The Economic Picture for the Industry: Tepid Growth
13 September 2010
The GALA quarterly survey on economic indicators has become a valuable tool for members to gauge overall industry trends and to measure their own businessâ€™ metrics against those of peer companies. Since the end of 2008, GALA has asked members to measure their growth in a number of key areas, allowing the association to create a picture of the broader economyâ€™s impact on the language and localization industry. Additionally this quarter we surveyed members on their satisfaction with the association.
The Economic Picture: Tepid Growth
The story for the third quarter of 2010 is more of the same. While demand and revenue are no longer declining, there also was not much growth over the past quarter. The traditional economic measurements we use—increase in demand, revenue growth and hiring—were essentially flat, with a solid third of respondents indicating no change from the past quarter. The most positive indicators from the past quarter were the continued decline in layoffs and the somewhat tepid growth in revenues.
Will there be the infamous ‘double dip’ recession in the language and localization industry? Maybe not, but the recovery is not bullish either.
Demand for Services and Products
Actual increase in demand for products and services in the past three months did not keep pace with growth reported last quarter, but, at the same time, fewer respondents reported a decrease in demand for their products or services. Only 42 percent of respondents reported an increase in demand (down from 50 percent last quarter), which is significantly less than the 77 percent who last quarter said they expected to see greater sales this quarter. But those who indicated reduced demand also shrank from 34 percent three months ago to 27 percent this quarter. That is especially encouraging given the numbers from one year ago, when almost two thirds of respondents (65 percent) showed a decrease in demand. Regionally, Asia had the highest number of respondents indicating an increase in demand (62 percent), as well as the highest number reporting a decrease (39 percent) (i.e. all Asian member respondents saw some kind of change over last quarter unlike their counterparts around the world).
Figure 1: Actual demand in the last three months (worldwide) in response to: “In the last three months, have you noticed a difference in demand for your language services or language tools that you can attribute to the economy?”
We also ask respondents to foretell demand for the next three months. Again, optimism reigns, with 68 percent expecting somewhat or greatly increased demand (down from 77 percent last quarter), and only 10 percent believing they will see reduced demand. North and South American respondents were also bullish, with 67 percent of both regions expecting growth.
Figure 2: LSPs anticipated demand in the next three months (worldwide) in response to: “What demand do you anticipate in the next three months compared to the last three months?”
Hiring and Layoffs
Hiring did tick up slightly this quarter. Globally, 53 percent of respondents hired at least one new worker in the last three months. By geographic region, hiring was highest in North America and South America, with 67 percent in each of those regions reporting new staff. This was particularly positive given the lack of hiring in those regions last quarter (North America hiring is up 29 percent; South America up 23 percent). The numbers were the lowest in Asia, the only region where the number of companies that did not hire outpaced those that did. However, 73 percent of Asian respondents had reported hiring new staff last quarter, so they may just be catching their breath this quarter.
It seems that each positive indicator during the recovery is counterbalanced with a less encouraging statistic. Respondents indicated that the pace of hiring growth last quarter will not continue in the coming three months. The anticipated hiring for the next three months dipped in every region from second quarter. Overall, 52 percent expect to add staff, which, although not bad, is much lower than the anticipated plans last quarter, when 61 percent of respondents globally expected to hire, including 78 percent in South America and 75 percent in North America. Whether this disparity is due to inaccuracy in forecasting or to actual issues with the recovery is unknown.
Meanwhile, on a positive note, layoffs are greatly reduced from a year ago, when 13 percent reported reducing staff through layoffs, and from the first quarter of 2009 when a whopping 24 percent indicated reduced staff. This quarter that number dipped to 6 percent. Furthermore, three regions—North America, Middle East/Africa and South America—reported no plans for layoffs in the next three months.
Revenue growth among respondents was relatively flat in the past three months, with 37 percent reporting that revenue “stayed more or less the same.” But the upward revenue trend did continue from last quarter, which was the first time since 2008 that growth outpaced decline. This quarter 42 percent reported an increase in revenue (up from 39 percent last quarter), and 21 percent reported a decline (down from 25 percent last quarter). Slowly but surely, the revenue trajectory is headed upward.
Figure 3: Actual revenues (worldwide) in response to: “In the last three months, my revenues have increased, decreased, or stayed the same.
GALA also surveyed the membership on their satisfaction with GALA as an association and the value of membership. Overall a significant majority of members are “very satisfied” or “somewhat satisfied” with all GALA programs listed. The programs with the highest level of satisfaction are the GALA website (89 percent satisfied), the GALAxy newsletter (88 percent satisfied), collaboration and networking opportunities (80 percent satisfied), the Language Technology and Services Directory (79 percent satisfied), and the GALA Webinar Series (77 percent satisfied). Other interesting findings from the member satisfaction portion of the survey include:
- Members overwhelmingly see GALA as the place to discuss industry issues with peers, with 70 percent agreeing with that assessment.
- More than half of respondents have gained new business or met new business partners through GALA.
- A full 50 percent of respondents did not rate LocalizationCAREERS.net, which indicates a need for the association to make members more aware of how they can benefit from the job site.
This feedback, as well as other member comments published in the full survey results, provides GALA with valuable information regarding member wishes and association direction.
The Q3 2010 survey was completed by 78 GALA member companies. Respondents were spread across all geographical regions with the most coming from Europe. The association began conducting quarterly surveys of its members in 2008 in an attempt to increase the overall industry knowledge base, and it will continue to focus surveys on information our members want to know. We encourage your participation in these surveys as the collective data is useful for all members!