S04E04: Macro-Economics and the Business Case for Enterprise Localization

Intro

Hello, and welcome to the Translation Company Talk, a weekly podcast show focusing on translation services and the language industry. The Translation Company Talk covers topics of interest for professionals engaged in the business of translation, localization, transcription, interpreting, and language technology. The Translation Company Talk is sponsored by Hybrid Lynx. Your host is Sultan Ghaznawi with today’s episode.

 

Sultan Ghaznawi

Welcome to this episode of the Translation Company Talk podcast. Today we will be covering macroeconomic trends and the business case for enterprise localization. The conversation will revolve around the current economic climate, forecasting demand, and supply in the next year or so, and the general appetite for translation and localization in the enterprise sector. To speak to me about this subject, I am joined by John Fennelly.

 

John Fennelly is the CEO of Lionbridge, the pioneer and leader in translation and localization services. As CEO, he is leading their 6,000 employees in 23 countries. Since joining Lionbridge, John has led a major transformation of the company and returned it to growth. Prior to joining Lionbridge, John was the CEO of HireRight, a leader in the HCM technology space. There, he engineered a major turnaround effort that resulted in record revenue and earnings growth and led to a successful sale of the company. He has also held executive leadership positions at a number of information services companies, including Thomson Reuters and SunGuard.

 

John, welcome to the Translation Company Talk podcast.

 

John Fennelly

Thanks for having me.

 

Sultan Ghaznawi

John, for people listening to you for the first time, I know you are very famous in our industry. I would like you to introduce yourself and tell them about yourself, about your background.

 

John Fennelly

Yes, thanks, Sultan. It is great to be here today. So, I have been with Lionbridge now for close to five and a half years. And prior to that, I was the CEO of a company in a completely different space in the HR human capital management space technology. And prior to that, I worked for a lot of large technology data type companies. And so, I started out many, many moons ago in the sales organization of a big Wall Street firm and then worked my way up and as luck would have it, I landed at Lionbridge and it has been a long journey, an interesting one, one I would not trade for anything, and it has been great to be at Lionbridge.

 

Sultan Ghaznawi

Fascinating. Well, Lionbridge is lucky to have you at the helm. How did you find yourself in translation and localization business? That is an interesting story.

 

John Fennelly

Yes. And as oftentimes happens, it is never a straight line. So, I knew somebody and said, you know, you should talk to these folks, and they are interested as CEO and it is a very long story, but I will make it shorter. So, I had been approached by a few people to join another company in the language space and I really was not interested. And then somebody called me a few weeks later and I was like, oh, I do not want to talk about that. And they said, no, it is different. You should talk to these guys. They are good guys. They just bought this language company. And I did and so Lionbridge had been a public company and just gone private and the founder was leaving, and they were looking for somebody to come in. And so, we hit it off, really liked the firm that had bought Lionbridge and, you know, I thought that they had a good vision and a good strategy on what to do with it. The more research I did on the space and realized how big the space was and how interesting it was. And it had a lot of characteristics I really liked. It was global. It was a big market. There was a lot of opportunity and all those things proved to be true. And so, you know, one thing led to another, but it was, you know, like a lot of things, it was a quirk in some respects that I ended up there. I had multiple opportunities to do different things in my life at that point. I am glad I took the Lionbridge opportunity.

 

Sultan Ghaznawi

So, tell me about your experience in this industry. And since you started with Lionbridge, what has really stood out to you in your tenure over the years? What technology was it, some sort of an event within the industry? Was it an economy that took some of your time and attention and that you think about?

 

John Fennelly

Multiple aspects. There is the complexity of the language business that surprised me as I assumed it was relatively straightforward. And the way I think about the language business is you take content, you transform the content, you send it to a translator, they send it back, you repackage it, and then you send it back to the customer. Seems relatively straightforward. I found out the hard way that that is not always the case, that there is a lot of different permeations of workflows. And I found that we have somewhere in the deep history of Lionbridge, I think we have identified about 35,000 workflows that we have implemented over the years and customized for customers. Now, I think that is a variation of probably about 10 workflows. So that is one thing.

