CEO Hernandez on how SDL Is Preparing for the Language Industry’s ‘New Normal’

The ‘New Normal’ was a term coined to describe the state of global economics and finance after the 2008 Global Financial Crisis. Its origin is commonly attributed to Mohammed El-Erian, former CEO of PIMCO, one of the largest bond fund companies in the world.

In the world of language service providers (LSP), Adolfo Hernandez, CEO of SDL, also sees a New Normal emerging for the industry.

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More and more client companies today want to leverage on digitization as a competitive edge, deliver their services digitally, and yet be assured that their digital infrastructure is secure. To Hernandez, digitization and how it has changed the global economy and in particular, the world of content management, will make the old localization tools and workflows obsolete.

“The models, the production, the processes, the technology, the thinking and the ambition that we’ve used for the past 10-15 years are simply not good enough to deliver on what is coming,” Hernandez said at SlatorCon Zurich on December 5, 2017, where he was a speaker.

Watch SDL CEO Adolfo Hernandez discuss what’s next in language services and tech with Slator co-founder Andrew Smart

This process of digitization and globalisation of more and more businesses will increase the rate of content creation and the number of languages it must be produced in significantly. Compound that with the fact the most large enterprises have content siloed across the organisation in various formats, localization will no longer involve just a few languages and be effectively managed by simple, manual tools like emails and FTP.

According to Hernandez, the language services industry will be undergoing what he calls a “root and branch transformation” driven by “an evolution that is being forced upon us”. While he says that this is not going to happen within the next six to 12 months, he is certain that this is the future the industry is moving towards as clients seek to reach the next one billion consumers over the next three to five years.

24/7 uptime for big brands

To SDL, availability is also a key issue when dealing with big brands. Hernandez cited the example of a client who wanted to do a new merchandise rollout for the Olympics, complete with new marketing campaigns and collaterals, as well as a rebranding of their communication touch points – social media, website etc. This amounted to millions of words in tens of languages. The client wanted it all done in two weeks.

So for him, staying competitive as a big LSP means that the concept of working hours and public holidays cannot exist. To service global companies, LSPs should be operating 24/7 using shift work, multiple locations and global sourcing so that they will can service their clients’ need for speed and quality.

This echoes the views expressed by another industry veteran in media localization, Bjorn Lifvergren, CEO and Founder of BTI Studios. Lifvergren also told participants of SlatorCon Zurich that he sees the future winners in his vertical as the big players with a global footprint who can operate and produce around the clock.

Re-engineering for the New Normal

Hernandez said that leveraging on technology and automation to run a big global business is a necessity that SDL has invested in heavily for the last 12 months, and in which they will continue to invest on an ongoing basis.

What Hernandez believes will give SDL a competitive edge is their ambition to use big data tracking, storage and analytics, as well as machine learning, to drive real-time operational dashboards and controls, so that they can one day do dynamic pricing and resource management. He compares this to how Uber allocate cars and prices based on demand and supply to optimize the price vs resource availability equation.

In response to a question from the audience on dynamic pricing of language services, Hernandez said, “The issue is not the pricing engine. The issue is whether businesses have all the data that you need in real-time to be able to do that dynamic pricing?”

To that end, he says that SDL is building systems to track everything that they do, everyone working for them internally and externally, and all the workflow and documents in order to reach their objective of instant, real-time information and analytics.

On the subject of neural machine translation (NMT), Hernandez made it clear to the attendees that SDL was betting big on the technology.

Hernandez said, “(We) are really putting our neural efforts and technology on steroids, to focus not only on innovation, but very quickly how we can package up the technology for our customers.”

“We need to double down on areas like our neural machine translation business”

In another part of the presentation where he talked about SDL’s re-engineering process, he said that, “We needed to sell some businesses that were not core to our vision. We need to double down on areas like our neural machine translation business.”

Delivering profits amidst transformation

SDL’s vision and ambitions are indeed grand and bold. But the challenge is, as Hernandez himself admitted, that they are a big, listed company that has to balance growth and cost during this transformation process.

“We are a public company, so this is always the permanent dilemma of senior executives in a public company” Hernandez acknowledged. “If this was a startup, arguably you could do this differently. What we are trying to do is to build that future, while delivering that present, while managing part of our past at the same time, which is kind of tricky.”

There is also the issue of legacy IT systems that are not always compatible or integrated. For SDL this is in part due to past acquisitions. He alluded to this twice during his presentation, recounting at one point that they even had to start from the beginning with basic connectivity and move 46 ADSL contracts into one single corporate network.

A high-wire walk for SDL

No doubt many industry players are watching SDL’s massive reengineering and moves to its ‘New Normal’ vision closely. By his own reckoning, achieving their ambition of being able to monitor and control their entire business through a real-time dashboard to conduct dynamic pricing and resource allocation is, “something that will be unique in the industry”. However, Hernandez admitted that this vision is still “science fiction today, but we’ll get there”.

“If this was a startup, arguably you could do this differently”

The financial pressures of working through this transformation are real. SDL’s financial performance has been disappointing for the last four years and, on December 15, 2017, the company released a profit warning, advising the market that adjusted EBITDA for 2017 will be below expectations.

Based on the statement this has to do with delays in the closing of “certain software deals”, as well as the capital investment and costs associated with re-engineering products and operations.

SDL also stated that they intend to increase overall investment on developing “premium solutions in fast growing verticals” and their “cloud-based, AI-powered Content Globalisation platform”. This means that the high-wire walk between investing for growth and delivering current profitability for Hernandez and his team may continue into 2018, with investors likely to look for results to show by year-end.

For a copy of Adolfo Hernandez’ presentation, register free of charge for a Slator membership and download a copy here.

Lance Ng

Slator Contributor. Has been, at various times in his career, writer, translator, educator, banker, financial advisor and entrepreneur.