LISA: As we approach LISA’s tenth anniversary, how would you categorize the localization industry?

Roger Jeanty: The industry is now undergoing transformation, with parts of it dying and being reborn. This isn’t a cause for worry, as the underlying trends in the industry are still very strong and business keeps getting more global. Rather, what we are seeing now is a fundamentally natural process—a stratification similar to what happened in the auto industry or the software industry, although the precise manifestations and the timing are different.

Specifically, what is happening in our industry is the impact of the Internet and the shift from project-based work to streams of work. An analogy would be the jump from discrete manufacturing to process manufacturing, or from the workshop concept of making cars to Henry Ford’s assembly line. In other words, we are moving from a situation in which most of the work used to be focused on discrete projects and applications towards continuous streams of projects. What is more, we are no longer just translating the pipes—the applications—but the flow of water through them—the content. Content is much broader in terms of the domains involved, and not so IT-focused.

Don Plumley: You cannot dispute the fact that the industry is going through great transformation. Bowne was an early consolidator in our industry—we rolled up the eleven companies that we had acquired within a very short period of time. Nevertheless, we are a service business and I feel factory models are not as directly applicable here. Instead, I prefer to compare localization to professional services such as accountants or the global law firms that are now forming and bringing a broader palette of resources.

When I came to this industry as a newcomer just over three years ago I did a Porter’s Five Forces analysis and concluded that the localization market had really unusual structural problems: low barriers of entry for new suppliers and an extremely high level of customer power for a resource-constrained industry. My feeling was and is that these fundamental disruptions will have to work themselves out, although it appears that the industry is its own worst enemy when it comes to correcting them.

LISA: Isn’t the Internet simply making things worse?

Don Plumley: The Internet has been a great enabler for companies such as ours by driving down communication costs. At the same time, though, it means that anyone with a computer can access at least part of the market. This increases the resource pool and stimulates competition, since you no longer have to invest large sums or be well capitalized to enter the industry. For most small companies, localization remains a cash flow-driven business. These enterprises coexist with mature players such as Lionbridge and ourselves who are trying to do things based on investment criteria, expansion criteria and—at least in our case—profitability goals. Unfortunately the customer doesn’t always appreciate the different levels.

Roger Jeanty: I’m not sure I completely agree with Don. The barriers to entry will rise again in the new paradigm I mentioned with its streams of projects. The traditional localization business model—which is still the majority of our business, as it is for Bowne—still focuses on large complex projects and strong project management. In such cases, technology predominately serves to reduce costs, reduce time and enhance quality. In other words, it enables the service side. However, in the stream business, we’re finding that technology is the critical link for connecting to the client on a real-time, ongoing basis, and the service side is more maintenance. In other words, the technology drives the relationship and the service side is more a consequence of this, or a maintenance agreement in product model terms.

Don Plumley: I agree with you that new barriers are rising. We’re seeing that with our extranet initiative (ExtraGLOBAL), and as customers become accustomed to this type of service, these big technology barriers will become difficult to scale. I also completely agree with you that the release-driven nature of the business will decline, certainly as regards software. The Internet has definitely increased demand for products in second and third tier language markets. Physical products, on the other hand, will still be release-driven in my opinion.

LISA: So what do you need to be a global player?

Roger Jeanty: We feel that Lionbridge has achieved the scale and business maturity of a truly global company. This is measured not just by the size of its revenues but also in terms of its employee base and its global footprint. We have offices in 16 countries but that alone is not enough. You also need global financial systems and a global IT infrastructure. I used to work for Data General, and we now have the same degree of global complexity and maturity as such companies that have in excess of billion dollar revenues. This in itself is a challenge that is not always appreciated by customers. It’s not enough simply to buy up a load of companies. You have to invest heavily and weave them together into a truly global enterprise. In some ways, this is even more acute than with traditional product companies that can live together in a decentralized model. We have to be centrally coordinated, with work being done locally.

LISA: And does big mean beautiful?