 

I think the other thing is the size of the industry and how pervasive it is and how it touches almost every industry that is out there. And then the very pleasant surprise about the language industry is the people. The people have been amazing. I found people from all walks of life, very interesting backstories that are, and I think it is the nicest industries I have ever worked at. Very interesting people doing really good things for folks. One thing I impress upon our team all the time is you think about all the products and the services that we help localize around the world that are literally used by billions of people. There are 8 billion people in the world. We do things at Lionbridge that a billion plus people use every day, it is either a product that is been localized, packaging, documentation, videos, whatever it may be. But it is very pervasive, and we lose track of that sometimes and how meaningful the work that we do or is and how many lives it touches in people’s day-to-day lives.

 

Sultan Ghaznawi

Because our industry is so global in nature, we are actually helping people live better lives, whether it is the translators, project managers, or the end users of our products, the people who read our translations, so their lives become easier. In a way, we are an enabler of quality of life in the world.

 

John Fennelly

No question. When we got here, we rebranded the company. One of the things we are really searching for is, how should we think about language, how do we think about Lionbridge? We came up with breaking barriers and building bridges. I thought that was very apropos not only for our own company, our own people, but that is what we do every day. We try to take content, whether it is product, whether it is service, whether it is medical advice, whether it is clinical trials, whatever it might be, and we try to connect it with people and we break down barriers, cultural barriers, language barriers, understanding barriers. I think that is the very cool thing about the entire space.

 

And I am an unabashed globalist, and we will backtrack for that. I think the more connected we are, the better off we are, all are for it. In an age where I think half the populations are probably heading in different directions, certainly, in this country, there is more populism and nationalism and barriers being thrown up, I remain very strongly of mind that that is not the way to go. The more outreach and the more cultural collaboration across collaboration, across markets we have, that will all be better off for it.

 

Sultan Ghaznawi

Given your expertise, your prism that you have through which you see the world and in particular the economy globally, I decided to invite you to speak about macroeconomic trends and the business case for localization, something that today will enable economy in so many different ways. You lead a super MLV, Lionbridge has its hands in so many different industries. What is your perspective and how does the landscape today look like in general?

 

John Fennelly

If you go back 18 months ago, most of the expert prognosticators were forecasting a deep recession that would have occurred by now. Obviously, it has not, which is good news, not to say that it will not. Is there a soft landing? Is there a hard landing? There is a lot of people that get paid quite nicely to try to predict that every single day. I think the market has been confused, interest rates have certainly gone up. What has not changed in my view is that companies are pursuing global markets unabashedly. I have not seen a pullback from companies finding new consumers. In the world we live in, I have not seen any customers come back and say, hey, for business strategic reasons, we are pulling back on these markets. In fact, we want to expand our language set there is new markets we want to get into.

 

There is new consumer basis we think that we can tap into. I think the world inherently at a corporate level and a business level and a macro level becomes more global by the day. That flies in the face of a lot of news that is out there. Certainly, supply chains are a different story. You will see contraction as we have seen it in supply chains and reworking of supply chains, which I think makes a lot of sense in many ways. Each industry has a different supply chain and a different set of dynamics. As far as the overall revenue goal of most companies, most large companies are global. Most have global aspirations. Most have a fairly clear view on where they think market share can come from. That is where the language industry comes into play. I think we will see a continued move forward by companies to try and find new markets and along the way, typically the language company comes in and supports them.

 

Sultan Ghaznawi

Let me ask you about how your enterprise clients or enterprise clients in our industry, how can they positively use the current conditions and with the help of our industry, which is localization and output of translation, to whether economic headwinds ahead, whatever it might be, it may not be as bad as initially predicted.

 

John Fennelly

Good question. I am not sure there is a clear-cut answer. I think it is a combination of technology and to do more with less. You see some pressure on budgets. As I said, I think there is a continued demand to go out and find new customers and to use language to do it. One of these that we came up with is localize everything. How do we help customers who thought about it in a very finite way, okay, this is all I can afford to localize, but I have big content sets that I want to bring to the market. How do I do that? How do I provide more insight into a return on investment? What are people consuming? What are they reading? What are they buying? If I am localizing it, is it actually turning into revenue? The more insight that we have developed, and we have developed quite a bit over the last couple of years in this front is not only can we help you localize content, we can tell you a lot more about what is happening with that content. What kind of engagement you are getting, what kind of ROI it is bringing back, and I think that is super important.

