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Translation Commoditization: Some Recipes for Defending Ourselves

By: Gordon Husbands (Wordbank) - Wordbank Limited

26 June 2006

If Oscar Wilde were alive and well and working in the localization business today, he would probably describe the Procurement Executive as a person who knows the price of everything and the value of nothing.

No doubt this has been the perennial lament of salespeople and suppliers in every emerging industry since the Stone Age and the early beginnings of trade in flint axe heads. But, like any other maturing industry, our business cannot avoid the onset of commoditization and the emergence of standards, metrics and benchmarks or the inevitable competitive shakeout.

Certainly, the degree of scrutiny and the intensity of demands by the "Procurement Police" have accelerated over the last few years. Since around 1999, translation costs have been visible on the radar (and the spreadsheets) of most corporate vendor management or procurement departments. Prior to this, the majority of the purchasing decisions were made by the actual customer or often, in our particular field of marcoms localization, just bundled into the costs of a third-party supplier such as a design agency or even the printer or print management company.

What is driving this headlong charge into commoditization? Of the many factors, I selected just three major ones of particular relevance to our industry:

  1. Globalization: the inexorable drive towards globalization (a visible example of which has been the number of WTO conferences in recent years resulting latterly in the admission of China) and the rapid increase in the number of viable economies.
  2. World economy: the volatility of the world economy over the last ten years has forced many companies to look for drastic innovations, such as large scale off-shoring, to reduce cost and capture a profitable share of their traditional markets.
  3. Technology: Pandora's Box is well and truly open and the world knows (or, worse, they think they know) all about machine translation, translation memories and GMS. Very high expectations have been set on the impact that these tools can have on translation and project management costs.

Here are a few defensive strategies to consider. The ultimate choice, is of course, yours:

  1. Sell up and get out. Take the money and sell to one of the bigger acquisitive competitors.
  2. Embrace it! In a commodity market, the supplier with the lowest cost base wins (note: not necessarily the lowest prices). Continually drive out cost and inefficiency from your supply chain.
  3. Milk your cow! Keep your prices high and cling on to those customers you have 'over a barrel' because you own the TMs, the glossaries or the archive until you or your customers throw in the towel.
  4. Cut prices! Keep cutting prices until you self-destruct.
  5. Extend the offer/Add value. Keep extending up the value chain, developing and delivering services that are provided by both those above and below you in your customer's supply chain.

As we face the beast of commoditization, we might bear in mind the words of George Bernard Shaw: "The power of accurate observation is commonly called cynicism by those who have not got it." Or in the more familiar vernacular "don't take your eye off the ball"!

Gordon Husbands is VP of Worldwide Sales and Marketing at Wordbank. He can be contacted at Gordon_husbands[NO...SPAM...PLEASE]wordbank.com. Wordbank is a specialist marketing communications localization company based in London and Denver.