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Common Sense Advisory Blogs
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Follow-up to "Who's Who in 2013?"
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Earlier this week we posted the list of top 5 language service providers from 2013. The storm of resulting e-mail and phone calls mirrored the winter blizzard outside our office window. To recap, we took a simple straight-line projection off the last few years of LSP revenue. We deliberately left out all the factors that would have grounded this list in reality. As we noted in the blog posting, we didn't factor in any of the difficulties of the market place, noting in bullets labeled "Errors and Omissions," "Absence of direct comparables," "Reality check," and "Politics" an array of issues that make our 2013 projections unlikely -- but still fun to look at in our language industry version of Fantasy Football.
From the stream of comments we received, we surmised that many readers skipped the text and went right to the line graph showing the putative top vendors of 2013. Apparently, we didn't put enough caveats into the text. Here are a few notes in response to what readers wrote:
- Top 5 vendors. There's a pretty good chance that the leading LSP of 2013 isn't mentioned anywhere in this posting. An outside investor or a company from outside the sector could buy its way into the market and shake up the world of localization and translation even more.
- Stuff happens. After we posted the 2013 entry, we heard that Language Line acquired Teleinterpreters and Lingo Systems, thereby changing its numbers for 2007. In the same vein, euroscript acquired companies in 2007, a fact reflected in our graveyard graphic from our September 2007 report about market consolidation but not yet factored into our market model for the year. We'll update that model in April. Before then, you can expect more deals to happen, adding more tombstones to the graphic and more revenue to the more acquisitive companies in our sample.
- Simple extrapolation. Our calculation, as noted, was merely a straight-line projection based on growth over the last 3 years. We mentioned -- but didn't factor in -- a range of scenarios likely to change the growth constant. For example, we could have added an accelerating derivative to make the curve non-linear. We could have added the possibility that the euro could become the new pound (worth US$1.80) while the pound sterling could return to its old 5x multiplier over the dollar. That would certainly shake things up. These are just a few of the things we didn't include. Of course, we noted the difficulty of continuing growth because this simple straight-line projection violates some basic rules of thumb relative to growth -- that the bigger you are, the harder it is to grow. It's "easy" to double growth when you're turning over US$40 million per year, but nearly impossible if you're pulling in a few hundred million dollars per year. Issues such as scale, translation automation, vendor management, and the average size of translation contracts all mitigate against such growth.
One of the messages we got summarized our posting very well: "To summarize, you said: The industry is very volatile; history is a poor indicator of future trends (many good examples of merger and acquisition, government mega-contracts). But, what the heck, here's an extrapolation out for the next 5 years. Methinks you're going to be fielding a number of irate calls from companies you've shown flat-lined." Stay tuned for our updates about language service providers.
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Keywords: Localization, Translation |
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