Roger Jeanty: The ecology of the industry—and by that I mean the relationships between customers, large service providers, small service providers and tools and technology vendors—is changing. In the old product-based model we often found ourselves competing with tightly focused, high-quality small units that were very client-driven and very focused on one language or niche market. Because these companies were often managed by one or two strong individuals they could be incredibly focused on a couple of customers. In contrast, the tools providers were usually our allies because they gave us technology that could help the process. In the new model, we see the competition being more in the area of the technology platforms and performance. In this model, the SMEs are providers, or collaborators in the ecology we’re trying to provide. In other words, we’re moving to a slightly different place in the value chain. Our strength is that we offer a global platform and infrastructure with which to handle high-velocity multilingual content in a real-time environment. We need single-language vendors to make this work. However, we’re at an awkward stage at the moment because a lot of our customers—including some very large customers—are still in the project model, even if they’re thinking of moving to hosted applications and streams. This is a particular challenge for the big guys, since it means we are living in two worlds, whereas a lot of small companies are either still firmly in the old paradigm or already in the new. They’re either a single-language vendor or a portal provider.

LISA: Does this match with the Bowne model?

Don Plumley: Certainly the technology infrastructure that we rely on is far different now to what it was four years ago. We’ve always said that our core model has been that we own and operate production facilities in target language countries. My mantra is that the network is our factory. It needs to run 24 x 7, 365 days a year and with a similar degree of reliability to turning the light switch and having the power go on. This applies both to the underlying infrastructure and to all of the tools and systems that build on it—workflow, language technology, etc. We have made and are making similar scale investments to Lionbridge here.

LISA: So what are the challenges facing the global players?

Roger Jeanty: One challenge is not only to meet client demands but also to anticipate what clients are going to want. Obviously quality levels need to continue to increase. However, you don’t want to be like the Swedish manufacturers of turntables for LP records who suddenly woke up to find everyone buying music on CD.

LISA: They still want sound in both cases, and to some extent anything else is a question of delivery.

Roger Jeanty: True, but what we have to do is anticipate technology shifts and what customers want tomorrow, while still serving them very well today.

LISA: Isn’t a proactive approach to providing customers what they want—indeed, positively telling them what they want—a solution to the pricing problems the industry has traditionally had?

Roger Jeanty: In the old, product model, a lot of the customer base was from the IT industry, which by nature claimed ownership of many of the tools, technologies and processes involved. The reason we weren’t paid enough was that they kept pushing us into merely being providers of words of translation for pennies. As the need for more real-time multilingual solutions increases, some IT companies will want to retain ownership of the technology platforms, but companies in other domains do not have that desire at all. At that point, service providers can get paid adequately for what they do. In hindsight, it does appear it is largely the large IT companies that have commoditized their localization suppliers into providers of translation, leading to a disproportionate amount of power on the buying side. These companies did not outsource the higher value-added segments of the value chain. This is definitely changing.

Don Plumley: With release cycles moving away from version releases to ongoing streams, our role is to be extremely agile and resourceful. The value we provide to new customers going forward is the value of our market knowledge and expertise. The days in which a customer would build a 100-person organization to manage localization are gone: outsourcing has been accepted. Our new customers are smaller, faster and want real partnerships. Our role as service providers is therefore to provide in-country expertise, package it differently and hold our customers’ hands. When we act like professional service providers, we’ll be fine. This is very simple stuff. We like to think we’re the world’s most complicated industry, but truthfully, it’s a business like most of the others. If you have the vision and the drive, you’ll succeed.

LISA: So why is it so difficult for the bigger players to find the path to profitability?

Roger Jeanty: There are different stages in the evolution of a business and growth is not linear. In the first stage, you’re a mom and pop company with a couple of partners managing the company, a single location and a couple of dominant customers. You then become a stage two company: you start to build the management team, you have a couple of other locations in addition to your headquarters and you become a regional player with a dozen or twenty big customers. To get to stage three, you have to jump over a huge chasm the size of the Grand Canyon. You need offices in many different countries, truly professional public company management and local management in each production site that needs to be as competent as the management of a stage one company. In addition, you have hundreds of customers rather than merely one, two or a dozen.

The amount of learning, investment, maturing and management required to make this jump is enormous. And while you’re making the jump, you’re burning fuel—be it money, resources, people or whatever. The pace of change during this process is enormous relative to a single language vendor, and it’s only now that some of the big companies are really getting on top of this stage. In such a situation, it’s easy to crash and burn. However, once you have truly reached stage three, you have a different natural size that leads to profitability.