 

The more value added you have to bring to customers that they could justify localization, they could justify spending money on language, and they could justify spending more money on content. I think all those are critical as LSPs move forward in a relatively commoditized business. You have to bring more value added to the customer.

 

Sultan Ghaznawi

We are almost at the tail end of Q1 in 2023.Where do you see localization and translation fit into the enterprise client’s strategy in the context of economic uncertainty?

 

John Fennelly

My view is they are all spreading water to a degree to see if really there has been changes in markets. What we have seen in the beginning of the year is fairly steady from the first part of 2022 and not a big change. There is a lot of discussion about budgets, probably more so than most years, but I do see that, and the motto we have is do more with less, and I think companies are trying to come across ways to do that. I think you will see more innovation that will come from any kind of downturn that you have.

 

Technology has to do more in a people-related business. I mean, I go back, and I know we have talked about this before, there are still a lot of manual processes in the language business. We think about machine learning. We think about AI. We think about new technologies that have been introduced into the space and continue to do so. Innovation in some respects is a bit of a fulcrum for us in localization and language space. I think any downturn you get typically in any industry and any seismic events that happen if you go back to the financial crisis, you always see a lot of things that germinate from there that you would not even have thought about a couple of years ago.

 

Language business, to me, is in a transition phase, saying how do we go from what has been a services-based industry to more tech-enabled services, if not technology, to actually help people do a lot more with their content, to understand it, to segment it, to deliver a lot more insight, additional insight, and metrics back to customers around content.

 

Sultan Ghaznawi

Looking at the trends, macroeconomically, we see that interest rates, which are headlines today, they were on a path to incline, at least until last month. Do you see that as a hindrance to localization business? I would assume that things such as M&A would be affected, for example. But what about how localization companies spend? Does that actually put some sort of a squeeze on their spending budget? How about their clients, or end clients, spending this year?

 

John Fennelly

Big question, a lot of different ways that can go. I would say, just if you take the people cost of things with inflation and interest rate rise for any company, you want to pay people more money every year, and people’s expectations, certainly, when rates are going up and prices are going up, is you have to pay people more. You have to pay people more. Can you pass through price increases, and that is an ongoing discussion I think in most industries, including RO. The cost of capital is certainly higher, and we have seen a lot of M&A in the language space over the last five years. That is certainly cooled down. You continue to see VC money coming into the space, which I always say, follow the money. It tells you quite a bit. So, there is a belief, I think, by technology investors, that there is a big addressable market that is out there. PWC estimates the language market to be $55 billion a year. That is a very large market, and there is continued innovation that comes into that. Will long-term rates stay here? My own view is they will go down. I think demographics come into play at some point, and do we go back to a deflationary environment? I do not know.

 

In the short term, it definitely will have an impact as it already has had on M&A. It puts pressure on companies of all types, including language companies, to keep pace with employee expectations, and then can you pass prices increases through? How do you increase revenue to pay for that, et cetera? So, it certainly creates more challenges than we have dealt with in the last five plus years. We have been in a very, very low interest rate environment for 20 years, literally, which has led to a fairly steady increase in employment, a low growth world that we have lived in, and the asset class owners in that 20-year period have fared very, very well. The lower end of the workforce, not as well. What will this mean with a spike in rates? Is it sustainable? Does it contract? I think we all want to know, but it creates a more difficult operating environment to work in.

 

Sultan Ghaznawi

Just to put that perspective, for people in our industry, do you think the credit squeeze, as a result of that spike, or increase in rates, has stabilized, and as a follow-up, do you think our industry can expect a return to pre-pandemic level spending in the next 12 months?

