With a Clear Vision and His Feet on the Ground
Mark Homnack, Founder, President and CEO of SimulTrans, has seen his competitors come and go… in fact in the year 2000, on a panel given at a LISA Forum in Silicon Valley, he predicted the demise of half the companies on his panel that day. And, he was right!
Mark continues to run the company he founded with only $50 in 1984 with a stable hand and a clear vision. SimulTrans is now the world's largest privately held localization services company. We spoke with Mark earlier this year and found that he hasn’t changed, still candid and very forthright as to where the industry has been and where it’s going.
You’re known for having a rather astute and unique perspective on the GILT industry. Where does this come from?
There’s really no magic to it… I’m now an old hand at this business, if not according to my age, at least in terms of when I started in 1984. If you look at the other CEOs in our industry now, most, if not all, have been in the business probably half of my time. Also, I’m free to say what I want since SimulTrans continues to be independent and privately owned.
What are the biggest changes in the GILT industry since the early ‘80’s?
For one thing it wasn’t called the “GILT” industry then; it was called the “translation” industry. The impact of software and what it meant to “translate” a program was just beginning to dawn on all of us, clients and vendors alike. The term “localization” was not coined until several years later. There wasn’t even a localization association until LISA was formed in 1990.
One thing hasn’t changed, though, and that’s the fact that this industry has always been consolidating; it’s always been fragmented since the early days. I’ve seen the fragmentation probably more than anybody in a company-leading position from the service side.
How has all of the consolidation during the last decade affected your business?
I think there are different levels of consolidation. On the client side, there’s been a lot of consolidation, and a number of our customers have gone away, or give us much less business because they have cut back drastically on localization.
From the vendors’ side, the consolidation has helped us, in that there are far fewer competitors. Instead of competing against ten companies, with a one in ten chance of winning, we’re now competing against only two or three. From a purely statistical perspective, it is much more advantageous for us in terms of our chances of winning. And if you look at our win-rate of proposals, it has gone up dramatically over the last year.
What’s the trend in terms of localization spending?
Customers are not spending nearly as much as they were on localization. There are several factors: Sept. 11th, the economic downturn, a desire to strengthen balance sheets, etc. What’s extremely worrisome is that companies have let localization staff go, and after not localizing nearly as much for the past few years, people are starting to talk like they did ten years ago, i.e., “Maybe we don’t need to localize after all.”
So, what you’re saying is that perhaps many of the early adopters in localization are sliding backwards from the top of the bell curve? Have they taken localization in-house or progressed to the point of producing global products that don’t require as much external localization support?
What I’m saying is that our future growth in IT localization will not come from the high-end, e.g., IBM, Microsoft, SAP, Oracle, etc. It will come from the 500 or so much smaller companies in hardware, software, networking, cards, etc. However, I think it has been very tumultuous for 90% of the companies out there, and I think that’s reflected by the NASDAQ in terms of what has happened to its aggregate value.
Outside of IT, the medical sector has shown growth and will continue to do so. That’s in part why Lionbridge bought Harvard Translations. Another promising sector is retail fashion with companies like the Gap, Land’s End and L.L.Bean that you would not expect to be translating, but who are.
Financial services is a great sector that I think some players in our industry, such as TransPerfect, understand very well. The business there is much more transactional: you have smaller increments more frequently, creating a larger market, and thus a larger revenue stream.
What about regional opportunities? We see tremendous growth opportunities in Asia, as substantiated by our recent Asian Globalization Resources Survey. Will this cause your revenue stream to be more focused by region and language?
That’s a good question. Over the last decade, our main language has been Japanese. Japan’s GDP still represents around 15% of the world’s total GDP. Our customers will frequently spend two or three times as much for Japanese as for German, which is the second most important language by number of pages translated. Italian is no longer requested nearly as much, while Spanish is still important because of Spain and Latin America.
However, going forward, the writing is on the wall, so to speak. Shipments of PCs within China now exceed those within Japan, and almost all of our customers require Chinese translation. That is where the growth will come, most definitely.
Are there additional challenges for localization into Chinese, besides the technical issues?
The biggest challenge is the same as with Russian, i.e., the cost of labor in those two markets is so low that it’s very hard for any of us here in the West to touch them. In China, larger companies usually have the work done internally by their offices in Beijing or Shanghai.
For a newcomer to the business, what is the biggest difference between localization for Chinese and localization for Japanese?
Japanese customers are always actively involved in the decision-making regarding translation and localization. However, the Chinese are not that way, not as control-oriented. They do not put up the fights that the Japanese do to get the translation done in China. They don’t argue about control or power. They just want to talk about the rates.
The biggest similarity?
Japan and China lack three things in terms of localization: (1) they do not use translation memory tools as much; (2) they do not have the same knowledge of process; and (3) they tend to avoid outsourcing and to do much more work internally.
The whole mindset of doing translation in Asia is much different, and therefore, can add to the cost over a longer period of time if you analyze the entire process, rather than just individual projects. It very well may make sense to do the work in the United States, the U.K. and/or Ireland to gain the benefits and cost savings from professional project management and global quality assurance and control. At some point, though, you will need to be in China offering services at local prices.
How important do you believe it is for this industry to bring the GILT message to the boardroom?
