We study history to learn about the future. My history of the translation business starts fifteen years ago with the start of the INK Group of the Netherlands. At the risk of oversimplifying complex reality, I have gone through two major waves of changes. One was in 1985 when the localization industry emerged as a specialized translation service for the computer industry. The second was in 1991 when the computer industry was hit by a severe recession. These waves of changes and other actors in the background have caused confusion in the cost-value chain of localization services. In my view this confusion will force suppliers of Localization in this and the years to come to search for new added value for their customers.

In 1980 the world of translation was still structured in a conventional way: demand and supply, easy to understand. There were users who needed a text to be translated into another language, and there were translators or small agencies who translated and delivered. In 1983, a consultancy firm surveying the Dutch translation market arrived at the conclusion that INK was by far the largest individual professionals and small agencies.

The market was changing. A new market sector came up rapidly that was in dire need of translation of massive documentation and product integrated information: the information technology sector. INK anticipated this new demand in the translation market by actually employing translators, training them and offering customers new value-added services besides the usual translation of text.

The growth of the computer sector and the migration to the desktop (the real end user) and the explosion of office automation software stimulated further changes in the translation market. At the first European Comdex in Amsterdam (was it in 1985?), I heard the terms Europeanization and Localization being used for the first time by companies called Lexitel and Dysan.

From the mid-eighties on, we see existing agencies changing, new translation companies being started up and users becoming service providers. Today the translation market is not easy to understand, not any longer. Translation and localization services are offered by many different "players." Still we have the traditional agencies and the individual professionals.

In addition, however, we distinguish Localization service companies, service integrators, publishers, language technology consultants. We can not even tell nowadays whether a "player" is active on the demand or on the supply side of the market. What really changed the market was the need of computer companies for new services besides the straightforward translation tasks. The first challenge in the early days of Localization towards the translators was to work in rather primitive text editors with complicated coding. Special training was required because the skills were not readily available. Translators at that time were still working on typewriters or with dictaphones. At INK we generated indexes, we cut and pasted illustrations and we translated software messages in limited space.

Organizationally we faced the challenge of forming translation teams that were able to turn around the massive jobs in the couple of months that we were given to complete the projects. Consistency of style and terminology were new requirements presented to translators, who were trained to work as "creative" translators. New terminology was invented to name the new devices and features of the computers that entered our lives at the office. A new breed of translation companies arose in the mid eighties, capable (or claiming to be capable) of responding to these new market needs. To clearly distinguish themselves they called their services "Localization services" rather than translation services. The world was confused about what was localization and what was translation.

In 1990 we formed LISA with the mission to bring some clarity in this confused world. A few years later, however, we must admit that for each of our private businesses we were in most cases better off with a confused market place. Now in 1994 I want to test your honesty with regard to the question of who is paying for what and how do costs relate to value. How much longer will confusion be to our benefit?

Who is paying?

The dilemma of the new Localization industry has been from the very start the question of who is paying for the new value-added tasks. At INK we did not manage to convince our customers in the early days to pay additionally for generating the index, for terminology research, for text layout, for training, for consistency between software and documentation, for project management. All of our extra effort was supposed to be included in one simple rate per word and our reward was in the big volume of words. With the growing complexity of projects we gradually managed to charge clients separately for desktop publishing and sometimes for management of multilingual projects. Like all other Localization companies we were "hiding" all other costs in the word rates. Flat word rates covered much more than just translation. The handling of files, the assessment of new projects, the handling of changes and author's corrections, the indispensable technical support, it all became part of the normal process. The common opinion was that "Localization" was "translation plus" at (slightly) higher word rates for those users who were prepared to pay for it. For those who did not want to pay the premium word rate the risks were that their products would not come out on the market in time or that they would end up with bad quality localized products.

Operating models

New changes were ahead of the freshly established Localization companies when the computer industry dived into a recession in 1991. Lowering budgets, continuous price pressure and a much more selective approach to the mix of languages into which products were going to be localized resulted in the early death of some promising Localization companies. Localization companies and Localization departments in clients' organizations that survived this recession had to change their operating model. The worst threat to the Localization companies was the ever- improving computer literacy among the "conventional" translation suppliers. The "plus" of the Localization companies did not justify in every case the significant difference in the word rates. It became much easier to find independent translators who were able to do a good job on the translation of documentation and software than ever before.

So the market was changing again. We saw users restructuring their Localization departments: centralizing all European activities in one or a few sites (DEC, Wang, WordPerfect) or moving from the demand to the supply side of the market (IBM, Rank Xerox, AT&T GSS). We also saw Localization companies being acquired (Softrans /Berlitz, INK) and changing their operating model, especially with regard to outsourcing the actual translation work. The maintenance of a qualified translation staff in a centralized location was--against the peaks and valleys in the work flow-- more and more uneconomical.

Today we see various operating models being applied in the Localization market. On the one hand we distinguish publishers (Microsoft, Oracle, Novell) Localization service companies (Mendez, Softrans, ITP) and service integrators (Donnelley, IBM, AT&T GSS) and fully decentralized operations (IBM). The last category has become very rare.

