While the Economy Changes, Pricing Fundamentals Stay the Same
By: Rocío Txabarriaga (Common Sense Advisory)
27 November 2009
Historically, the price of translation has been remarkably stable. Common Sense Advisory noted this first in May 2004 when we compared rates then with the historical record from ten years prior. Last year, we observed a similar range of prices in comparison to 2004 (see The Price of Translation," April 2008).
Over the last two decades, even with the current global economic downturn, prices have stayed largely the same. From our research with both buyers and suppliers, we attribute this stability to several factors – specifically, automation leading to increased leverage, process efficiencies, and competition.
We are now emerging from what many economists have characterized as the worst recession since the Great Depression. Has the language services sector experienced any systematic disinflation? The simple answer is “no.” Our feedback from buyers is that most are paying the same rates as they were before the recession hit, and have not been able to negotiate a drop in prices unless they switch to lower-cost vendors. That’s not to say that they haven’t been trying to get a better deal from their suppliers.
Buyers always demand lower prices, but that’s not the top factor in their decision matrix – it’s only fourth (see “He Said, She Said about Translation,” May 2007). However, language service providers (LSPs) believe that it’s the second most important issue for their customers, and that quality is first. That said, language service providers tell us that everyone is price-conscious.
Most language service providers have already fielded requests for lower rates and chosen their path forward. Understanding that once they drop their prices, it will be difficult to raise them later, we have observed two distinct behaviors:
- LSPs will offer discounts, but not lower rates. While the distinction may be semantic, some LSPs have offered temporary discounts based on loyalty and volume. For example, if a client asks an LSP for a lower per-word tariff, the vendor may grant a temporary price reprieve for a quarter or two “until the economic situation improves.”
- Some LSPs preemptively change the pricing calculus. Anticipating or feeling actual pressure from clients, some mid-tier and large language service providers asked their suppliers – both subcontractors and freelancers – to drop their rates some months ago. However, most smaller LSPs have chosen not to budge, and data from our surveys, conversations with suppliers, and threads on freelancer forums indicate that most freelancers were also unwilling to decrease prices (see “The State of Freelance Translation,” May 2009).
Our recent Quick Take (“Price Pressure in Language Services,” July 2009) offers additional tips on this topic to help buyer organizations reduce translation spending, identify when to user lower-cost and offshore vendors for lower-priority projects, learn how to negotiate with vendors for concessions, discover how to present the big picture to management, and utilize automation as part of an overall strategy to improve quality while staying within budgets.
Rocío Txabarriaga is a Language Services Strategist at market research and consulting firm Common Sense Advisory. Her primary research and advisory focus area for the company is coverage of the Language Services Provider (LSP) marketplace. Ms. Txabarriaga has been involved in all aspects of the language services industry for 20 years, from production to quality assurance to business development, and is a frequent speaker at industry events. She can be reached at [email protected].