Not Only Translations: About the LSP Sector in Four Acts

Last Updated April 27, 2017

Can we help redefine the LSP sector?

The demand for translation and localization services continues to grow. 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.

Here’s how that plays out in four acts.

Act I – IPO

Before 2015, there was no point in looking for Polish translation agencies on the Warsaw Stock Exchange. That’s until Krakow-based Summa Linguae decided to take this step.

Krzysztof Zdanowski, our 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. That 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 – LSP Sector Acquisitions

Zdanowski admits that a business model based on acquisitions predates Summa Linguae. It’s no surprise, then, that within two months from launch, 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 develop our own procedures and schemes, but each transaction is different, and thus it needs to be individually negotiated. (Krzysztof Zdanowski)

Subsequent take-overs increase the company’s production capacity, build value for investors and customers, and supplement the portfolio of services.

This later allows 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. That takes us to the third act.

Act III – New Pathways of Organic Growth in the LSP Sector

As we have already mentioned, the demand for translation services will certainly not diminish in the near future. But the market is increasingly more competitive, and that’s why it’s important to think prospectively and invest in market segments that are less obvious.

For instance: post-edited machine translation already generates approximately 4% of revenue on the global market. Summa Linguae has these resources and, what is more, develops its own machine translation engines that enable the company to offer its services at a low price.

We post edit and verify these translations 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 also launched another line of business, namely outsourcing. The offer is for large western translation agencies. There, 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. (Krzysztof Zdanowski)

Act IV – Global Presence

Outsourcing to large foreign translation agencies would not be possible if it were not for 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 (Mayflower’s home) are 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.

A cooperation and investment agreement with Mayflower extends Summa Linguae’s services in which the Indian company specializes:

Summa Linguae uses 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 translation agencies by not resting on its laurels.

It has already started researching new markets and looking for another partner – preferably in North America or Western Europe.

Further reading: Why LSPs are Taking the Lead in Data Collection

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