S05E14: State of Language Industry – ALC Survey

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

Hello and welcome to this episode of the Translation Company Talk podcast. Today we will be speaking with Anna Wyndham about the state of the language industry. Anna Wyndham is the head of research at Slator with over 15 years of experience in the language industry.

 

Slator is a source of analysis and research for the global translation, localization, and language AI and technology industry. Headquartered in Zurich and with an office in London, Slator also has a presence in the US and Asia. Anna will be covering topics that are very specific to our industry based on the ALC survey conducted recently.

 

Anna, welcome to the Translation Company Talk podcast.

 

Anna Wyndham

Hi Sultan, I’m very happy to be here.

 

Sultan Ghaznawi

We talked briefly about quite a few things in our recent meeting in Montreal at the ALC annual summit. I know you from your work from the past few years. But for those of us who are listening to you for the first time, Anna, please introduce yourself to our listeners and tell us about your work.

 

Anna Wyndham

Sure. Hi to the listeners of the podcast. My name is Anna Wyndham. I’m the head of research at Slator. I’m based here in Madrid, Spain. You may know Slator already. We provide analysis and research for the global language services and technology industry. We do a wide range of activities, news coverage, and conferences. We do M&A advisory. We have our own podcast, SlatorPod. But my focus is really on leading our research efforts, producing industry reports and analysis. Our flagship report is the Language Industry Market Report.

 

We also publish targeted reports and looking at specific verticals or specific services. So, for example, we just published a Translation AI Pro Guide, unpacking 20 practical applications for large language models. So, we’re trying to make content and analysis that’s practical, digestible and actionable and of the moment.

 

So always keeping in mind that we want our analysis to be useful to players in the language industry. Obviously, it’s a very fast-moving space. That’s what makes it interesting to work in.

 

Sultan Ghaznawi

Exciting. Yes. Obviously, Slator’s work is well known in the industry. The whole team is really, really innovative. Let me come back and ask you about your own career in the language industry. When did you decide to enter the translation localization industry? What was the motivation behind it?

 

Anna Wyndham

Yeah, it’s an interesting question. I have listened to many of these podcasts. It’s always interesting hearing the different paths into the industry. In my case, I studied linguistics at university in Sydney, and then I moved into speech technology. I was at a speech technology company building databases to help train speech recognition systems.

 

From there, I moved to London and then Madrid, working for two different language service providers in production and quality management. From there to Slator and industry analysis.

 

In terms of the motivation behind joining the industry, I think I’ve managed to trace it back to kind of growing up slightly starved for linguistic diversity. So, I grew up in a very remote and rural area of Australia, there was no chance to hear other languages being spoken and the opportunities to learn other languages was very limited.

 

So, when I finally discovered linguistics, and I got to meet people from different backgrounds speaking different languages, it was like a light bulb moment. From then, it seemed natural to make language the center of my professional life. It’s just flowed from there.

 

Sultan Ghaznawi

Can you tell us about your experience in the industry and what really stood out to you as major pivotal changes in this industry? Was it technology, was it the process, was it the people or was it the world as a whole, the economic drivers? What really stood out to you?

 

Anna Wyndham

Obviously, the big shift specifically in translation was the advent of neuro machine translation and it’s moved to, we call it, expert in the loop workflow, human in the loop workflow. Obviously very interesting because this was one of the first examples of machine learning models being implemented in a human in the loop workflow at an industry scale, so in a wide widespread way. So, the industry’s obviously leading in that way, so that was a major moment.

 

I think the biggest shift in the industry is the one we’re inside right now. It’s kind of hard to move away from this. It’s very much the elephant in the room. It’s reshaping the industry on so many levels, how language services are delivered, business models, roles, the landscape.

 

It’s completely transformed what we can do with speech and text in terms of converting it between languages and generating original speech and text, because that’s now possible with an ease and fluency and quality, that hasn’t been possible until the recent past. It’s really changing what enterprises want to do and able to do with speech and text.