 

John Fennelly

If we only had crystal balls that could speak, I bullish on the long-term nature of spending in language, and what we have seen is the nature of the business has changed a bit, where the volume of transactions or projects continues to increase, the size of them decreases, hence more pressure on using technology. If you have customers that send you 4,000 or 5,000 projects a day, very, very difficult, if not impossible, to process those manually. Will the spend continue to be there? I think so. I think language would be, obviously, this chatGPT, there is a lot of things that are changing right now. I think you will see consolidation continuing at some point with 25,000 plus LSPs that are out there. It will be harder and harder to do things manually. My sense is that a lot of the larger LSPs will pick up smaller LSPs, who will join, translation agencies will join, bigger enterprises to get more flow. It will be an interesting few years to say the least.

 

Sultan Ghaznawi

Let us shift our focus onto something that is a headline these days. We have seen a lot of layoffs and major tech companies where, sadly, thousands of people have lost their jobs, and it is also true for localization, teams, and departments. But these companies, these platforms still have to deliver their products and services and those markets for their customers. How can they maintain the same level of service, I am talking about localization, by making sure, that their customers are served as well?

 

Sultan Ghaznawi

Very good question. We have not seen a lot of pullback in localization teams, and we have got a big exposure to tech companies. There is also a perspective needed as the number of layoffs, I think, in the tech industry, as I read last week, is about 117,000. That is still down substantially in the amount of hiring that is been done in the last few years.

 

If you go back to pre-COVID levels, employment’s not back to pre-COVID levels. It is still above that. You have to bring some perspective to that. With any downturn, what we have seen historically is that there is vendor consolidation. There are ways, again, from an innovation standpoint, that workflow customers will think about doing things that they would not have thought in flush or time, saying, oh, okay, maybe we can re-examine workflow. Maybe we can look at ways to simplify the process. Maybe we do not need three reviewing processes we need two.

 

There is a myriad of different ways to do that, but I think what you will see as it comes out of this is the ability to innovate, the ability to be smart with customers to figure out ways that they can do more, and if history’s a guide, it almost always plays out that way.

 

Sultan Ghaznawi

Let us look at another macro trend in our industry, John. You talked earlier about following the money when it comes to VCs. How do you see the interest from the investor community today? In the past few years, we saw a lot of investment coming in. Is it still the same? Do you see it growing, slowing down?

 

John Fennelly

When you think of investment, at least I do, I think of it in two buckets. You have M&A investment. You have had a lot of private money that has come in, and particularly in Europe, had bought a lot of LSPs, and you have had venture capital money that has come in and funded data training start-ups, MT start-ups, some localization companies, tech companies. That continues to a degree, not, I think, with the fraughtness that is been there for the last couple of years, and the M&A window has certainly slowed down. Will that return to where we were? I do not know.

 

I think valuations got a little bit ahead of where the market was over the last few years. We looked at certainly a number of acquisitions that just became very expensive when you brought some logic to it, projected into the future. I think it is actually a very good thing. All things, nothing goes up forever. You need to hit plateaus, if not come down a little bit, consolidate, and then go forward. The long-term trend of consolidation will continue. The long-term trend of investment will continue. I do not think we have completely hit the pause button, but it is certainly slowed. Again, a very natural business cycle dynamic where you have consolidation, you have retesting evaluations, a reassessment of what the growth prospects are for a space, and I think we are seeing that play out in the localization business as we speak.

 

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Sultan Ghaznawi

John, let me ask you something with regards to your perspective as the CEO of Lionbridge. When you look at your dashboard, your company handles so many different industries in terms of localization and their technology and marketing needs. Where do you see that which industries are performing well versus which ones are losing in this economy? I am just talking about trends so that the industry can focus on those and those industries that are thriving that we could serve better.

 

John Fennelly

I assume we all look at the same things. With any company you would like to be with growth areas. We made a strategic decision a number of years ago that we would focus on games, video games, life sciences, and technology. We did those for very specific reasons. We believe very strongly in the dynamic of big tech and the impact that technology companies will continue to have. That has been a good place to be. Plus, they have been at the forefront of so much of the localization industry since the inception of what I would call the modern-day localization space. So that remains a very big focal point for us. Games is an interesting one. We had a footprint in games and then we looked at it and said with testing and localizing and doing audio for video games.

