LISA In acquiring Mendez, was your ambition to become the largest language services provider in the industry, or to leverage specific value from a given player?

Carl Glaeser The basic model for running a global business means having a global platform with in-country offices, languages and presence. About three years ago, at BGS we managed to build this kind of global platform, not only in terms of offices but also processes that all run the same way throughout the system. We look at business in terms of projects that are performed everywhere according to the same methods with consistent performance metrics.

With scale like this, you need throughput across your offices to be profitable. We believe the localization business has been undervalued and under-invested in. Why? Because people have worked on price not value. It has been dominated by small vendors serving large customers, so the leverage point has been off-center.

Mendez have operated with a single country model, via independent operating companies in each country. This will enable us to take on the local business models and apply our global models and metrics to them. Mendez has a tradition of good business practices and processes so it's a good marriage.

Their Japanese operation, for example, is an excellent model that we shall integrate into our processes. Moreover the manager in our Japanese affiliate is Michael Shannon, an ex Mendez employee, so we believe we can leverage their core strengths.

LISA Some people in the industry have felt that in terms of corporate culture, Mendez might have felt more at home with another player. How and where do you see natural synergy between your two organizations?

Carl Glaeser With our positioning and operations, we view ourselves as industry leaders. We are a well-run company, and that means making the most of good, well-trained people and investing in infrastructure so we're still around five years from now. We believe in generating both top and bottom line growth, but not at the expense of stupid short-term errors. We view the localization industry over the long term as a great category area which is now maturing. Five years ago it was still a cottage industry, and it was companies like Mendez and Bowne who took a leading role in pulling it out of that space. You need good operators to grow a category.

To integrate the two companies, we created an integration team of senior managers from both organizations covering all functional areas, each with a Mendez and BGS counterpart. They reported to a senior team at BGS, with Florita Mendez acting as the Chief Integration Officer. With respect to our integration plan, we are pretty much on schedule with office integration, world wide systems, production, project management, accounting, forecasting, and language management.

The hardest part about this kind of change is people. The best approach is to have a lot of open two way communication, so we established this early in the process. We set up an HR project and got the brightest and best for the new company, since we are both leaders we had a good talent. We looked at strengths and weaknesses, and interestingly enough when we looked at who went where, it was about 50-50 for both companies.

LISA In light of history, what makes you think you can succeed as the largest localization player in the market?

Carl Glaeser The localization industry is a classic case of a sector dominated by companies managing by cash flow and making very little investment. There is a small group of large consolidators—Berlitz, Lionbridge, SDL, Alpnet, Bowne and Mendez , followed by a large group of small companies (with up to US$ 15 million in revenues). Depending on whose figures you prefer, we now have 20% to 30% of the market.

On top of that there is still a large group of in-sourced localization services in such firms as Deere and Caterpillar, where localization is a cost center with internal spend of around US$ 10 to 15 million. We feel this market is the next major target in the evolution of the industry. With our acquisition of Mendez, we now have the scale, financial backbone, and global processes in place to attack it. So we are saying: outsource it to us, and you can move from a fixed cost in your business to a variable cost with us.

We feel that is the major growth step and that we are probably the only people capable at this point in time to pull it off. Why? Because of our process systems, and quality and performance metrics. Because we have the financial wherewithal – a relatively strong balance sheet and a strong parent. And we have the breadth and depth in our management team to pull it off. We shall be the largest and most profitable player in the business

LISA In this global service framework, where are your vital market segments, and where are they likely to change?

Carl Glaeser I can't mention percentiles for these segments, but our business comes from IT software, medical devices, the automotive industry, telecoms, the financial space, and the online learning and entertainment space. We offer services in consulting, technical translation and authoring, and multilingual support. We look at the strengths and weaknesses of each market. Each market has unique needs and we have enough foothold to develop these markets over time.

LISA Mendez brought considerable technology resources to the table. How do you intend to integrate and leverage this asset?

