Nearly 80 senior executives leading the language services industry gathered on October 12, 2017 for the first SlatorCon New York. The forum featured seven 20-minute presentations examining key industry issues such as how to grow as a language service provider (LSP), how investors approach the industry, how corporate procurement shapes demand and what’s happening now in technology and neural machine translation (NMT).
Slator Co-Founder Florian Faes opened the forum by reviewing the trends that have shaped the industry in 2017 and are driving the growth opportunities for 2018. “There is now a broad-based recovery underway across most large mature economies and GDP growth in China and India exceeds 6% and 7%, respectively,” said Faes. “Key players like TransPerfect, RWS and its newly acquired division Moravia plus many small- to mid-sized LSPs are all reporting rising sales.”
Faes focused on two of the larger growth opportunities for 2018 that he sees arising through the globalization of media and the rise of emerging markets like India. In the last few years, Netflix, Hulu, and Amazon have gone from not producing any original content to budgeting USD 13bn for 2018. They now produce marketing and entertainment content in dozens of languages, which has been a boon for LSPs like BTI, who were sold in July 2017 for a reported USD 250m.
In China, the growth of tech companies like Alibaba, Xiaomi, and Oppo is driving demand for language services, as is the addition of tens of millions of new internet users in India each month. The Indian government will also implement a rule in early 2018 requiring phone manufacturers to support the 22 official languages.
The potential impact of NMT continues to dominate discussions as Linguee develops DeepL into an enterprise solution and Systran releases NMT on a demo platform. Slator is also seeing three to five new M&A deals announced every month, with 53 of the 61 transactions reported on Slator since January 2016 being driven by strategic investors.
Inside Global Procurement
Following Faes’ introductory remarks, Kevin Giblin, Chief Procurement Officer, Dun & Bradstreet, which has the largest global commercial database with over 265 million records, provided delegates with an overview of the fast-changing procurement landscape and a deeper insight into the often misunderstood business function of procurement.
Leading a team that manages over USD 1bn in spend annually, Giblin shared the sourcing strategies they employ to ensure his team adds strategic value to the business beyond cost reduction. He stressed the importance of building value-based supplier relationships and detailed where LSPs fit within Dun & Bradstreet’s procurement mix.
A Seller’s Journey
Rory Cowan, Chairman of Lionbridge, still the world’s largest LSP in terms of revenue, discussed the M&A process from a buyer’s view of the seller’s journey. He stressed the importance of understanding the unique character of the language industry before going into the M&A process and expanded on the motivations behind the decision to sell by founders and owner-operators who are thinking about a transition.
Having bought, sold and listed companies throughout his illustrious career, Cowan guided the audience through the “very difficult process” for sellers who may sell a business once or twice in their lives as opposed to buyers who are likely to be shopping every day. He also shared his advice on practical ways to enjoy the opportunities of either working inside a larger organization or the newfound freedom of retirement.
The Thesis for Investment
The option of selling segued into Ronald Kuehl’s presentation on what private equity is looking for in the language service industry. The Managing Director at Frontenac, a leading mid-market private equity firm that has invested over USD 1.5bn since inception, shared their approach to investing through their trademarked “CEO1ST” methodology and which has resulted in over 200 successful partnerships with founder-owned and entrepreneurial businesses.
Kuehl delved deeper into trends and drivers that have attracted Frontenac to the industry including globalization as a key driver of growth and the many attractive opportunities developing across client industries and end markets. He also emphasized the importance of high-quality language services as a differentiating advantage given the high cost of failure in these regulated and high-growth industries.
Driving Organic Growth
Following the networking break, TransPerfect Co-Founder and Co-CEO Phil Shawe, whose firm has delivered 100 quarters of continuous profitable growth, invigorated delegates with strategies for accelerating organic growth. In Shawe’s view, the key to the success of these strategies is people and the greatest skill to building an effective team is identifying and motivating the best talent.
Shawe believes the greatest impact that top talent can have for a LSP is with technology, where the difference between an average hire and a top talent is 100 or 1,000 to 1. Client service is also critical to growing client relationships and Shawe advised that you should find the best talent, align the incentives and get out of the way.
The State of NMT
Shawe’s insights on talent and technology lead well into the presentation by Kyunghyun Cho, Assistant Professor, New York University, on the current state-of-art in neural machine translation and the main issues and challenges he faces in NMT research in the drive to advance the technology.
Cho shared that NMT is already mainstream and being used by Google Translate for over 100 languages, as well as by Microsoft Translator, Facebook, DeepL, Systran, the European Patent Office, Booking.com, and many others. Nevertheless there is more work to be done as Cho focused in on ongoing developments in NMT at the character-level and at multilingual translation. He concluded with a few thoughts to consider should you wish to build your own NMT system.
Predicting Content Impact
May Habib, CEO of Silicon Valley startup Qordoba, concluded the presentations by discussing a data-driven approach to predicting content impact and painted a positive vision of the future where linguists are more than just translators, multilingual everything is ubiquitous and language is more than country-level.
Central to creating this vision are the strategies to create and target content to diverse international audiences and leveraging data to predict and improve its impact. In Habib’s view, breakthroughs in NMT will rapidly grow the size of the localization industry and its integration with the product development process and the source code, as all companies are now software companies regardless of industry.
The presentations were followed by a panel discussion and Q&A. One question focused on the rapid changes in technology and the way it is changing the industry sells. Habib shared that she thought the sales process was now more collaborative than ever before, with sales calls as chats and with greater involvement on both sides by product engineers.
Phil Shawe thought sales was still a transfer of trust and that technology helped them be more knowledgeable about the client and come better prepared to develop solutions.
Another question probed the biggest challenges for the development community in advancing NMT that were not seen by the business community. Cho felt that, as developers worked to advance the technology, it would be impossible to predict its potential disruptions and so he advised businesses to monitor developments and be prepared to respond as the technology emerges.
Slator Co-Founder Andrew Smart closed the forum by thanking the speakers for sharing their expertise, summarizing their main messages and updating delegates on Slator’s recent growth and plans for 2018. He shared the agenda and outstanding speaker line up for SlatorCon Zurich on December 5, 2017, and welcomed delegates to the evening networking reception.
Stay tuned in the coming days for deeper coverage of each speaker’s presentation and the ability to download their presentation.