 

I went to a conference years ago and I saw a slide that somebody was presenting and said there were 1.8 billion gamers in the world. So, I said, okay, that is a big number. The next year I went back and saw another presentation at a conference, and it was 2.7 billion people played video games. At that point I think there were 7.8 billion people in the world, and I said, whatever the number is, it is a big number. So that is a space that I like, a space that I want to play in. We have had a great offering in that space, and it continues to grow, and we have grown exponentially in the game space, and we will continue to put a lot of focus on our games business.

 

Like science is at a different end of the spectrum, different dynamic from a demographic standpoint with lots of older people that consume more healthcare, more drugs, more advertising for drugs. You cannot go on some TV stations, podcasts, whatever it might be and not hear an advertisement for a drug and localization plays a big part of that. They are inherently global as is the games business as is the tech business. So, we strategically pick those three as three large areas of focus for us. When we look across the spectrum, we play in almost every industry that is out there.

 

Automotive is fascinating. We have had a big footprint in automotive for years. The transition to electric vehicles is one that we have been quite keen and involved in and battery lithium, et cetera, in trying to help companies localize some start-ups, some bigger ones that are morphing in production from combustible engines to EVs, et cetera.

 

And you go around the world and you think about all the different industries and where they are at various points of time. Again, our sweet spot is the S&P 500 Fortune 1000 global set of companies that are big, that operate at scale across multiple markets. And I do not think we are smart enough to be able to pick winners and losers within that. We do know that big complex companies that operate at scale in multiple countries are where we want to be and even when they are in a downturn in an economic cycle, it does not mean they stop localizing either.

 

Sultan Ghaznawi

We talked earlier about how translation and localization industry as a whole can help companies perform better during these difficult times. If you call it difficult, how do you suggest they should leverage these opportunities to identify those gaps to fill them?

 

John Fennelly

It goes back to what I mentioned previously. Knowing more about what your content is doing is going to take on a new premium. And so, a lot of what we have to do is go back and arm our end customer with information that they can go back to the firm and say to the product teams, to the marketing teams, what you are doing is working or what you are doing is not working. And we can give you a lot of data about the quality of your content, how translatable it is, how expensive it is to translate, what it looks like to the end consumer. Are you getting more engagement on your websites, with your products, with the content? Can you justify continued spend? Should I increase spend?

 

I think the next phase of localization in many ways is a lot more about data and analytics than it is pure translation. And it will be a more sophisticated market, a more technology driven market. And if you are not providing that type of insight to customers, I do not think you will remain very competitive.

 

Sultan Ghaznawi

Let us take a look at geography. While most of the Western world is recovering from the pandemic, China is an exception. And they are also on path to recovery. And other countries are still dealing with persistent health and economic problems, right? What markets, John, present the biggest opportunities for American and European companies to expand to look at?

 

John Fennelly

Well, the US remains the largest translation market. Europe is always a super focal point for us. Just the nature of Europe language is at a premium in Europe, just with the geographic nature of different countries, different cultures. The US is much more homogeneous.

 

Asia to me is always fascinating. Dynamic growth. We grew at 30%, 40% in Asia last year, after a couple of tough COVID years there, love the dynamics of what is happening in Asia. We have got an operation in China, fascinating what is happening there, and we can talk for hours about some of the Chinese companies that are trying to go global, et cetera, work we do there. The game space, the life science space, super attractive in Asia to us, and we remain very focused on the US, Europe, and Asia.

 

And trying to pick places that we think will provide the biggest return. One of the things that is very difficult, you cannot do everything. So as much as I would love to say, hey, let us go all in on Singapore or Hong Kong, China itself is obviously a very complicated, very big market, very difficult for Western companies to navigate, but with the allure of large returns.

 

But we have had a big footprint in Japan and Korea for years, where I think we have only scratched the surface, and in Europe, as I think about it, either by country or by region, amazing opportunities. And I do not think there is any company that starts today that limits themselves, say, you are in Canada, I am in the US, I am only going to do business in the US, I am only going to do business in Canada. No, I have built a series of products where I have built a really cool new technology application. How do I go out and market this to the world as a platform, as a service, whatever it might be? And I do not see any change in that at all.