At Lionbridge, we are confident that we have passed through the chasm, and our path to profitability is clear. We still have transaction costs to flush through and infrastructure investments that are still affecting our bottom line, but our fundamental operating figures are strong. The most recent merger went very smoothly, possibly because we’ve learned from mistakes in the past. The only area where we had some difficulties was on technical IT issues of bringing networks together, as you always tend to underestimate the IT migration effort. On the management side, the new company is very tightly integrated: central management, sales and operations knit together very well—it went very quickly.

Don Plumley: From Bowne’s point of view, we went through the consolidation phase a bit earlier and saw over 18 months ago that it was time to focus on profitability. We have done this by concentrating on our core processes, since running your business efficiently and effectively is a critical step towards profitability. In fact, last year we moved USD 7 million to our bottom line and are on track to achieve profitability this year. That’s something we are all extremely proud of.

LISA: Rapid change means that people also have to change and adapt rapidly. How are you coping with this in an industry in which talent is scarce?

Roger Jeanty: Well, the first point is that the skills shortage means that you have to pay more for good people, but this in itself isn’t enough. The move from being a single language vendor to being a global player also entails a change in culture—you still need a culture but it can’t be the same. Smaller vendors can offer a close-knit, family atmosphere, whereas global companies can offer stock options and the opportunity to help build a world-class organization.

Don Plumley: In a way, the fact that our employees are working for a stable company gives them the freedom to take personal risks and develop more. We support this by providing extensive training and an environment for growth. For example, we are just about to complete putting all our 120 project managers through a weeklong training course. That’s a significant investment that few companies can afford—but from our perspective we cannot afford not to.

LISA: So what are the critical success factors for a global services provider? What can you offer that one of the new smaller Web companies cannot?

Roger Jeanty: There’s a tendency in the Web world to look for the silver bullet—the one portal that will solve all your problems or the one tool that will make everything run smoothly. Companies like Lionbridge have the maturity to know that you need a lot of things to be successful. You have to focus on quality, service, resources, technology and scale, for example. That’s very different from looking for a silver bullet.

Don Plumley: We are relied upon to consistently deliver mission-critical projects for our primary customers—to protect and extend their brand equity into new markets. We have earned that trust over years, and the projects we are involved in help our customers earn billions of dollars and have a direct impact on their profitability. We take this responsibility very seriously.

As for the small Web companies, these firms are experiencing many of the same issues that we already addressed in terms of project management, employee retention and building stable infrastructures. Even the large Web development companies with huge valuations are an integration nightmare. There are horror stories of them competing with themselves in markets where they have multiple acquisitions. So competing with them is not the driving challenge for us.

What is more, there’s still a tendency to regard Web translation as simply translating HTML files. In fact, there’s a lot more to it that that. The real strength of the Web is its ability to enable truly global e-commerce—to transform supply chains and the entire sales and support process. The real issue isn’t having a fancy tool to translate HTML, it’s providing industrial-strength end-to-end solutions. These normally involve a number of technologies, careful integration and world-class professional services.

LISA: So you see yourself moving into the space occupied by the traditional consultants?

Roger Jeanty: It’s interesting that you say that, as we recently formed a consulting group. In the old localization world, people pretty much knew what they had to do, but in the new world there’s a lot of confusion and uncertainty, and there are a number of different paths that clients can take. It’s very useful to have a service organization that helps clients navigate through these questions and enable their own platforms to be able to connect to a multilingual solution.

Don Plumley: A fundamental difference between consulting companies and ourselves is that we produce something. We don’t just give advice. In addition, in the Web world development cycles are measured in hours and there is a new generation of programmers who have not had meaningful if any international exposure. To this extent, we’re back to ten years ago when we were all talking about writing good internationalized code. Remember, those who do not learn from history are doomed to repeat it. If we cannot help them do what they need to do while being sensitive to the speed of their business, we are going to continue to be profitability challenged.

Roger Jeanty: There is Internet awareness and global awareness, and we are seeing extremely savvy Internet companies that are globally ignorant, and very global companies that lack experience with the Internet. You have to move customers to mastery of both areas, and it’s a huge effort.

