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Latin American Language Services Industry Overview


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ClientSide News Magazine pictureThe Latin American language service industry is growing up. A clear sign of this is that Latin America's first major international industry event for the translation and localization industry was held in Buenos Aires in November. Localization Latin America was organized by the Localization Institute and Multilingual Magazine (the team behind the successful Localization World conferences) and attracted some 170 or so people from many different countries.

Before taking the leap to start a language services company in Latin America in 2003, I spent over 15 years on the client side of the business, including vendor management roles in major IT companies like Oracle and Microsoft. Hopefully merging my understanding of the buyer side of the business with a growing knowledge of the regional marketplace, this article sets out to help potential language service buyers to better understand the market and the main inhabitants of the supply side "eco-system", and provide guidance in terms of finding a partner to match requirements and expectations.

The Latin American market

There are two main target language markets in the region - Spanish and Brazilian Portuguese. Spanish is larger in overall scope as one of the largest and fastest growing languages in the world. Brazilian Portuguese seems poised for exceptional business growth. Brazil is one of the largest individual markets in the world and with a current dynamic development pattern it looks set to finally deliver on its long-promised potential in the global economy.

Argentina is dominating the region for services into Spanish and well on its way to become a global powerhouse in this respect. A fragmented local industry dominated by freelancers and small agency operations meant the country was a marginal contributor in this respect up until only a few years ago, especially when compared to the dominant and more mature market in Spain. The country is today transforming itself and increasingly getting recognized not only for cost efficiency, but also for a growing number of companies and improved service standards. Argentina benefits from strong "raw" translation resources thanks to the many universities featuring translation programs. Low costs as a legacy from its financial meltdown a few years back provides another key advantage. This has eroded over the past years with local inflation well above international averages, but costs remain competitive in global terms. A convenient time zone for collaboration with both Europe and North America, as well as a strong cultural alignment with those locales, adds further appeal. The city of Rosario, is generally regarded as the cradle of the national language industry as this is very the first company entities appeared. It remains an important industry hub, but has in recent years been challenged by the capital city of Buenos Aires as the focal point, with Cordoba the other center of any significance. Outside of Argentina, there is relatively little happening, with some smaller sized operators in Central America, Peru and Chile. Surprisingly, there is not a single GALA member in the large Mexican market place, perhaps indicative of a lack of skilled resources and a challenging cost competitiveness scenario.

Brazil's basic characteristics and its inclusion among the "BRIC" countries mean it has more of a history for language services than other countries in the region. It has however proved a volatile market with a number of local and international companies have opened for business only to close down again. The apparent complexity of simply "making a company work" has created an industry which seems curiously underdeveloped both in terms of the number and size of operators. Sao Paulo is the major business center of Brazil, but does not dominate the local language scene. Legacy issues coupled with educational facilities puts Rio de Janeiro at the fore in this respect, with the southern city of PorFind to Alegre also emerging as third industry hub. The only other noteworthy location in Brazil is Florianopolis (also towards the south), which hosts GeNess - an innovation laboratory under the auspices of the local Santa Catarina University - which aims to help Brazilian software companies reach out to international markets. Outside of these areas, the language industry of this vast country is very underdeveloped.

The eco-system

Seeking a language partner in an emerging market such as Latin America inevitably means challenges when it comes to differentiation between service providers. The market is dominated by individuals and small entities, whereas companies with an enterprise infrastructure are still few and far between. Translation buyers need to distinguish between the services offered by individual freelancers or co-operatives, small businesses and full service companies. As a potential buyer, make sure to choose a partner that meets your requirements in terms of capability and capacity. Compare like with like when it comes to pricing. A freelance network can operate at a fraction of the cost compared to an enterprise operation, but if you need scale, flexibility, reliability and a full set of services, you probably need a solid company infrastructure, not just a company name and a good looking website. There are three broad categories when it comes to options for sourcing local or regional language services - freelancers, agencies and companies.

Freelancers

There are many thousands freelancers in Latin America advertising their services in internet based forums, as well as in other media. A quick search on Proz.com shows some 4.600 based in Argentina and 3.400 in Brazil. As an interesting comparison in terms of Spanish, the same search for Spain yields 6.500 and for Mexico 1.800. The sheer number of resources (ProZ.com is only one of many online freelancer forums) gives an idea of the daunting task of finding the right one.

Published rates vary hugely, but my impression is that the majority of English to Spanish freelancers in Argentina seek rates between USD 0.05 and 0.10 per word, and English to Portuguese translators in Brazil around 20% more. I expect it is often possible to negotiate down 10-20%, perhaps more depending on the size and type of assignments. The wide price range reflects significant fragmentation and a varying degree of translator experience. Those operating at the upper end of the scale typically have relationships with multiple overseas clients, enabling them to obtain a premium on rates. At the other end of the pricing spectrum you find a competitive market, characterized by operators with limited professional experience and a need for increased occupancy levels. Generally speaking, there is likely to be a price/quality correlation, although this is by no means guaranteed.