 

Before we started, we were talking about kids. And I was fascinated, I had a long discussion with somebody on Saturday, oh, the kids do not want to come back to the office, the young people do not want to do this. My view of young people is they are super connected, they are way more connected with older people, they have grown up on social media, they have connections that older people cannot even fathom. When I was a kid, if somebody moved away from your neighborhood, you never talked to them again, right? Now, my son, who is in his 20s, he is still connected with people he knew that were when he was six, seven, eight years old, which is, you know, I mean, the world is definitely interconnected these days.

 

As much as politicians would like, I think, us to go back into little silos and boxes, the populace of the world is more connected than it has ever been. And from a commerce standpoint, I do not see that changing at all.

 

Sultan Ghaznawi

I completely agree with you, and John, looking at the global picture, do you find that there is a business case to localize content now to attract local customers, consumers within the US, for example, let us speak other languages within the enterprise’s home market. You know, you have lots of clients in the US who are trying to penetrate markets outside the US, but US itself presents a huge market for localization. Does it make sense to be more approachable and presentable as a company to non-English speakers to make up for some of the economic slow performance by the mainstream consumers?

 

John Fennelly

Absolutely. I think that is often an overlooked part of the market. If you look at the number of Spanish speakers in the US, it is enormous in the tens of millions. And if you look at Europe and the immigration flows, I mean, the interpretation business has boomed for the last 10, 15 years in Europe as you have had influx of people from all over the world into various countries, that there are social services that are provided to them and the government in many cases will supply an interpreter. And so, there has been a boom there. And as we know, the research says that if you can, you know, present your set of services or products in a local language to the buyer, your engagement ratio is much higher, right? No surprise.

 

I think, in the US today, and I think every country now is more and more global. I was in London a few weeks ago, and this is nothing new with London. You walk around London, and you feel you are in this very, very globally connected city with people that do not look like each other from all over the world in a very cool way. And increasingly places that used to look very homogeneous in the world, they do not look like that anymore.

 

I mean, take Toronto where you are, it is one of the most multicultural, multiracial cities in the world. To be one of the coolest cities in the world. How many languages? There is a borough here in Queens, I am in New York City. I read something, there is a 142, 145 languages spoken just in this little area of New York City. And so, we are increasing global. I think that is, to your point, a very often overlooked area of the localization space.

 

Sultan Ghaznawi

In our industry, you are known to be a very unique leader. Let me ask you about your leadership style. And given the difficult times that people have been talking about, how would you lead Lionbridge with your leadership style to make sure that there is, you know, you handle uncertainty, you bring confidence to your staff internally and also to your clients?

 

John Fennelly

Great question. And thank you. Well, I have been talking to our folks a lot the last few weeks about uncertain times and, you know, different things you can do in uncertain times. One is you can put your head in the sand and just wait for the dust to clear. That is never been the way I think we should go. And if you think about life, I mean, it is, you know, life is difficult and, but somewhere tomorrow in the blinkist of days, the sun always comes up. And so not to lose that perspective, but when times are tough, the people that can really lean in and dive in and say, okay, you know, something has changed. Where is their opportunity? We will find opportunity.

 

And I think this is a fascinating time for us when I have really tried to get our folks heads wrapped around is, okay, you know, if you, if you just consume the news every single day, it is a bleak world that we live in. But if you think about the bigger picture of long-term trends that remain very positive in a lot of ways, you will find big opportunities there. So, the sun will come up tomorrow. Do not become paralyzed because everybody says, oh, this is terrible. This is bad. I go back to where we talked about the recession. If I listened to the economists, I would have stopped everything. I would have stopped investing 18 months ago because a massive recession was looming. Now. Again, it may come, but we have gone through an 18-month period here where we have continued to see growth. We still continue to see employment growth. We continue to see economic growth. And we cannot lose that perspective.

 

At the end of the day, I mean, leading is a tricky thing. You can change policies. You can change procedures, convincing people to change or to do something that maybe is a little bit different that they do that they do every day is tricky. And what I found is I try to explain things in very simple terms and not lose sight of the fact, you know, what we are trying to do and be transparent and honest. I mean, our employees, I think a lot of employers do not trust their employees. They do not think their employees can handle a certain set of information.

