To understand the effect of the pandemic on the language industry, CSA Research began quarterly surveys of the CEOs of LSPs in March 2020 and expanded regular primary research to LSPs in China, freelancers, langtech vendors, and enterprises. Here we present datapoints to close out 2020 and identify what to expect in 2021.
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Setting the Baseline for Language Sector Performance
Our surveys from March onward echoed global business uncertainty. With language market CEOs still nervous about the future in the third quarter, we reviewed primary and secondary data – our survey results and interviews, and our analysis of macroeconomic data – to make three estimates for 2020 and beyond.
Growing confidence over the last few months leads us to support the optimistic GDP+ trendline. In our January 2021 survey, CEOs in our ranked group of LSPs said they had expected 16% growth for 2020, but COVID-19 capped the increase to an average of 3%. Forty-four percent of the sample showed less revenue in 2020 but for 2021 they expect revenue to rise by 18%.
Profits Increased or Stabilized for Most LSPs
In our January 2021 survey, we asked CEOs how their 2020 performance in various verticals compared to responses to their 2019 results. About one-half (52%) said they were more profitable in 2020, 17% saw no change, and nearly one-third (32%) made less profit than the year before. Companies that showed a profit benefited from lower costs for travel, reduced expenses in some cases for office space, an increase in jobs for corporate and emergency communications, and more work for sectors such as online retail that benefited from stay-at-home orders.
Some Verticals Weathered the Pandemic Better Than Others
Online retail wasn’t the only sector that grew during the pandemic. We asked CEOs how their 2020 performance in various verticals compared responses to their 2019 results. We plotted the results for the second half of 2020 against 2019 to show how sectors performed in the throes of the pandemic, dividing them into three categories by demand: improving, steady, and decreasing. We note that how far down an industry was in May has almost no predictive value for where it was in December. The correlation between them is 0.36, which is positive, but not predictive. See our upcoming “Changes in Localization Demand by Sector” report for more detail, analysis, and data on net improvement.
Remote Operations Define the Language Sector
The biggest lifestyle change for most people was pandemic stay-at-home orders that shut down offices worldwide, in most cases allowing only businesses deemed essential to keep their workplaces open. That reduced the work-from-office percentage of our sample from an end-of-2019 average of 70% to our December 2020 average of nearly one-half that (33%). The suspension of live events, conferences, and business travel doomed even road warriors to a less peripatetic existence. Looking ahead, we expect the future to be more about Webex and Zoom than airports, visiting customers in their offices, and big exhibition halls.
MT Touches a Growing Range of Content
Our CEO respondents told us that 13% of their 2019 projects for end-clients involved machine translation, but that number climbed to 24% in 2020. We don’t attribute this increase to COVID-19, but rather to the long-standing shift to MT that we’ve observed over the last decade. That said, the growth in certain types of corporate and emergency communications in the first few months of the pandemic likely spurred more MT usage, and likely much of it from free online services. However, 23% of our sample told us they haven’t used MT on any client projects.
LSPs Still Face Classic Business Challenges
Besides the pandemic-driven challenges they’ve battled since last March, CEOs still must overcome traditional business troubles such as competition (65%), business model and technology disruptors (39% and 35%), and changing customer needs (32%). COVID-19 complicates these with the requirement to address each of these issues while transforming their operational structure, marketing digitally, and retaining and training staff.
With Great Challenges Come Great Opportunities
The pandemic impetus to rethink their business models has led smart CEOs to re-evaluate their world view more quickly than they might have without it. For many that’s pushed them to more data-driven automation (52%), expanded offerings (46%), or a drive into new markets (42%). Success in these areas will help them overcome the challenges they face.
LSPs Shift Investment Strategies to Push 2021 Strategic Growth
Staring down those risks and chasing those opportunities will take some investment in the coming years. At the top of the list is online marketing, an area that 84% of our CEO sample agreed is necessary for growth – that compares with just 24% planning to invest more in offline marketing. The second biggest area of planned spending is on technology such as project management or business automation (70%), machine translation or interpreting (69%), and business management systems (47%). Developing new products (62%) or markets (58%) is high on their list, along with human capital development: sales team growth (58%), staff development and training (57%), and staff safety (42%). Costly M&A activity is further down the list as a priority for 32% of our sample.
Looking Ahead to the Multilingual Digital Transformation
The stay-at-home mandate shifted many interactions and transactions online, thus speeding up by years the digitalization of content and processes that’s been going on for decades. The demand for satisfying customer experiences crosses every language and culture, thus accelerating the digital transformation in every market. With commercial and governmental organizations shifting their investment to online channels, CSA Research’s Global Revenue Forecaster demonstrates increased economic benefit in supporting more markets. A successful digital transformation must be both global and multilingual.