 

That obviously has huge implications for language service and technology providers. So, I think we’ll have more of a chance to go into more detail on the specific impacts, but I think we’re right in the middle of the biggest transformation the industry has seen.

 

Sultan Ghaznawi

It’s exciting times, as you mentioned in our industry. We are all going from more of a traditional legacy model, into something new and it’s very exciting. I see it that way. We talked briefly at the ALC summit about your role and performing an industry analysis through association of language companies, to kind of do a survey of how things are. You presented that and I was very intrigued

 

I wanted to speak with you about what your findings were. So, that’s basically what we will be covering today. Please describe the initiative of the association of language companies to conduct the annual survey about market conditions, emerging technologies and future growth prospects. Tell us at a macro level what this survey was about.

 

Anna Wyndham

Yeah, as you mentioned, Slator collaborated with the ALC on this. It’s an annual survey that’s been running; I think for more than 15 years. On Slator’s side, we were responsible for performing the question design and survey design, managing the engagement and performing the analysis.

 

In terms of what the survey covers, it’s kind of both broad and deep and you’ll see that if you pick up a copy of the report, which was at the summit in printed format, it’s 150 pages of data. What we’re looking at, company financial performance results, such as growth and profitability, market dynamics, customer demand and pricing, workforce trends, company strategies and each year, we dig into a specific theme.

 

This year was AI. So, the goal is to give companies insights and benchmarks that will allow them to strategize, to stay competitive, get a broader insight into the dynamics that are shaping customer demand. Basically, provide analysis that’s going to help individual companies and the industry as a whole, to flourish and make data, kind of data-driven, informed decisions.

 

Sultan Ghaznawi

That’s great. Thanks for that introduction of this initiative. What did you find in terms of how the industry is doing today or this year, when you kind of check the pulse of the industry through the survey?

 

Anna Wyndham

Yeah, so I guess a couple of the indicators that we looked at were growth. We found that 60% of companies that took part in the survey grew over the past year. To give you a sense of the sample set, it was 127 companies that took part from 28 different countries, the majority from the US. The majority of the companies in the sample set are between 1 and 8 million in US dollars in annual revenue, with a few under 1 million and a few larger, but primarily those small and mid-sized companies.

 

So, 60% grew and this is roughly in line with last year’s results and lower than the results that we saw in 2020 and 2021. So, the proportion of companies growing has declined somewhat over the last couple of years. But if we break that down and look at how companies focused on interpreting performed compared to how companies focused on translation performed, we see a big difference. So, 70% of interpreting companies saw growth in the last year, in 2023, compared to 50% of translation companies.

 

The survey probed into the customer demand and the buyer demand that’s underpinning that growth. We can see, obviously, that interpreting is being held up by strong and increasing demand from the healthcare sectors, governments, and education.

 

Also, that interpreting companies or companies whose main service line is interpreting tend to have a smaller service portfolio and service fewer sectors, whereas translation companies tend to be more diverse.

 

Translation companies have obviously been affected over the last couple of years by this slowdown in a couple of key sectors, one being technology. I know you spoke to Slator’s Managing Director, Florian Faiz, about one year ago. He talked a bit about the slowdown in the technology sector, the layoffs there and the impact, the kind of knock-on effect that’s had on localization function.

 

The other big slowdown that we’ve seen is in media localization. So, this was affected by those actor and writer strikes over a year ago now. We’ve seen a lot of change in the way that we’ve seen in the way that we’ve seen in the last year and it was hoped that companies would bounce back pretty quickly from that, but it’s taking slightly longer than perhaps we would have expected, though we do still expect demand to bounce back.

 

So, in short, some indications of a slightly challenging environment, but it really depends on where your focus is as a company.

 

Sultan Ghaznawi

Anna, let me ask you a question about the macroeconomics of things. The world, obviously, after COVID, had to start tightening the credit access through interest rates and now we are seeing the impact of that with the cost of everything going up. As the costs are dropping, the inflation is dropping.

 

Basically, most of the governments in the Western hemisphere have started to reduce interest rates. Does the survey tell you anything related to this industry with how the economy is performing?

