GALA MemberPulse Survey Q4 2011
17 November 2011
After showing solid growth numbers in the first half of 2011, worldwide growth for GALA members responding to our survey has stagnated. While the dip is not severe, the results of the survey may point to slowed growth, especially in Europe. Optimism for the future, however, remains fairly strong, and South America is a decidedly bright spot.
The GALA quarterly survey on economic indicators has become a valuable tool for members to gauge overall industry trends and to measure their businesses’ metrics against those of peer companies. This quarter we asked GALA members to measure their growth in a number of key areas, allowing the association to paint a picture of the broader economy’s impact on the language and localization industry.
Demand for Services and Products
The majority of members are still reporting growing demand for services, though less than in the last survey. After a solid 57 percent of respondents reported an increase in demand in the second quarter of this year, demand worldwide slipped back down to 51 percent in the fourth quarter, the same as the first quarter of 2011. Moreover, for the first time in a year, those reporting a reduction in demand increased. The uptick in reduced demand was only two percentage points, from 20 percent to 22 percent, and remains low compared to the last two years. However, the overall picture, with a decrease in demand may indicate an oncoming reversal of the past year’s growing trend.
The main reason for the shift comes from a decrease in demand reported by Europe and North American member companies. While in Asia, the Middle East/Africa, and South America no company reported a decrease in demand, in Europe, 29 percent of respondents reported reduced demand, and in North America 21 percent reported the same. Digging deeper, the numbers show that 57 percent of North American companies reported an increase as well—above the worldwide average. But in Europe, only 42 percent had an increase. The most impressive increase in demand was in South America where a full 88 percent of all South American respondents reported an increase in demand (and 12.5 percent saw no change in demand).
Worldwide Responses to the survey question “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?”
NOTE: Data was not collected in the third quarter, 2011.
Meanwhile, optimism that growth will continue also dipped, but not severely. After peaking at 77 percent halfway through 2010, optimism sunk again, and then almost reached 70 percent again in the second quarter of this year. But this quarter it dipped again, down four percentage points to 65 percent. But the decrease was not significant. Concern about growth rose slightly to 10 percent after reaching single digits (8 percent) in the second quarter of this year.
Responses to the survey question “What demand do you anticipate in the next three months compared to the last three months?”
In terms of optimism, the regional numbers are especially significant. The only companies worldwide reporting an expectation of decreased demand came from Europe. Seventeen percent of European respondents anticipated a downturn in demand for the next three months, and 22 percent expected no change. Taken with the decrease reported over the past three months, these numbers seem to reflect concern in the European market about the overall economy.
Meanwhile, the most optimistic region this quarter was North America with a full 86 percent of respondents anticipating growth. South America and Middle East/Africa were similarly very optimistic, while Asia was a bit more split. Sixty percent of Asian respondents expected growth in demand but 40 percent to not see any change over the past three months.
Hiring and Layoffs
One of the most positive numbers in this quarter’s survey was hiring. Hovering around 55 percent for the past year, the percentage of companies now hiring increased to 65 percent since the last survey. This points to a worldwide improvement in labor numbers. Regionally, South America saw the greatest amount of hiring with 88 percent of respondents reporting new employees. Europe, North America and Middle East/Africa also had strong numbers. Only one-fourth of Asia respondents hired in the second quarter.
Importantly, employee numbers have also grown, validating that staff hires are not just to replace staff who have left. Forty-six percent reported a one to five percent increase in employee numbers, up from 41 percent in the second quarter. An impressive 21 percent of respondents reported a six to ten percent increase in employees, and a full 10 percent show an increase of “20 percent or higher.”
Meanwhile, layoffs held steady at 9 percent, a dip of two percentage points from the second quarter. While layoffs had been as low as four percent in the first quarter of this year, the reduction this quarter is a good sign. Anticipated layoffs (for the next quarter) stand at 7 percent with only European and Asian members expecting any layoffs.
A Dip in Revenues
After breaking the important psychological barrier of 50 percent two quarters ago, revenue growth dipped below that halfway mark again this quarter.
When asked whether revenues increased, decreased, or stayed the same since the last survey, 46 percent of respondents said there was an increase, a reduction of seven points from second quarter. In fact, the revenue number is now flat for the year—the same number of respondents reported an increase in the first quarter. Meanwhile, the figures for those reporting a decrease was also the same as the first quarter and up from the second quarter (20 percent this quarter, up from 16 in the second quarter). However, the revenue numbers are still far better than two years ago when they were the reverse, with far more companies experiencing a decline in revenues rather than an increase.
Responses to the survey question “In the last three months, my revenues have increased, decreased, or stayed the same.”
The numbers by region again showed that Europe and Asia have the biggest decreases in demand and revenue. Both had one-quarter of respondents reporting a decrease in revenues. In fact, in Europe, 8 percent reported they had experienced a full 25 – 49 percent decrease in revenue.
South America had by far the strongest revenue numbers with 57 percent of respondents reporting an increase and none of the South American members experiencing a decline. These results represent an enormous shift compared to a year ago when half of all South American respondents reported a decline in revenues.
The GALA quarterly member pulse survey gives an economic measurement of the industry. Previously distributed every quarter, the survey is now semi-annual. This quarter approximately 28 percent of GALA’s membership of 266 companies completed the survey.