Not only translations – about the LSP sector in four acts

Last Updated April 27, 2017

The demand for translation and localization services continues to grow and perhaps no one can imagine a situation in which it could dramatically decline. For this reason, not only is this sector dynamically developing, but is also extremely competitive. Therefore, owners of translation agencies have to look for new development pathways. Our question is: can the LSP industry be redefined?

Act I – IPO

Before 2015, there was no point in looking for Polish translation agencies on the Warsaw Stock Exchange until Krakow-based Summa Linguae decided to take this step. Krzysztof Zdanowski, its CEO, comments on this decision:

Our IPO on the Warsaw Stock Exchange had been provided for in our development strategy for quite a long time. First of all, we have better access to capital, which makes our strategy more flexible. Moreover, as a public company, we are characterized by high transparency of action, which translates into trust of investors and customers. This was also a response to an observable market pattern – we had noticed that companies which aspire to take over a significant part of the market through mergers and acquisitions tend to go public. The LSP market is not as popular as others, which may be the reason why many people forget that translation agencies are often companies with global potential, hence their presence on the stock market should be of no surprise.

Act II – Acquisitions

Zdanowski admits that the business model based on acquisitions had been developed yet before Summa Linguae was founded. It is no surprise then that within merely two months from the launch of the business, Summa took over two translation agencies. Another four acquisitions were completed within the next three years.

Mergers and acquisitions are a trend which has been dynamically developing among West European and American translations agencies since the early 2000s, so we rely on a well-known and proven model. Of course, we have developed our own procedures and schemes, but each transaction is different, and thus it needs to be individually negotiated.

Subsequent take-overs are intended to increase the company’s production capacity, build value for investors and customers and supplement the portfolio of services. The thus achieved economies of scale allow later for offering services of a higher quality at a lower price. Obviously, building capital in such an abrupt way makes sense only when it is accompanied with a well-thought-out strategy of organic growth. In this way we move on the third act.

Act III – new pathways of organic growth

As we have already mentioned, the demand for translation services will certainly not diminish in the near future. Yet the market is very fragmented and increasingly more competitive. That is why it is important to think prospectively and invest in such market segments which are less obvious (thus not so much exploited yet) and necessarily use technology which will define the future value.

For instance: post-edited machine translation which already now generates approximately 4% of revenue on the global market. Summa Linguae does have such resources and, what is more, develops its own machine translation engines which enable the company to offer its services at a low price. Such translations are obviously post edited and verified by a translator in terms of content, terminology and language. By deploying technology, the translation time gets significantly shorter, while the quality of translation is constantly under control.

Summa Linguae has launched also another line of business, namely outsourcing. The offer is aimed at large western translation agencies for which the costs of running auxiliary departments dealing with project management, administration and HR are very high.

The cost of running a project management department for a medium-sized translation agency in England or the USA may be reduced by approximately 30%, provided the agency decides to outsource these resources from Poland. For them this means savings, while for us it is a brand new line of business which has not been exploited yet on a commercial basis anywhere in the world. Our clients will have at their disposal dedicated project managers who will work in their ICT and CRM systems. Everything is based on procedures ensuring the highest standards of secure storage of confidential information – comments Krzysztof Zdanowski.

Act IV – global presence

The whole project of the service outsourcing center for large foreign translation agencies would not be possible if it were not for cooperation with Mayflower – a translation agency based in India. Krzysztof Zdanowski emphasizes that this cooperation will be based not only on service outsourcing:

India is a market with enormous technological potential. Both Krakow and Bangalore (where Mayflower is headquartered) are recognized as national outsourcing centers and cradles of new technologies in the region. Each software or application needs to be translated and, first and foremost, localized, i.e. adapted to the target market. Given the forecasts (6.3 billion users of smartphones and other mobile devices by 2021), this is a huge chance for language service providers. Moreover, cooperation with Mayflower enables us access to experienced translators of regional languages.

Conclusion of a cooperation agreement and an investment agreement with Mayflower was aimed at extending the offer of Summa Linguae with services in which the Indian company specializes: translation and localization of websites, software and mobile application as well as their testing. Summa Linguae wants to use the experience of its partner to build an offer for new customers interested in outsourcing services in order to optimize costs and provide translations in less popular language pairs involving Asian languages.

Although the LSP sector is a stable one, there is certainly no room there for stagnation. To be successful on this market, you have to keep looking for new development pathways, diversify the offer and draw inspiration from those regions of the world where translation is not just a business for beginners. Summa Linguae paves the way for other Polish translation agencies and not rest on its laurels. It has already started researching new markets and looking for another partner – preferably in North America or Western Europe.

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