 

And my own personal style is to be as transparent as possible. Try to get everybody up to speed on why we are doing what we are doing and why it makes sense. I always try to put myself in the shoes of an employer and say, okay, if I was sitting there and I see some change coming or strategy, why are you doing that? Why does that make sense? And when you go through that, it is like, okay, now I understand why the company is doing that. I always feel that you can build followership by informing people and having them come along the way by telling them, this is exactly what we want to do. Not some policy that comes from on high and says, here is a memo. We have decided the committee has decided to do this. Please do this. Instead of, hey, there is a business rationale behind what we are trying to do. This is what we think will make everything better for the company. And so never lose sight of that. Never lose sight of the fact that there is, in our case, 6,500 people that have very smart and formed views of life. Try to inform them. And the hardest thing to do, let alone two people, but 6,500 people is to get everybody going in the same direction and to build alignment. And that remains a challenge to anybody, certainly for me every single day.

 

Sultan Ghaznawi

A very unique way of leading and leadership with a business case, leadership with empathy. I am impressed and I admire that. So let us talk about technology. I mean, there is no conversation today, complete without referring to things like chatGPT, you referenced that earlier. I guess we have seen the emergence of generative AI and like that and other tools. How will they impact the localization economy this year, John? What do you see? Will they create new opportunities for LSPs?

 

John Fennelly

Well, a bit of a different vein. I was listening to a podcast last night and they had taken the voices of some famous people and I could not tell the difference. And so deep fakes are out there. I think there is a business, the language business, for us to uncover deep fakes. The technologies here, chatGPT is fascinating. We have a group of people that are immersed in it every single day, trying to figure out what it means for the language business. It is a large language model. Large language models have been in existence for a long time. Now, if you think back a month ago, it looked like chat or Bing and chatGPT and Microsoft was going to be it now, Google is got theirs and China is coming out with different language models. You have competing language models. I do not think it will be much different in some respects than the different MT engines that are out there for us. I think it will have a big impact on the language industry and we will certainly see the creation of more content, more opportunities, and like all changes in very in particular for this one, there will be winners and there will be losers and it will be complicated.

 

And so back to what I talked about before, I think it is very important not to have your head in the sand on this one. You have to be at the forefront of how I help people navigate what will be actually fairly complicated or large language models? Will they scale? How do I get lots of content in there? How do I use it? How do I use the construction of the customers? How do I advise them on how to do that? And so, there is a consulting side of this and a services side, which I think typically we have done very well as a company and industry that can actually lead the way.

 

And then there is another side, say there is a discontinuous technology here that is quite disruptive and how do you not become disrupted? And so, lots to come in the coming weeks, months, and years, but this will undoubtedly generate a lot more content and a lot more potential from a marketing standpoint, a PR standpoint, legal standpoint, and we can go down the list. Very exciting.

 

And at the same time, I go back to what we discussed earlier is the nature of language has changed where we had projects that thousands and thousands and thousands and thousands and thousands of words and now, we process projects that have two or three words. And so how do you build the capability of transaction processing capability to keep ahead of that and to be able to do it affordably and to provide value for customers? But it is got to be faster.

 

The one thing that is always been interesting with the language business is everybody wants super high quality; everybody wants super-fast turnaround times. And that sounds contradicting, and it is contradictory, but our customers want it and that is where the industry is headed. And how do you use technology to get there? I think quite important, there is a lot of smart people working on it, including a lot of smart people who work for us and the next few years, the next two, three, four, five years in language space will be very fascinating from a technology standpoint.

 

Sultan Ghaznawi

Do you feel that translation and language industry in general, do you think this industry is prepared to deal with turbulence and economy we talked about earlier, with technology, with the people that we have and with the mindset?

 

John Fennelly

No, I do not think so. Most industries are not, and everybody acts like a surprise when you have a big downturn even though in the history of economics there is always big downturns and how big it is and how you deal with it is always quite tricky. I think that there is a view, maybe a hopeful view, it is more status quo. I think you will continue to see change. You have 25,000 LSP’s estimated to be in Europe, in the US and beyond and then another 20 plus thousand in China alone, so collectively 40,000 – 50,000 LSP’s around there. Is the market big enough for that, $55 billion? Yes, it is supported it today. I think a lot of the small end of the market gets subsumed by the bigger players where they join as translators or there is just a changing nature of work. But I would see, I think the landscape looks a lot different five years from now than it looks today.

