6 years ago
August 19, 2015
How the Rise of Shared Services May Cost You Your Biggest Client
Traditionally, global companies in enterprise and consumer technology (e.g. Apple, HP, Microsoft) partnered with language services providers (LSPs) that match their global footprint. However, Fortune 500 companies in verticals where translation requirements are more ad-hoc and project driven (finance, life sciences, consulting) are now also adopting a standardized approach.
Consulting giant Ernst and Young, for example, used to have hundreds of individual buyers and vendors of translation services, which they have reduced to a handful of global vendors. UK Pharma company GSK likewise announced just last year they will consolidate all translation work under Lionbridge.
Companies like PWC, UBS, Wells Fargo, or Roche would traditionally engage dozens of small- to mid-sized LSPs through local subsidiaries, but now the trend is toward favoring a handful of global vendors. This tender process is run by Shared Service Organizations (SSOs).
The Rise of the Shared Services
Shared services is a centralized consolidation of business processes typically used by different parts of a single company.
According to a presentation dated June 26, 2014 by advisory firm Chazey Partners, 90% of Fortune 500 companies use shared services, citing a 2012 HfS-PWC report indicating “nine out of ten enterprises use shared services and 97% manage outsourcing relationships.” Back in 2000, only half of the Fortune 500 used shared services.
This shift towards SSOs is putting pressure on more domestically focused, small- to medium-sized LSPs who usually work with local contacts of global firms, as the very nature of the outsourced work makes translation a prime candidate to be funneled through shared services.
LSPs that often deal with a single company but through multiple points of contacts and under several accounts would find that as this client moves into a shared services model, the accounts converge into one, the project costs are minimized, and prices might be standardized (read lowered). This allows this single account to squeeze more out of the LSP for less.
And yet while LSPs may think a single point-of-contact may make it easier to build long-term relationships with a client, they often find that their shared services category manager may be rotated based on innovation or performance priorities within the SSO.
Of course, arguably the most crucial blow Shared Services could deal small- to mid-sized LSPs is if it runs a tender process excluding LSPs with strong local roots but an insufficient global footprint.
Catering to the Needs of SSOs
As it stands, the top five LSPs are likely always invited to the table, while their smaller rivals may not make the list based on simple criteria such as number of office locations or lack of cloud-based translation management systems.
Lionbridge’s onDemand, for instance, aims to meet the following categorical needs of SSOs:
- Centralized and transparent billing and distributed demand and user management
- A translation management system with shared and standardized style guides and glossaries
- Enterprise-wide best practices that allow economies of scope
- Best practices and standardized processes by content type
Furthermore, LSPs should be able to meet the needs of SSOs in the future. According to SSON’s 2015 State of the Shared Services Industry Report, there are five “megatrends” worth monitoring. The first two seem to be salient for LSPs:
- Shared services are focusing more on optimizing service delivery, which means “supporting client growth with reduced budgets.” Among the top things shared services wanted from their vendors are improved cost and higher quality.
- Shared services will increasingly adopt digital and automation technology. Technology is a key driver in the space, and LSPs who can’t integrate with or deliver services in the same technical capacity might find it difficult to prove value in the long-run.
Maintaining excellent customer service and client relationships on the local level are no longer enough as SSOs increasingly become the decision-makers choosing who gets the global business. Scale is becoming the deciding factor for LSPs.