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Can LSPs Become the Exclusive Language Service Vendor for their Clients?
Posted by Hélène Pielmeier on December 12, 2014  in the following blogs: Translation and Localization, Supplier Business Issues
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Becoming the go-to supplier or preferred language partner is a core goal of many language service providers. To do so, most LSPs prefer what we call the “asphyxiation route.” They provide any language service under the sun in order to keep competitors off their turf. But the route to becoming the vendor of choice is quite different.

In May and June 2014, Common Sense Advisory conducted a detailed survey of 73 enterprises that buy translation services for their own use about how they manage their suppliers. In the resulting report, “Insights on Enterprise Buying Behaviors,” we found that a mere 15% of respondents work with a single provider – proof that buyers like to manage risk by adding diversity to their supply pool. We found outliers at each end of the spectrum, with just a couple of companies using only in-house resources and another few using more than 100 suppliers.

The situation is complicated by the fact that LSPs don’t usually know when they’ve maximized their revenue potential with a given client. They are often unaware of their customers’ total translation and localization spend, especially when operations on the client’s end are de-centralized. In addition, clients may downplay the role of other suppliers or might not even mention their existence. That doesn’t mean they aren’t any competitors seeking an ever growing slice of the work.

If the reality is that most buyers rely on multiple vendors, should LSPs keep trying to convince their clients that a single-vendor approach is the best solution? Savvy clients consider three basic options:

  1. A single provider simplifies management, but may bring a narrow focus. Buyers that rely on just one LSP contend with fewer coordination and less overhead. They find it easier to enforce terminology and style preferences. However, that approach means that buyers only get one perspective, which may prove troublesome when the LSP becomes complacent or lacks the ability or drive to innovate. Vendors that are unable to scale in time can also quickly cause delays or quality issues. In addition, having just one supplier looks bad in the eyes of central purchasing departments.
  2. A small pool of suppliers has many benefits, but increases the management load. Having a few LSPs on call provides backup, allows buyers more flexibility, lets them assign jobs based on specialty, leverages the power of competition to negotiate rates, and brings different perspectives more likely to trigger innovations. The downside to the model is that it involves more coordination and technology integration on the buyer’s end. On projects split among vendors, job requestors need to spend more time monitoring projects while managing some squabbles and even backstabbing among suppliers.
  3. An army of small suppliers meets the needs of some specialized applications. In our advisory engagements, our analysts have worked with companies that use 100 or more vendors and others with thousands – where most of that horde comprises freelancers and single-language vendors (SLVs). While this is not a common model, we find that some buyers choose that approach to better control linguistic resources and achieve turnaround times by being close to the source. However, in turns them into de facto agencies.

Managers at mid- to large-sized buyers that have a long history of buying translation services are often the most willing to take the risk of working with a single vendor. LSPs that stand a chance of winning that client’s trust provide an extensive range of services for a wide variety of file formats and languages and can handle the volume’s peaks and valleys. If they deal with global clients, they often have round-the-clock operations.

Our research on buy-side vendor management identified six progressive stages of the relationship journey between clients and LSPs that go from the initial interactions to when a tight partnership is established. Genuine client-LSP partnerships are rare. In order to succeed, LSPs need to be committed to catering their approach to each step of the relationship lifecycle.

 

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