Why, I think that in many cases it is in the boardroom with newer companies. The public companies aren’t really that interested in localization. They have evolved to the point where they’re just interested in international sales and view localization as one aspect of the VP of Engineering’s job.
Pre-public companies, however, are another story, with their boards going so far as to review individual expense reports in order to ratchet down spending. Obviously, this includes large internationalization and localization projects.
What is the current profile of a “typical SimulTrans customer?”
Perhaps a bit different than you might think. We in the localization industry sometimes take IBM or Microsoft or Oracle as a representative example when we shouldn’t. Even billion-dollar companies like Cisco probably spend more for everyday items such as postage and beverages than they do on localization. Just think of the incremental revenues that they realize off of localized products and services, while the drinks and postage are simply costs of doing business!
Our typical customer does between $50,000 and $500,000 of translation or localization per year. Most of the companies that SimulTrans depends on, and that Lionbridge and SDL and WeLocalize also depend on, are really not at the MBA (Masters of Business) level when it comes to localization. They’re in elementary school. They’re very basic. You know, the two most frequently asked questions still are, “How much will it cost?” and “How long will it take?”
And that’s not a problem for us because there are many other peripheral issues that are very interesting. There are probably fifty topics that you need to know about when you discuss localization with a company. For example, I recently visited a customer that’s doing very well in the messaging sector. With between US$ 50 and 100 million in revenue, they spend around $300,000 on localization. And their focus? The tools that they had created to ensure that links are not broken when we upload our files. And that’s typical.
We need to keep our feet on the ground and concentrate on what these customers need and want, regardless of what the high-end companies are talking about.
What standards are important to companies such as these?
The main open standard that I hear about 50% of the time is, “Do you guys use Trados?” It’s not really an open standard, but it’s the only standard in our industry, as far as I can tell. There’s TMX, but it’s only important to vendors, not clients. There are certain sectors, e.g., the automotive sector, where XML has been a secret player and helped to reduce translation and documentation costs. Still, I would say that only one out of every thirty customers might want to talk about XML with us.
The needs are still very basic and not much different from what they were five or ten years ago. And all this XML, TMX, you know, global portals, is not interesting to 90% of the customers out there. Sorry.
Then how do your customers deal with content management and legacy data?
In a word, they’re not, from what we can tell, at least not with open standards or off-the-shelf solutions at this point. With smaller documentation sets, I just don’t see documentation departments being funded well enough to make a sincere commitment to XML. I see a lot of these companies doing their own customized management of their web sites, and not necessarily spending the amount of money that they were in customized, external solutions.
There is on-going discussion as to whether we’re commoditizing this business. What do you think?
Well, no, I think it’s much nicer than that. I don’t see money and time as being the drivers they once were. Certainly, customers are price-sensitive, just as any customer would be. When you book a hotel room, you prefer to spend $150 rather than $300. I think that our business is a service business and is essentially about responding to the customer. It’s just like being a law firm or an accounting firm or an advertising firm. It’s not about tools and technology. It’s about how you take your car to the mechanic and how much trust you have in believing him that your manifold really needs to be replaced. We’re not commodities in the same way as, you know, buying pencils or some other commodities.
Is there any light at the end of the tunnel?
Yes, actually there is. I am optimistic because our business is real. It’s a real service, and I think people do appreciate it at the mid-manager level, and even at times, at a high level. We increasingly work with companies that are hatched from business plans that have been put together by smart people, and localization has already been anticipated in the budget before the company is funded. There are some amazing companies doing $20 to $30 to $40 million where localization has been planned from the very beginning. They’re just dreams to work with.
Perhaps Silicon Valley, and the venture capitalists in the United States, are somewhat unique because the partners are often not American-born. They’re Indian, they’re Chinese, and therefore, they’re more readily accepting that most of the world lies outside of the United States. Certainly, there has been a big improvement over the last five years in terms of companies thinking about globalization from the very beginning, with architects designing for internationalization. This was unthinkable in the early ‘90’s, and it’s quite a positive improvement.
We delved into the history of the localization industry at the beginning of this interview. Let’s look forward a bit. What do you see in your crystal ball over the next few years?
I actually think that the economy will get worse and that 2003 will be even tougher for the IT sector. I don’t believe that there will be much more consolidation within our industry over the next three to five years. I expect the landscape to remain fairly stable. However, there are a few companies still around in which the VCs now own the company, so we may see some changes in those companies.
Eventually, I see Lionbridge disappearing, maybe being bought by Bowne. Maybe Bowne disappearing, being bought by Lionbridge. As for SDL, if Mark Lancaster remains in the business, they should be fine. He is a very savvy guy making the right moves, and I’m impressed by what he’s done.
As CEO of SimulTrans, email@example.com widely considered to be one of the world’s leading localization experts. In addition to overseeing the company’s global operations, Mark has led SimulTrans’ expansion efforts into localization, major accounts and international markets. He received his B.A. from Williams College, M.A. from Middlebury College and Ph.D. (abd) from Stanford University. Mark may be reached at
Reprinted by permission from the Globalization Insider,
6 May 2003, Volume XII, Issue 2.3.
Copyright the Localization Industry Standards Association
(Globalization Insider: www.localization.org, LISA: www.lisa.org)
and S.M.P. Marketing Sarl (SMP) 2004
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