Carl Glaeser Technology is the only way to grow in this industry over the long term, and we are dedicated to maintaining and growing our technology platforms. We have mainstream translation technology such as term management and tools with bring efficiency to working with customers. Then there is specifically linguistic technology, that can be adapted in terms of market parameters, and finally there is machine translation (MT) proper. We are investing heavily in MT to develop it into a product that can be used both internally and externally. We think that the technology developed by L&H and used by Mendez is excellent. We have made some recent purchases and believe it will need two more years of investment before it's ready. We shall be spending literally millions on technology and R&D in the coming year and we shall support it down the line.

LISA With all these teams and technologies in place, how will you be positioned against the other large regionals?

Carl Glaeser The localization industry has dragged down by per-word basis pricing, which has been accepted as the lowest common denominator, so there has been little room for maneuver. You have to create value in other areas. What we are planning to do is move higher up the food chain, by leveraging our consulting services. Over time we shall be using our breadth and depth to differ our positioning and offer a high service value model. We haven't been able to educate the industry as much as we would have liked, so we're trying to add value around the consulting aspect. We shall be looking at industry efficiencies, about how customers operate internally, and then compare them across industries, setting up global metrics so as to help clients grow more efficient.

LISA Do clients really want consulting services from players who are also service providers?

Carl Glaeser We're trying to avoid the self-service model, using key data of our own. Once our customers get the analysis back, they make their own decisions about how to implement the results. This gives us a industry leadership role; obviously not all our consulting clients will do business with us, but we have to push the industry ahead and we'll get our fair share.

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Before joining Bowne Global Solutions, Carl Glaeser worked at Lucent Technologies as vice president and general manager of its Value Added Network Telephony and Wireless Services business units. He has served on numerous advisory and standards committees in the Wireless and Intelligent Network area and has been appointed to the Board of HEAVEN (Helping Educate, Activate, Volunteer & Empower via the Net). He has been a featured speaker at COMNET, CTIA, Networld and other domestic and international sessions.

LISA What led Mendez to join the Bowne Global Services?

Florita Mendez For the record, it should be made clear that Mendez was auctioned off rather than merged. Due to bankruptcy proceedings at Lernout & Hauspie, the administrators decided to auction off my company to the highest bidder. Mendez itself did not choose to be sold and we could not select our buyer. Nor, because the administrators wished to maximize the financial gain from the operation, were we able to make a bid for our own company. Ideally, we would have stayed independent, because we have had 23 years of proven profitability when compared to many others in the industry. But all that is all behind us. Now to the future.

LISA Of the localization industry as a whole, perhaps. Is there growth and if not why not?

Florita Mendez I am a bit puzzled by the current landscape. If you look at our major competitors and colleagues such as Alpnet, Lionbridge and SDL, the bottom line is that nobody appears to be growing or even making a profit any longer, apart possibly from Berlitz. Yet at the same time, analysts talk about localization and globalization as a huge market. On the mainstream localization market, I believe there will still be growth of 10 to 15% maximum, but nothing as spectacular as some figures might suggest.

The question is: where is this huge growth potential for translation? I think we may have to revolutionize our view of the whole market. Traditionally, we offered language services by dedicating human translators to complex workflow environments, which entailed very high costs. This may not be the right way to serve this market after all; it is time to try something radically new.

In 2005, there will be 25 billion pages of information accessible from the Internet via mobiles, in car systems, PCs or even TV sets, and the key barrier to distributing all this content is language understanding. The response is not simply to localize more websites and applications so that people can understand in their own language. It must be to actively help people understand all the information they need when they need it.

If I come across a document in German and I don't know the language, I can't afford to wait 8 days for a translation from a human translator. If I can get it gisted on the web using a MT button, that may well be good enough for my information scanning purposes. It allows me to choose how I wish to access knowledge—either rapid, cheap but acceptable in quality, or slower, more expensive and perfect quality.

