a project management process.

We cannot avoid then thinking that history repeats itself, as if men were actually condemned to endlessly reiterate their mistakes.

The recent history of the translation industry, with its double-digit growth rates, recalls the deception of certain speculative bubbles.

A year ago, Facebook was still growing very fast in terms of page views and number of users, and there did not seem to be limit to that growth. And yet, at the time, Tim Worstall predicted the end of Facebook. Today, it looks like its end is nigh.

The US $ 40 per-share quote means that Facebook would be worth US $ 100 billion (half of what Google is worth and a quarter of Apple’s worth). But Google has a turnover of US $ 40 billion and profits of a tenth, while Facebook has a turnover (3.7 billions) that is not even a tenth of Google’s, while its profits are still debated.

According to CSA’s 2011 estimates, the translation industry has the same value of the bike industry, which in UK alone is worth £ 1.5 billion. According to Federculture’s annual report, in 2011 only, Italians spent € 70.9 billion in culture. Moreover, according to the Country Brand Index, Italy is the fourth country in the world for creative goods export and the first for design.

It doesn’t add up…