A Year of Recovery in the Language Industry – and Just About Everywhere Else
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2020 disrupted nearly every human activity on the planet. The pandemic, lockdowns, and economic consequences blocked the expected growth in language services that we forecast for that year (“The Language Services Market (2021)”). In stark contrast, 2021 was a year of recovery for most of the language services and technology companies that responded to the survey for the 18th CSA Research Global Market Study. They got back on track from the pandemic body slam, optimized and rethought their businesses, and increased revenue as their clients themselves recovered and got back to business. Companies on our annual list of the largest providers showed significant improvement year over year (“Rankings of the Largest LSPs in the World (2022)”).
Our global ranking of the 100 biggest businesses in the sector includes 103 firms, counting ties. We base these rankings on our annual survey of providers with revenue and business data supplied by the companies themselves – and validated by their executives. Our seven regional lists add 68 firms, for a grand total of 171 ranked LSPs and langtech companies.
Here is a timeline showing the 10 largest providers for 2021 and their journey since 2005 to their present positions. The colored lines indicate LSPs that appeared on the Top 10 list at least 10 times. Some changed their names since our first study in 2005, typically due to mergers and acquisitions. For example, RWS Holdings grew substantially by acquiring SDL in 2020 – both companies appeared on our first ranking in 2005. Earlier in the timeline are scattered names of other LSPs that appeared in the Top 10 for just one or a few years.
This timeline highlights only the most visible companies in the sector. Keep in mind that there are thousands of other language service and langtech providers in our database, each with its own story. Two reports, “Who’s Who in Language Services and Technology (2022)” and “The Market Landscape for Language Services (2022),” tell you more about the 171 firms in our rankings and describe their role in helping commercial, governmental, NGOs, and other entities deliver multilingual content and user experiences for global and domestic multicultural markets.
Noteworthy Trends in 2021 and Beyond
Our annual Global Market Study focuses on revenue, where companies earn it, and what assets they need to deliver language services. Let’s follow the money:
- Five of the 10 largest LSPs played musical chairs around their M&A activity. № 1 TransPerfect crossed the vaunted one-billion dollar revenue mark with its 2021 acquisition of Semantix, displacing RWS (№ 2), which had reached the top position last year with its purchase of SDL in 2020. LanguageLine moved up to third position based on organic growth while Keywords Studios rose to fifth with some M&A, but Lionbridge slipped from third to fifth after selling its AI unit to TELUS. The remainder of the Top 10 stayed in place. GienTech Technology (né Pactera) went from thirteenth to eleventh place. If it continues growing at the same pace as in the last three years, Pactera will be the first China-headquartered LSP in the Top 10.
- Revenue growth in 2021 was strongest in the middle market of the Top 100. The Top 10 in 2021 grew at an average of 9.65% over 2020, below its historical three-year CAGR. However, the next 93 LSPs on average substantially exceeded that rate of growth, driven by especially strong performances by PGLS, MasterWord, Propio, Verztec, XTM, Argos, BIG Language Solutions, and OXO Innovation. Some of the listed companies are already owned by private equity (PE) firms; others can expect calls from PE investors or from acquisitive larger companies if they can continue that rate of growth.
- Companies ranked only in their regions are worth watching. When we consider LSPs that we review only in their regions (that is, not globally), we note strong year-over-year revenue growth for a few companies among the market leaders in each geography. These fast-growing LSPs on our seven regional lists are companies to watch – both for their individual performance and as acquisition targets. Private equity firms and large LSPs have asked us to refer them to providers earning as little as one or two million dollars in revenue to help them establish, secure, or reinforce footholds in new regions.
- Consolidation continues within and across revenue tranches. Acquisition is the quickest path to scale for growing LSPs. Recognizing that the traditional business of translation, localization, and interpreting limits growth, larger companies are broadening their ability to help clients with global customer experience, digital transformation, ubiquitous devices, and new channels such as the metaverse. Expect consolidation to continue within tranches such as the 20 to 30 largest companies, as bigger companies follow the path of acquisitive LSPs such as Acolad and t’works in hoovering up regional competitors – and strategic moves from larger conglomerates, such as TransPerfect solidifying its position in the Nordic market by buying Semantix.
- Asian companies look to the west. Our second Chinese-language survey provided us with more insight into the East Asian market. This year, several Chinese LSPs joined the Top 100, including the already mentioned GienTech Technology (№ 11). This begins to answer the common question, “When will China birth its first LSP behemoth?” Meanwhile in Japan, Takara & Company, a Japanese business printer, began consolidating LSPs with the purchase of Simul (№ 30) and TOIN (№ 70). If Takara consolidated and reported earnings from its two LSPs, it would move up several positions in our rankings. Aiming for the top of the lists, Toppan, another Japanese printer, launched its UK-based Digital Language unit in 2021 and made its first acquisition by buying UK-based TranslateMedia (№ 75 in our 2021 ranking).
As Always, LSPs Operate in the Real World
The language industry serves organizations across the entire spectrum of commercial, governmental, NGO, religious, and other human activities. Here are three drivers rooted in the last few years that will continue over the coming year or two:
- Money still makes the language services world go round. We reviewed the performance of LSPs and langtech providers with various funding models in our “Who’s Who in Language Services and Technology (2022)” report. With trillions of dollars available from private equity, venture capital, special purpose acquisition companies (SPACs), and other investment funds, funding has flowed freely over the last few years for attractive or proven business opportunities. Similarly, publicly traded companies like RWS and Keywords Studios (№ 4) leveraged shares in a hot stock market to acquire companies. Trillions of dollars in PE and VC funds continue to seek great returns on equity – a home run or good innings.
- But the money may move more slowly – external factors raise red flags for planners. Loans, investment, and share-funded acquisitions may flow a little less freely going forward due to an array of economic challenges, tight labor markets, war, supply chain issues, climate change, declining stock markets, and higher interest rates. In our report on “The Market Landscape for Language Services (2022),” we analyze six considerations for any LSP planning exercise covering: 1) an array of real-world economic, political, and other issues; 2) the mismatch of high demand with low rates; 3) profitability; 4) technology-driven changes in delivery models; 5) the changing competitive landscape; and 6) the need for LSPs considering these challenges to review and revise their value proposition.
- Labor concerns amplify the challenges. Our analysis shows that LSPs share the same problems as the rest of the economy in acquiring, developing, and retaining talent. An array of employment and business trends such as “the Great Resignation” and pushback on the return to the office means that LSPs face the cost of hiring and remotely training new staff, raising pay for current employees, all while making jobs more satisfying, rewarding, and safe. Meanwhile, the talent pool for language services is shrinking due to fewer linguists graduating plus growing demand in sectors such as artificial intelligence and natural language processing that often pay more for that same cadre of specialists.
LSPs continue to evolve as they grow and consolidate. CSA Research has plotted their journey outsourcing business processes like translation and interpreting to become a more strategic role managing transformations, locale-specific knowledge, and enabling processes and technology for organizations operating globally. As they move from being a business process outsourcer (BPO) to this new role of knowledge process outsourcer (KPO) or global content strategy provider (GCSP), they will become even more essential partners to businesses and governments operating internationally and in domestic multicultural environments.
Finally, we’re keeping the survey for our Global Market Study open until August 31st so that we can fill out the sample for a few regions and vertical specialties. If you haven’t already taken the survey, you can take it by clicking this link. Completing it will take about 30 minutes. We’ll send you our report on “Tempered Optimism, But Improved Results for LSPs” for taking the survey. We will also enter you into a drawing for three respondents to win a sales-centric workshop for your company.
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