 

Anna Wyndham

Actually, the survey that we did last year, that is also still available, its major focus was the impact on inflation on the macroeconomic factors. So, we delved into some of the ways that companies are dealing with some of these pressures.

 

In this year’s results, we can see that companies are focused on cutting operational costs at this point. So, when asked, what is your top priority in 2024? The top three results, number three was cutting operational costs. Number two was adding services. Number one was revenue.

 

So, cutting operational costs is well up there and we also see a degree of caution in hiring. So, in workforce trends, we see that around 30% of companies cut their workforce size over the last year. So, these are some of the ways that companies are responding.

 

But another way that companies are responding is, of course, kind of in a risk management sense, expanding their service portfolios and expanding the sectors that they are delivering services to. So yeah, kind of a wide range of responses.

 

Sultan Ghaznawi

Thank you. Anna, let me ask you about your findings in terms of the customer demand. You just briefly touched on that. Can you share any specific findings that have stood out from the survey regarding customer demand for different language services, such as interpretation, translation, localization, et cetera, across various regions or sectors, such as healthcare. You mentioned technology is kind of experiencing a bit of a slowdown, e-commerce. But do you see other sectors that are experiencing a little bit of an increase in demand?

 

Anna Wyndham

Yes, a couple of the trends that we see, obviously, there is increasing demand for telehealth. This is part of the healthcare part. Also increasing demand for remote simultaneous interpreting. So that has kind of traditionally been more in demand in Europe compared to the US. But we now see that demand is picking up in the US for remote simultaneous interpreting and that’s for facilitating all of these different contexts in which workforces are now conducting their business, online meetings, hybrid conferences, and events.

 

So, this is one area where demand is picking up. We also see that demand for post-edited machine translation as a service has increased as well. 78% of companies in the survey now offer it as a service, as a client facing service, compared to 60% of companies just one year ago.

 

I’ve already touched on kind of those the big drivers of demand being healthcare, and government for interpreting services.

 

Sultan Ghaznawi

Anna, let me ask you about technology. The buzzword these days is LLMs or large language models and everyone wants to be involved in, somehow, with this type of technology. What are the major challenges faced by language service providers due to evolving translation technologies, like large language models? And how do you see it impact their business model? How is innovation being harnessed in this context as per survey data?

 

Anna Wyndham

Yeah, we definitely see pressure on the model of particularly small traditional language service providers who are using traditional workflows to deliver services to established customers. So anecdotally, and some of the research that we’ve done and is in our report shows that there are more difficulties there in acquiring new customers.

 

Particularly in acquiring customers who might be kind of novices in the localization industry. So those novice customers, because of large language models and AI and the general pervasiveness of this era, they approach the industry expecting AI enabled services, AI enabled translation, and this is something that companies that are still within that traditional model are starting to see the impact of.

 

But on the other hand, we see incredibly rapid innovation among AI first translation agencies. We see translation management systems over the past, just over the past 18 months, injecting all of these AI capabilities into their technology platforms. And the really big companies, super agencies like your RWSs, your Accolades, Lightbridge and so on, they really transformed their service offering to center around AI.

 

If you go to the websites of these companies today, almost unrecognizable. From 12 months ago, 18 months ago, they’re offering LLM enabled translation, quality estimation, automated empty engine selection, customized models, editing interfaces, obviously, slash language and shortened text and do all sorts of things to align that text with the enterprise size needs.

 

As well as other services like AI dubbing, multilingual content generation and speech is a big one as well. Services enabled by large language models. Value out of the language service provider, which is that deep knowledge of customers, customer language needs, per sector and per customer.

 

That’s now being addressed by this kind of big portfolio in response to changing buyer needs. So, in terms of business model, there are lots of different models at play. So, we see fully automated off the shelf AI solutions at very low-price points offered for low risk, low stakes, kind of transient use cases.

