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Global Watchtower
Common Sense Advisory Blogs
STAR Not Interested in Mergers, Acquisitions, or Growing the Market
Posted by Donald A. DePalma on September 23, 2005  in the following blogs: Translation and Localization, Web Globalization, Business Globalization, Technology, Interpreting, Market Data, Global Marketing, Best Practices, Supplier Business Issues
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Several months after Lionbridge and SDL acquired Bowne Global and Trados, respectively, STAR AG's CEO Josef Zibung weighed in on the mergers. For those keeping count, STAR is the fourth largest translation company in the world. Zibung notes that "STAR can afford to look upon this shake-up in the translation industry not only with a shrug of its shoulders, but even with a twinkle in its eye: For is it not a merger of competitors which once again results in STAR - the biggest unlisted company in this sector - moving up yet another rung on the global ladder?"

Zibung's statement of STAR's direction tells us that he plans to stay the course and passively benefit from other companies' M&A. STAR will NOT do any M&A and will NOT change premium pricing. In a kind of pretzel logic, he maintains that STAR will keep its prices unchanged in order NOT to "diminish the financial investments of existing customers." Hmmmm. Depending on the market, only 0-10% of translators use computer-automated translation (CAT) tools like translation memory (TM). Why? Most buyers and non-buyers complain about the high license cost, high upgrade fees, high support tariffs, and ease-of-use problems.

What could break this impasse? More affordable translation tools would be a good start. Learning from the experience of office productivity tools in the early 1990s, we think the right price point for TM tools is US$99 in the U.S. and Western Europe, even less in developing markets. With buyer concerns about the merger of SDL and Trados, STAR could use a combination of its "high-grade tools" plus value pricing to grab a bigger share than its current tiny slice of the TM pie. Besides such an approach appealing to new buyers, we suspect that many of STAR's customers would be thrilled to buy familiar tools at lower prices, and would provision more of their language workers with STAR tools if they were more price-competitive.

Absent market-development activity from STAR, we expect pricing, usability, and distribution innovation to come from companies like Across, Idiom, Heartsome, and some we know to be waiting in the wings. These growing firms seem to be more responsive to market needs and tend to issue affirmative press releases telling the market what they are doing and what they will do -- rather than what they will not do (for that matter, STAR doesn't say much to the outside world).

STAR was a pioneer in language technologies, having developed one of the first translation memory and localization project management systems. Internal management struggles, limited transparency in its vision, and a determination to maximize profit over market growth threaten slower growth for the company and even stagnation.


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