I believe we've reached a kind of limit to the current structure of doing business of this kind in the localization industry as it is organized today. The correct response is to build the right combination of technologies, including MT. Even in the mainstream documentation market, millions of pages are simply not translated, despite the need. The legal requirements state that aircraft documentation should be translated in all target markets; but it simply doesn't happen. But if you can put together a set of technologies and the right staff teams, you should be able to address the whole market more efficiently, with 'good-compromise' quality.

LISA Do you see any particular new vertical markets that could benefit from this mix of technology and human services?

Florita Mendez I believe that there is a huge opportunity not in any specific vertical market—where there will always be unsatisfied needs—but in the new horizontal markets that have emerged from the Internet revolution. I am thinking here of knowledge databases and customer support databases, which have huge volumes of material that cut across all sectors, from software, to consulting to the financial space. So far, only a small part of this mass of strategic information is translated.

Again, if you can come up with a solution that combines human skills and technologies and with a faster, cheaper and 'good-compromise' quality model, this is very often good enough for the market. You don't always need a translation that reads like Baudelaire…

LISA What are good examples of these technologies that can help gisting content for all-comers?

Florita Mendez All of the major automatic translation suppliers, from Systran to IBM, who is back giving credibility to the MT market again, have their specific strengths. We constantly use all these systems, since no one supplier has the full spectrum of language pairs or quality level parity across languages.

Customers continually need new language pairs to address new types of content, and we spend a lot of time improving dictionaries and terminology for specific customers. Others ask us to customize and handle chat streams over the web. This simply can't be done on the fly by humans, so we are working on technology-based solutions for these people.

LISA At LISA, we have a new and growing SME network, which in many ways contrasts radically with our large-player constituency. Do you see the SME sector capable of meeting customer needs and fostering growth, or is there a risk that it might develop into a cartel?

Florita Mendez I have a very high opinion of the SME sector, provided that it knows its limits. SMEs in the industry should limit themselves to specific areas of competence. If they try and compete with bigger players, they inevitably expose themselves to excessive risk.

I also feel that a certain size matters. Traditionally—and still today—localization companies start small and grow to a certain limited size. Above this they lose focus, develop profitability problems and start having staff difficulties. They must stay either small or medium.

Our sector today is experiencing a certain ceiling on competencies. It is simply a fact that globalization and localization are a poor man's business. And since this is not a high growth field, it is difficult to attract really high quality people unless you can offer an adequate salary package. Which then puts a terrible burden on your overheads. How can you squeeze a growth business from a unit price of 20 cents a word?

I believe that the localization sector should be comparable in structure and pricing to the auditing sector. But we must still work out why our customers only want to pay US$ 50 an hour for a localization engineer when they are happy to shell out US$ 250 to a management consultant.

The fact is that everyone in our industry has been addressing the same large customers, and when it comes to prices you just take it or leave it. You have to fight with these customers for years to get a slight price rise. At the end of the day, these customers with huge revenues from foreign markets will have to understand they are shooting themselves in the foot. We decided to walk away from the commodity business and now we work in databases and encyclopedia work, building dictionaries and other added value work by serving less structured customers, where our added value and services are genuinely differentiating.

You sometimes have to sacrifice your company to find a new differentiating direction. At Mendez we managed to do it successfully. But as soon as they hear about how one of the big boys managed to push prices down, we shall be back to square one. I've always refused to pull my price down just to get a customer. But if I don't, another vendor will accept a 10% drop of price to get the deal. In this industry we hurt both ourselves and each other.

It might be a good idea to develop some form of council within the industry, whereby vendors agree to specific terms across the industry. But how many would sign up, when it comes to the crunch?

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Florita Mendez is Chief Integration Officer and President & CEO of Mendez, which was recently acquired by Bowne Global Solutions. She has led her eponymous company from a small technical translation firm in the 1970s into one of the world's largest translation technology and service organisations with annual revenues in excess of US$ 100 million. In 1996, the company was taken over by Lernout & Hauspie enabling Mendez to pursue its cutting edge linguistic technology development. Ms Mendez is also a co-founder of LISA.