 

We see other cases where we’ve got expert in the loop workflows and human only workflows for those more high-end, high stakes, creative and regulated scenarios. So, there’s a huge diversity of models in play. I guess it really is the moment for language service companies to experiment and find either the niche that suits them or decide whether they want to look at providing that kind of full language services coverage. The path that the super agencies have gone down.

 

We have a couple of data points as well from the survey. We found that 76% of companies have been proactively approached by customers asking them about applying AI in language services. As I mentioned, apart from growing revenue, the next highest priority for companies in 2024 is to develop new service offerings.

 

The most frequently cited service offerings were AI services, and this innovation is happening. Companies are experimenting. We see 20% of the surveyed companies had already implemented large language models and a further 70% planned to do so.

 

So, yeah, it’s the moment to innovate and find a new business model that works in this kind of new paradigm.

 

Sultan Ghaznawi

Does the survey tell you if the demand for shifting towards AI is driven by customers or are the LSPs taking a leadership role and going to their customers and telling them that now we’ve added these new capabilities? As a follow-up to that, does AI open up new lines of revenue for LSPs?

 

Anna Wyndham

I’ll answer the last one first because that’s the easiest. It certainly opens up new lines of revenue because many of these new AI language services are addressing new use cases. So, they’re not replacing the old use cases, but they are adding new ones. An example of that would be AI dubbing.

 

So, AI dubbing is being applied to short form videos or e-learning or other content that would otherwise not have been professionally dubbed. So, this is a complement to human dubbing services.

 

Speech-to-speech translation is the same. So, it wouldn’t have been practical or possible from a cost point of view in the past, to provide an individual interpreter for every business meeting, but speech-to-speech translation is now making this possible.

 

So, companies are adding this. It’s expanding the market; it’s not taking away from it and certainly adding new revenue streams, and we do have a couple of data points. So, one of them is that the 76% of companies are being approached by buyers asking them about AI services. So, that clearly indicates a huge appetite on the buyers’ side to implement AI, and more than this, we can look at the industry within the broader backdrop of this movement to implement AI and extract value from AI.

 

So, every company no matter what the industry, is having this discussion. What are we doing with AI? How are we benefiting from AI? A kind of a theme that’s developed at Slator conferences this year, is this elevation of localization and translation one of the easiest use cases to implement AI compared to other use cases that aren’t to do with language or converting language.

 

It’s a use case where the impact is relatively easy to demonstrate, as well. So, the scenario that this creates is one of opportunity for language service providers, to kind of step up and proactively describe and demonstrate to enterprises that implementing these AI language services, is one way that they can make progress and show impact in terms of AI innovation and adoption, more generally.

 

So, I think the general need is coming from the buyers but the specific information about how to implement these technologies, where it’s useful, where it’s not, where the quality makes sense, where it probably shouldn’t, it isn’t at the right level. All of that information is coming from the language service provider side.

 

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Sultan Ghaznawi

Anna, what trends are you seeing in LSP’s workforce stability. Particularly regarding the retention of recruitment challenges for language professionals?

 

Anna Wyndham

Yeah, so we have a couple of different sources on this. We’ve done our own research recently and we produced a report on the future of language industry jobs. I’ll share just a smattering of key data points from that.

 

So, we see that workforce size is staying flat or slightly declining and that relates to some of the challenges and growth that we’ve already touched on. But we do see that there is some net job creation at language service providers, that’s mainly happening in IT departments. Whereas we’re seeing a contraction in the number of project and program management roles.

 

Our research showed that the average employer tenure at a language service provider is around four years and interestingly employees tend to stick around at small language service providers for longer, than at large ones.

 

Another key insight is that if you’re looking for a localization role on the enterprise side, so you want to work for the localization function of a company like Netflix or Amazon or so on, we have found that the first quarter of each calendar year, is where there is a spike in hiring for senior and strategic localisation roles at enterprises.

 

In terms of Linguists, it does look a little bit tough out there. So, 60% of the linguists that we surveyed, said that demand for their services had decreased in the last 12 months. We also found some new roles emerging on the back of these AI services. So, editing monolingual AI content. This new role of post listener for AI dubbing, which involves checking the audio and speech quality as well as the translation quality.

