GALA's Member Pulse Survey, Q1 2010: Economic Recovery Remains Slow, Especially in Asia and Europe. 2010 Begins with Mixed Results, Mixed Growth
12 March 2010
For the eighth straight quarter, we asked GALA members about the world economy and its impact on their business, allowing the association to create a picture of the broader economy's impact on the language and localization industry.The Economic Picture
When we began asking members about economic impact in the second quarter of 2008, there was a general downturn in North America, but most members were continuing to see strong growth worldwide. That picture changed one year later, in the second quarter of 2009 when all data points clearly showed a negative impact of economic pressures on members in every region of the world.
The question going into this New Year was whether companies are now seeing growth after such a difficult year. We received some pushback this past quarter regarding the survey approach, with some saying that the questions posed were too negative—that, in fact, we are not in a "global financial crisis” impacting all regions. Yet, while some regions such as South and North America are seeing some positive growth, overall the responses we received throughout the survey were decidedly mixed.
When asked, “Is your business directly impacted by the current global financial crisis?” almost three quarters of all respondents (74 percent) answered yes. That number was, in fact, two points higher than the quarter before. In fact, after declining for two straight quarters, the impact actually went up this quarter, speaking to the difficulties GALA members are still experiencing. The biggest shift was in Asia. After declining from 85 percent in the second quarter of 2009 down to 57 percent in the fourth quarter, the impact shot up to 80 percent among Asian participants this quarter. The other regions held fairly steady. The European respondents reported a 73 percent impact (two percentage points lower than fourth quarter 2009), and North America stayed the same at 78 percent. South American respondents experienced greater impact than the fourth quarter (63 percent rather than 57 percent in the fourth quarter).
Respondents from the Middle East and Africa do not report a decrease in impact yet either, with all respondents from that region reporting that they continue to experience direct impact.
The demand for language services or tools remained roughly the same as the fourth quarter. Exactly half of respondents reported reduced demand, which is slightly more than fourth quarter 2009, though significantly lower than the peak of weak demand in second quarter 2009. But there was not an increase in demand quarter over quarter—that number stayed the same. Thirty-nine percent of respondents reported an increase, which shows improvement over the third quarter of last year when 18% reported increased demand, not to mention the second quarter of last year when only nine percent reported an increase in demand.
When asked what demand they anticipate over the next three months, participants expressed significant optimism. Worldwide, 70 percent expect somewhat or greatly increased demand, up from 65 percent in the fourth quarter, and completely flipped from a year ago when 78 percent of respondents expected reduced demand. Asian members are particularly optimistic, with 90 percent anticipating greater demand and 10 percent unsure. Significantly, while 33 percent of North American respondents and half of Middle East/African respondents do not expect any change, very few respondents from all regions predict reduced demand (only 10 percent).
Layoffs continue to trouble the industry with that number remaining unchanged from the fourth quarter. Nineteen percent of respondents reported layoffs in the last three months. That number remains high, especially after dipping to 13 percent in the third quarter of 2009. Layoffs appear greatest in Europe, with 22 percent reporting layoffs, and fewest in North America (11 percent) and Middle East & Africa (no layoffs).
Hiring continues but not as ambitiously as respondents had anticipated. While 58 percent had said they would hire this quarter, 52 percent actually did, slightly fewer than actual hiring in the fourth quarter (55 percent). Hiring was strongest in North America, where 67 percent of respondents said they brought on new staff. Half of respondents in Asia and South America hired and 52 percent in Europe. There were no staffing increases reported among the Middle East & Africa respondents.
Employment growth in the next three months looks about the same as the last quarter with 55 percent reporting plans to hire. The most hiring is anticipated in Asia, with a full 80 percent of respondents reporting goals to bring on new workers. Hiring is still off from highs in second quarter 2008 when a staggering 78 percent of member respondents reported having expanded their workforce the year prior.
Revenues seem to have stabilized a bit this quarter with 42 percent reporting they stayed more or less the same. South America had the best revenue results; no respondents from that region reported a decrease in revenue. Asian and European member companies have experienced the most loss in revenue—40 percent in Asia reported revenue decreases; 38 percent in Europe. Meanwhile, general optimism for the outlook over the next three months remains high, though it is a bit deflated from the second half of 2009. This quarter, 62 percent of respondents voiced general optimism, down from 71 percent in the fourth quarter and 66 percent in the third quarter, but significantly higher than one year ago. The most optimistic respondents were from South America (100 percent optimistic) and North America (78 percent optimistic).
The Q1 2010 survey was completed by 80 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.
Members may download the complete results at this link.