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Does Size Really Matter? A Look at Cross Border Partnerships in Europe

By: Dirk Loehn (Locatech)


03 January 2005

Yes, size does matter. At least when you look back at the consolidation process in localization. Those who remained small or mid sized enterprises saw a rapidly changing market that divided localization into small SLVs and large MLVs. But from todays perspective, this black and white view has turned into a much more colorful landscape of localization companies that act individually or jointly and regularly provide a more or less global service offering, whatever the actual size of the company.

Is it possible to create a partnership with other companies and offer added value through a global service offering, while at the same time maintain the strengths and advantages of a small to mid-sized localization company? Certainly, but it ain&rsquot always easy. It is neither simply subcontracting non-core language services to freelancers or subcontractors, nor a full-fledged merger or acquisition. What it requires is a true partnership attitude, and a good deal of mutual trust and open mindedness, especially in a cross-border partnership with different native languages and mentalities.

To build a successful partnership, make sure you know what you want. Within a partnership, power and control is distributed among partners, so decision making is much more like a corporate board structure than an SME with one owner or majority shareholder. All partners in a partnership need to have a clear, common view about where they want to go and how to get there. And remember that a partnership is not just about money; it is first and foremost about people working towards a common goal. This can lead to problems if executives used to leading their companies don&rsquot apply their skills to building a successful team with other executives. Decisions always need to be taken jointly.

If all partners have a common strategy, a partnership setup can be a great vehicle for delivering business success. It addresses the client's need for size, while integrating the individual strengths of each partner. And it offers major benefits to partners, ranging from cost savings through shared investments (e.g. in marketing, vendor management, or quality processes) to simply sharing best practices. Moreover, a partner setup can maintain much of the flexibility that individual partners contribute &ndash a non-negligible asset for software localization clients, yet almost impossible to maintain in larger corporate structures.

If you plan to set up a cross-border partnership in localization in Europe, with partners you trust and who share a common goal, take a look at a special form of legal setup: the European Economic Interest Grouping (EEIG). The European Economic Interest Grouping is the only transnational legal instrument for co-operation between entrepreneurs in Europe. It's flexible, free of red tape and offers many fiscal advantages. The main purpose of an EEIG is to promote the economical activities of its members, thus it can be the ideal type of joint-venture to promote international localization services.

  • EEIG members remain individual companies, yet can offer their common services through a common EEIG umbrella.
  • EEIG members are jointly liable with regard to services offered to clients through the EEIG, which addresses a basic liability need clients have.
  • An EEIG can be easily set up in any EU country.
  • Since the EEIG is based on European law, it requires members to be part of the European Union. However non-EU based companies can become associated with an EEIG or join an EEIG through a European subsidiary.
  • An EEIG is not subject to any form of company taxation. This is due to the fact that an EEIG is not meant to generate a profit, but either uses profit for shared investments or distributes it to its members.
  • Overhead created through an EEIG is very limited, e.g. the EEIG can be located at one of the member sites, and it can be administered by already existing personnel. Furthermore, members may, but are not required to, lay in capital to form the EEIG.

If you're interested in the EEIG concept, check out the European EEIG Information Centre. It lists competent contacts and a wealth of additional information on the subject.

After studies in computer science and work at Microsoft as a software localization specialist, in 1993 Dirk Loehn founded and still manages Locatech as a software localization company in Dortmund, Germany. In 1999, he co-founded LCJ EEIG to form one of the largest partnerships in localization in Europe.

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