 

So, things are changing there. Then the ALC survey also tackled this. I guess one of the points that a lot of people were talking about at the ALC summit in Montreal was 61% of companies say that they face a shortage of talent and the top three hardest roles to fill are sales and business development, project managers, and linguists, and particularly freelance interpreters.

 

This is kind of a perennial challenge of the industry, finding interpreters and also translators to fulfill those very specific language and domain expertise needs. So yeah, it’s kind of an influx job market at the moment.

 

Sultan Ghaznawi

Let’s talk about consolidations and how things work in our industry. But before that, could you shed some light on any potential partnerships between different sectors, such as education, technology, AI developers that are being explored in the language services sector, based on insights from survey data or other relevant reports within company networks?

 

Anna Wyndham

Sure. I’ll highlight just two interesting types of partnerships that we’ve seen popping up recently. One is between language service providers and AI services companies. An example of that is the media localization company Deluxe. So, they service kind of high end, kind of Netflix, films, TV, media localization. They partnered with Aptek, which is an AI service provider, and they have particular expertise in speech translation.

 

So, this is kind of exemplifying what I mentioned as well, in terms of the expanding use cases. So, what Deluxe is doing here with this partnership, is enabling themselves to augment their human dubbing and subtitling offerings with AI and AI dubbing offering. And by doing so, be prepared to service this kind of new emerging demand.

 

This is not a partnership, but I just wanted to mention an interesting data point from the ALC survey as well, which was that 60% of the companies that we surveyed, provide services to other language service companies. So, this perhaps doesn’t sound too surprising, given that most of the companies surveyed were between that 1 and 8 million revenue range. So, they’re obviously servicing larger language service providers.

 

But this is one of the synergistic relationships that allows the industry to tackle that challenge of finding interpreters and translators for all of those specific niches given, kind of fluctuations in client demand. Just one other type of interesting partnership is between these language AI companies that have been popping up over the last two years and Slator covers these in our 50 under 50 list, that’s 50 companies under 50 months old.

 

These companies tend to be built on top of large language models. They tend just to focus on a specific AI language service, and possibly for a specific use case. So, for example, speech to text for transcription for podcasts, for example. So very niche, very narrow. We’re seeing that companies like this are starting to partner with language service providers.

 

So, this is one of the strategies that language service providers are using to expand out their services to cover these language AI needs. So, yeah, I think it’s quite essential that language service providers continue to explore these collaborations. This is a really good way to adapt to these changing demands and to deliver kind of innovation to clients.

 

Sultan Ghaznawi

Let’s briefly chat about the M&A activity in the language space. What were your findings and what does the data tell us?

 

Anna Wyndham

Yeah, so Slator is really close to the M&A space. We provide end-to-end M&A sell-side advisory services. We support founders and owners looking to exit via sale. The ALC survey revealed some interesting trends. It showed heightened interest in both selling and acquiring. Not a huge spike in interest, just an increase from last year. We found that 8% of companies want to make an acquisition in the next 12 months and 5% are considering exiting in the same period.

 

It was smaller companies who are more likely to be looking to sell. But larger companies are much more likely to say that they are completely open to considering selling, if an attractive opportunity arises. In terms of what we’re seeing at Slator, the M&A market has been fairly steady this year compared to last year.

 

There was like a slowdown over summer which is normal, but there’s just been a new wave of deals and just in the last couple of days we’ve seen the interpreting company Propio acquire ULG and this has the potential to create another super agency, so a company above 250 million US dollars in annual revenue.

 

So, that’s really a big market consolidation there. We’ve also seen a couple of TMS acquisitions as well. So, we’re seeing a little bit more consolidation and we can say that the landscape is active and there are opportunities there for language service providers who are well prepared.

 

Sultan Ghaznawi

Do you see that in the next 12 months Anna that there will be more consolidation and what segment of the industry are we talking about, the larger super MLV type companies merging together?