The obvious attraction about using a freelancer option is that it is likely to offer the lowest unit price. If you find a translator that consistently delivers a good translation it may prove a cost effective solution. Drawbacks include high mgmt overheads, very limited flexibility and high risks from a service and quality perspective.   If you have recurring translation needs, chances are you need to maintain several freelancers on your records to ensure availability when a project needs to be processed. This means establishing a base of resources, including identifying, testing, approving and maintaining such a structure. It is also unlikely to provide a satisfactory solution for larger assignments, especially if you also have a requirement for quick turnarounds. As the service depends on a single individual, processing is limited to cater for only the first step of the workflow typically associated with high quality output - translation, editing, proofreading. An interesting footnote is that more than 95% of test translations performed by applicants to join our company's approved freelancer network fail to meet our minimum quality standards.

Aagencies

This category includes setups with a company profile such as a name or entity as well as a website, but with a very limited infrastructure and less than 10 employees. I also include freelancers operating within in a co-operative structure. There are hundreds in Argentina alone and presumably over a thousand in Latin America. In many cases only the owner (-s) is linked to the company permanently or full time, with other resources engaged on a contract basis, which means that key personnel often perform multiple roles such as QA, project management, business development, etc. This structure extensively avoids having to pay social fees/taxes and take on other employer responsibilities, and thus requires lower fixed costs and operational overheads. Although these setups claim a structured solution, in many cases they offer little or nothing more than a management layer on top of a freelancer network. Word rates for agencies in Argentina tend to range from USD 0.07 to 0.10, in Brazil typically 10-20% higher. Discounting arrangements are possible on a project basis.

The principal advantage with agencies compared to freelancers is that they can coordinate multiple resources to provide some scale and flexibility. Serious operators also incorporate a more complete translation process. Lower operational overheads mean they can offer lower prices than companies. Key drawbacks include limited scalability/flexibility as well as restrictions in their service offering. Complementary services such as DTP/graphics, localization engineering/testing, project management, may not be available, handled by non-specialist resources, or outsourced to third parties, thus generating service and quality risks. The lack of infrastructure also puts question marks around sustainability and reliability.

Companies

This category includes registered companies with a solid and stable infrastructure, more than 10 employees, defined processes and business practices, as well as advanced technical solutions for networks, systems and security. Apart from a comprehensive language processing structure, complementary services such as DTP/graphics, localization engineering/testing, project management, are typically handled by in-house specialist resources. They may also offer services into Spanish as well as Brazilian Portuguese (and possibly also further language combinations), although hardly any have their own production setup in both native markets. (To the best of my knowledge, Idea Factory Languages is the only independent regional LSP that does.) There are perhaps a handful of such companies in Argentina and Brazil respectively, with various sizes in terms of revenues, employee numbers and service offerings. Prices will be in the region of USD 0.10-0.15 for Spanish and 15-20% higher for Brazilian Portuguese. Discounting options are often obtainable on larger projects or targeted annual collaboration volumes.

Key advantages of working with a company include scalability/flexibility, a complete range of services, and dependable service and quality standards. The availability of complementary services such as DTP/graphics, localization engineering/testing, and project management can also help to streamline processing and increase efficiency. A more solid business and finance infrastructure also brings a higher level of reassurance in terms of sustainability and overall reliability. The only drawback is that higher overheads required to develop and maintain a company infrastructure also mean higher prices. Note however that price and cost are two very different concepts, and a low price can bring about a high total cost, and vice versa.

Conclusion:

The most critical success factor is to understand your requirements and ensure you select a partner with the right characteristics to successfully meet them. If you only have to process smaller, non-critical assignments and have the administration and management bandwidth to deal with individuals, the freelance option may well be a smart choice. Keep in mind however that the output is likely to require further QA processing to ensure consistent high quality. Naturally, translation agencies/companies are interested in services supplied by freelancers. An agency may be suitable for clients who need to process small to medium sized, non-complex, assignments, and for whom price is as a key decision making factor. If your requirements are more challenging in terms of volumes, deadlines, technical complexity, quality standards, etc., or if you want to minimize internal overheads, a company is likely to prove the optimal solution. Remember that it can be difficult to differentiate between the supplier categories, and even more so to compare different operators within in the same category. Always try to define what areas are critical to make your business successful and look beyond the web sites and price lists. The partner that offers the best alignment with your needs will most likely prove to be the most cost effective solution.




Published - January 2009




ClientSide News Magazine - www.clientsidenews.com







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