Most models have outsourcing of translation work in common. Publishers had already decided ten years ago to outsource all translation work on a project-by- project or on a freelance basis.

Since the last wave of changes we recognize that the Localization service companies have also chosen the outsourcing model. They have translators working on a freelance basis or on a project-by-project basis, sometimes on their own premises, most of the time externally. Of the "translation plus" that publishers, localization service companies and service integrators offered, only the "plus" has remained. Sooner or later we will find ourselves in a situation where we will have to explain to our internal or external customers what this "plus" really represents. In other words, how do cost and value relate to each other?

Cost-value chain in localization services

Based on my knowledge of the Localization business, I have made a reconstruction of the cost and value chain of the localization service. The table below shows what value and which cost each switch in the chain adds to bring a localized product to market.

Chain	Cost	Value
End user	100%
Publisher	25%	File handling Project assessment and management Problem solving Communication Testing Quality Assurance
Localization service company	20%
Service integrator	File handling	Project assessment and management Problem reporting Communication Terminology research Quality assurance
Translation agency	20%	Project status reporting Problem reporting Communication Sample checks
Translators	35%	Translate

Value of each Switch in the Chain

Naturally it can be argued that each case will be unique and thus different to some extent. Sometimes a publisher is taking on more tasks and sometimes a publisher is outsourcing more. The DTP (not reflected in this model) is sometimes taken care of by the Localization service company or service integrator and sometimes by the translation agency or even by the translator. And there are still localization service companies . especially on a single-site national level who actually do the translation work in-house. Also, the cost contributions may be different.

Still I am convinced that whatever is argued about the model, it remains valid that there are too many overlapping tasks in the chain. Publishers, service integrators and Localization companies represent an overlay over the thousands of agencies and hundreds of thousands of independent translators. Their role can partly be justified by the project management and technical skills offered and partly by the access they offer to the translation resources. Every transaction in the chain must be managed, however. The money and time this costs is not justifiable for every kind of translation job.

What is it that leaves this cumbersome chain largely intact? In other words, what are the barriers that can break this chain? Access to qualified translation resources is certainly the first barrier for publishers who need their product localized. A good organization that is capable of guaranteeing the required turnaround time is the second barrier. And third, it is the vicinity of the Localization service company that makes communication a barrier to overcome.

"New world order"

In my view the Localization industry has to prepare for a new drastic turnaround, which will result in a "new world order" for the translation/Localization industry. In its growth to maturity the Localization industry is facing its third wave of changes. The conventional chain will be broken. We will see a split in technical centers on the one hand and purely translation centers on the other hand. Users and buyers will buy the services separately rather than in a chain. The reasons I see for these new changes are

• products become more easily localizable, which will take away the need for high level technical skills
• use of groupware among translators becomes common practice, which makes the organization task of the service company almost obsolete
• use of language technology and document database tools will soon be common practice; this will break the access barrier to the translation resources
• computer literacy improves, which results in a vast distribution of potentially good translation service providers.

Similar to what Localization centers can do for the computer industry we will see technical centers for other sectors of the industry equipped to help both publishers and translators: understanding the technical requirements, official regulations and perhaps terminology. The translation market will be industry-oriented rather than nationally-oriented. After being overshadowed for some ten years by the localization industry the translation market now seems to be mature enough to come out of the cottage. It is high time for the Localization service companies to search for the "plus": the real added value.

In search of the added value

Looking back ten years we can draw the conclusion that the service companies that we have come to know as localization companies have benefited enormously from the immaturity of the established translation market. Improved professionalism in the translation market, less technical requirements from the publishers and effective use of technology all together form a serious threat for the Localization service companies. Pure Localization services are a shrinking business. Every company active in this field will have to search for the added value, that is, the distinctive "plus," in order to maintain its revenues. The added value may be found in limiting its services to pure Localization consultancy, in applying advanced technology or in innovating the services and pricing model.

In the new world of translation we will meet new players: the privatized telecommunications giants who are offering all kinds of value-added network services, among others, translation. Telefonica, Deutsche Telekom and France Telecom are already experimenting with these services. Translation will become very easily accessible through a simple icon on the screen.

Quality, reliability, financial stability will be guaranteed by the value-added network service providers, who may even take care of the billing. They will offer groupware facilities as part of the overall services to help organize more complex projects and facilitate interaction with the authors. Access over great distances will be natural and even direct communication between the translator and publisher will be a natural aspect of the "Infobahn."

In the new world of translation the chain between the end user and the translator will be much shorter. We can even imagine that publishers will step out of the chain and leave the choice to have translated documentation entirely to the end user. The publisher may have to decide to limit its interference to selecting the service integrator who will manage the documentation database, maintain the language versions and provide the translations on demand to the end users and bill them directly. Publishers will have the more complex task of localizing the software integrated information and "animated tours" in multimedia formats for all foreign markets.