 

Sultan Ghaznawi

John, what is your message for enterprise localization managers and executives, most of them are your clients, as they are trying to meet your KPIs this year?

 

John Fennelly

Well, they would say set realistic KPIs. I think the most important thing is to really understand what business problems you are trying to solve for customers. What I say to our folks all the time is, okay, what is our customer trying to do? Are they trying to reach a certain market? Are they trying to do more with content? What are they trying to do? And then how do we build a series of capabilities that actually helps them solve a business problem? And if they build KPIs around that, you are solving a business problem, not what I think are relatively uninteresting KPIs about how to measure a business, and the simple question I ask is like how the customers are doing? And that is not a KPI that people usually use. They want to know about turnaround times, and they want to know about content, and they want to know productivity and utilization and lots of different things, which are all interesting. But the scorecard I say is again, well, how are the customers doing? Because if the customers are doing really well, then typically you are. So, there is NPS scores, there are a lot of other things, but again, what I talked about before is content, we are actually moving the needle for the customer. And if you can quantify that, then you can open up lots of possibilities. Those are very interesting KPIs.

 

Sultan Ghaznawi

As we reached the end of this conversation, John, what is your advice for a leadership in the localization industry, I mean, other LSPs, what can they, both large and small, do to stay ahead of the curve?

 

John Fennelly

You have to embrace change. If you are scared of change, it does not mean you are going to be successful just because you have embraced it, but to give yourself an opportunity to take advantage of changes in a marketplace is super important. And the smart people can think very, very clear-eyed when there is turmoil. I am always amazed with, if you think about people that make great fortunes, a lot of times, it happens in the highest times of economic turbulence, and they are clear-eyed enough to get the noise out and look at opportunities and say, okay, history shows me this.

 

This opportunity is actually not low risk but has the possibility to pay off. And I think if you look at where we are headed, the age of uncertainty may be the next five years in the language space. And the people that embrace uncertainty, are not scared of it, can have a clear-eyed view of what they think the future looks like and can allocate capital towards that will be the ones that are most successful.

 

Sultan Ghaznawi

Thank you so much for sharing your thoughts and insights, John. It is very important for our industry to hear from leadership and organizations such as Lionbridge. I think you have educated the industry today about the current economic challenges and opportunities and the self-confidence that our industry performs very well during these turbulent economic times. I am hoping I can get to hear your thoughts throughout the year and follow up with you next quarter. And with that, thank you for your time and for sharing your perspective with us.

 

John Fennelly

Great, Sultan. I enjoyed that. Thank you so much for having me.

 

Sultan Ghaznawi

Okay, it is time for my roundup of the interview and my analysis as to what has been discussed. As you heard from John, the current macroeconomic trends dictate that enterprises can leverage globalization in new markets to remain competitive and profitable. The translation and localization supplier side of the equation has their work cut out for them to deal with supply-related issues such as labor shortage, political issues in certain markets, and a tightening credit market. I personally think this environment presents incredible opportunities for LSPs to take the slack from tech firms that have shrunk their workforce in recent layoffs. Not only do we have access to a bigger pool of trained and skilled labor, but we can also help bridge that gap as suppliers to these enterprises that do not have those large localization departments as the previous years but still have to maintain the same level of service. This year will bring opportunities to those of us who are creative and brave enough to adapt to a rapidly changing landscape.

 

That brings us to the end of this conversation with John Fennelly, CEO of Lionbridge. I hope you found it interesting and engaging. I will be connecting with him to discuss future conversation plans and we will bring you a lot more of this in the coming months.

 

Do not forget to subscribe to the Translation Company Talk podcast on Apple Podcasts, iTunes, Google Podcasts, Spotify, or your platform of choice and promote this episode by sharing it on social media, giving us a like or thumbs up or adding your comments.

 

Until next time!

 

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