The Reality of the Language Services Sector in 2018 and Beyond
Business is looking good in the language sector. CSA Research’s business confidence survey of the CEOs of the largest language service providers found 2017 to be a growth year, and respondents optimistically entered 2018. Sector revenue and language output continue to rise as the content and code that power economies are becoming more global. Our annual survey will give a more complete picture of the market as we collect and analyze the data.
This optimism plays out against a backdrop of concerns about the future of language services, on both the demand and supply side of the market. Buyers worry about the need to process ever-growing content volumes into more language pairs – but with relatively stable budgets. Meanwhile, they must deal with their management’s expectations that Amazon and Google Translate will take care of that pesky language problem once and for all – and with less complexity and at a lower cost.
On the supply side, LSPs express fundamental anxiety about the sustainability of their business models. We hear concerns across all tiers of the language service market:
- Automation and procurement specialists marginalize small providers. These LSPs wonder where they fit in the market and how they’ll survive. They worry about sales, staffing, and the need for more – and competition with – increasingly powerful technology. Will their translation work be replaced by a bunch of Amazon servers? Will their project management value be replaced by bots? Further, they must also contend with commoditizing forces beyond their control such as distant procurement functions created when their clients are acquired by global behemoths.
- Market forces squeeze mid-sized companies from both ends. Further up the value chain, medium-sized companies face niche specialists on one side, generalist multi-language vendors on the other, and those same procurement challenges. These mid-tier firms strategize about how they can scale up more quickly and compete against the economies of scale that the largest LSPs bring to bear. They plan growth both organically and by strategic liaisons or acquisitions.
- The largest providers scramble for scale. At the top of the pyramid, the largest LSPs position themselves to get even bigger, scale to their clients’ fondest dreams for global content, strive for organic growth, and engage in pitched battles to buy a shrinking pool of mid-sized acquisitions. They’re also investing more in building their own technology as they climb to the higher stages of LSP Metrix maturity.
In conversation after conversation, we witness debates about technology. On one side, advocates pitch the importance of advanced technology to growth and scalability. On the other, naysayers anxiously await the swarms of AI-driven language bots and machine learning that will surely exterminate their companies. Their concern extends beyond machine translation to project management − will simple rule-based automation and deep machine learning conspire to eliminate the last humans on the language shop floor? CSA Research characterizes this angst as techno-phobia − or maybe more precisely, phobAI or its homophone FOBAI, the fear of being AI’d out of existence.
But we contend that FOBAI is a symptom of a bigger problem – mistaken identity. LSPs concerned about having automation wipe them out think they’re in the translation business. They’re not. Language service providers are business process outsourcers (BPOs), traditionally tasked with the job of rendering one language into another but now on the cusp of a much broader role managing more of the content assets for their digitizing clients. While conventional agencies still quibble about how many pennies they charge to translate a word, their buyers are far more interested in bigger content issues tied to their digital transformation. These clients are bringing all their information online, optimizing it, adapting and adopting technology to manage it, and making those assets available across the enterprise. This digitization has forced them to re-think internal systems and processes, pry open databases and content management systems, and educate their staff and suppliers in this new model.
How will their clients’ digitization strategies transform the LSPs supplying them?
- Buyers must provide for many content functions where they’re not expert. While the digital transformation is a big mission in itself, it becomes even more challenging once enterprises factor in global content and international operations. Doing business in multiple locales means that buyers have to adapt core business functions for those markets, along with the materials, supply chains, support functions, transactions, and user-generated content that support them. Some companies have been undergoing their digital transformation for nearly 25 years, and still haven’t figured out how to manage their digital content.
- Language service providers have expertise in managing complex content. Therein lies the future of LSPs – but they must fundamentally re-think their businesses away from translation-centric to offer content-centric services, both source, target, and a portfolio of content management, analytics, and intelligence services. In the process, they will work on connecting content, analyzing it, and adding valuable services such as automated content enrichment. This more strategic role takes a heavy non-core competency.
This existential threat of FOBAI most terrifies those companies that hang their hats on simple translation. Rather than having their translation businesses AI’d out of existence, LSPs can invest in their own transformation into global content service providers. Their BPO future is to move higher in the content value chain with support for global content management, marketing communications, customer care, and the customer experience. They will manage content in any form, both source and target, as they service the growing requirements of their clients' digital transformation.
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