 

Will we see a lot of M&A with outside organizations such as Venture Capital funding and so forth or do you see a lot of these smaller companies consolidating to become slightly medium-sized or larger companies? How do you see this model you know changing over time morphing into something different?

 

Anna Wyndham

I think the example that we’ve just seen with Propio acquiring ULG to become almost a super agency or almost one of the top niches or the top kind of level of size. I think that is something that we might see more of and another interesting thing that we’ve seen is public companies delisting.

 

So, there are not too many public companies in the industry but Keywords which is Gaming Localization, was one of them and it’s just delisted and transitioned into private equity. So, language service companies remain just a good proposition for private equity, they tend to be they tend to be profitable, so that’s probably a trend that’s going to continue.

 

Sultan Ghaznawi

In closing Anna, based on these findings, what are your predictions for the next 12 months or so for the industry in general?

 

Anna Wyndham

Sure, I’ll give three very quick predictions. One about the market, one on workforces and one on tech. In terms of market demand, it really looks demand for interpreting services is going to remain strong and continue increasing and healthcare and government buyers being the pillars there and there’s also this increased interest in adopting AI speech translation in lower risk contexts as a complement to human interpreting.

 

As I mentioned I don’t see this easing into demand for human interpreting at all but really opening up new streams of revenue.

 

On workforces, I’m going to go out on a bit of a limb here and say that despite the disruption that we were just talking about, the skill sets of interpreters and translators in particular, fit perfectly well with the demands of the AI era.

 

The World Economic Forum released a report at the end of last year, I think, where they identified the skills that are going to be most important in this era considered by companies globally across industries as the most important and its cognitive skills that are coming up top.

 

More so than programming. More so than management skills and so on. So, analytical skills, creative thinking, resilience, flexibility, curiosity and lifelong learning and I think that is a striking overlap with the skill set of interpreters and translators.

 

So, it’s hard to say how that need is going to emerge, but with language AI being adopted so broadly, it’s going to need to be complemented by human experts in many different contexts. So, I think that new roles will emerge and take shape that might take a little while.

 

And lastly on technology, we see a big trend in translation shifting away from specialised machine translation models to large language models. So, this time last year, I think it was kind of a 50 / 50 as to which way the trend would go. But in the last six months, this has really started to accelerate or the use of large language models for this purpose has started to accelerate. So, it’s gained a lot of momentum, and I think that’s going to keep going.

 

Sultan Ghaznawi

Thank you, Anna, for such an insightful conversation on the state of the industry. I know that there is a lot of research and analysis that has gone into this year’s ALC survey, and I want to give a shout out to Shamus Sayed, my friend and ALC colleague, who has worked with your organisation and yourself on the survey.

 

So, the information there is very insightful and useful as to what is happening. I’m sure the analytics and information in this survey helps every LSP to position themselves better for the current market trends.

 

With that thank you for your time and I hope we can speak again soon.

 

Anna Wyndham

Thank you very much.

 

Sultan Ghaznawi

Okay it’s time for my roundup of the interview and my analysis as to what has been discussed.

 

The language industry is undergoing a transformative and pivotal time with technology. The findings of the survey commissioned by the Association of Language Companies offer very interesting insights. Companies are changing in both the structure and what they are offering to their clients in the language space. AI will continue to drive the change, and I think we’re past the time of resistance to adoption of this technology.

 

Language companies still have an opportunity to catch on to the disruption by this recent industrial revolution where labor is shifted towards machine, which provides humans a unique opportunity to work in supervisory roles. Human experts will always be needed, and new roles will emerge as Anna mentioned.

 

We need to pay attention to all the different possibilities and new use cases where we as language experts can add value and lead the change, both inside our industry and in our client industries.

 

That brings us to the end of this conversation. I hope you enjoyed listening to Anna Wyndham about the current state of the language industry. Please get your copy of the ALC survey to learn more about what’s happening in our industry. Don’t forget to subscribe to the Translation Company Talk podcast on Apple Podcasts, iTunes, Spotify, Audible, or wherever you can find us and give this episode a five-star rating.

 

Until next time!!

 

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