Don Plumley: That’s a good point. The speed at which international markets want products and services in many ways precludes an adaptation mentality. Look at Yahoo! Japan. The US company is a minority owner, providing the brand and technology—but the content is developed here in Japan. We produce 21 markets for MSN Communities. We take a content plan and create and/or find content that is relevant to the local market interest. It’s creation, not adaptation.

Roger Jeanty: …and we’ve done something similar with our China Connect operations.

LISA: So how will the rest of the industry adapt to you?

Roger Jeanty: They have to find their niche. Are they traditional language providers or Web companies? Do they prefer working for end clients or associating themselves with large companies?

Don Plumley: We’re in the right country to think about this. Japan is a society that values craftsmanship. Look at the beautiful dishes in front of us and the elegant screens in back of us. It’s also a country of great industrial might that has the ability to do production at a scale and quality that is the envy of the rest of the industrialized world. There is a place for both of these things, but it is difficult to do both as a single organization.

Roger and I are part of large concerns that scale up in order to attract investment and provide appropriate financial returns. It’s no less meaningful, but we cannot spend vast amounts of time making handcrafted products. Of course, we’re serious about quality, and this means it has to be an integral part of the upstream process. You cannot inspect quality into the product.

Roger Jeanty: True, and cars like the Lexus are still beautiful, even though they are made on a global scale. I like to use the example of regional airlines: there are some that are world class and some that you really don’t want to fly.

LISA: Will other companies also be able to take on the new consulting role?

Don Plumley: Focus is always rewarded in business. Small companies have limited resources and doing everything is usually a recipe for disaster. The smaller companies should focus on what they want to do and not feel they have to do everything.

Roger Jeanty: Initially we were hoping for cooperation with some of the big guys—Andersen Consulting, EDS and the like—and some of the new Web firms such as Sapient. However, in our opinion they’re moving too slowly. They’re not filling the hole and they’re making mistakes. The Web guys may be the architects of the new economy but they don’t quite understand the global thing yet. And Andersen and the like understand global business but not the language issues.

LISA: What does this mean in practice?

Don Plumley: One of the great shifts happening right now is that we are at a point where the market matters. The IT business is a language-centric business. The Internet is a market-centric business. That’s why we’re seeing a meaningful shift in what our customers need. To that extent we’re becoming more like publishers.

Roger Jeanty: I agree. The flows of information we produce include translated content, customized content and local content.

LISA: So who are your competitors going to be in future?

Don Plumley: Who knows? That’s one of the beauties of doing business in the new economy. However, I think it will be more a question of coopetition than of competition. And this makes our industry much more dynamic and interesting.

LISA: So what keeps you awake at night?

Don Plumley: Well, it’s not Roger—and I mean this in a positive way. The challenge is to maintain a velocity of business that’s difficult to sustain. That and staying ahead of the technology curve.

Roger Jeanty: Absolutely. The larger the ship, the more vital the steering is.

LISA: And how do you achieve this?

Don Plumley: With a lot of air miles. It’s one of the ironies of the new economy that with the Internet you need even more face-to-face communication. The subtlety of human contact is what drives our business. And I think that’s why we’re all here.

LISA: Thank you very much.

---

Donald J. Plumley, Bowne Global Solutions

Don is Executive Vice President, Marketing and Business Development for Bowne Global Solutions, a unit of Bowne & Co. Bowne Global Solutions is the industry leading provider of product localization and global content creation services to high technology companies, such as Microsoft, Oracle, Palm, Hewlett Packard, Dell, Novell, Corel, Compaq, and Network Associates. He is the author of a recent white paper, “Global eCommerce: The Market, Challenges and Opportunities”. Don holds an MBA from the Anderson School at UCLA and a BS from the University of California, Davis.

Roger Jeanty, President, Lionbridge Technologies

Roger became President of Lionbridge when the company he founded, INT’L.com, was acquired by Lionbridge in January 2000. As a pioneer of the localization industry with over 20 years of experience, he has recently focused his efforts and his organization on pushing the technical and service boundaries of industrial-strength multilingual Internet solutions. Prior to being the CEO of INT’L.com, founded as International Communications in 1988, Roger has held a wide range of management positions in international and technical areas, at companies such as Data General and the International Software Centre. Roger was raised in France, is an MIT graduate and has completed the Entrepreneur's Management Program at Babson College. He is a frequent speaker at industry events, including LISA.