All of us active in the GILT industry are only too painfully aware that what we all love and hold dear to our hearts rarely causes a blip on the strategic radar screens of top-level management, regardless of the type of organization. One way to "level the playing field," as the sports metaphor describes it, is to drop our somewhat messianic language and switch to that of the people whom we are trying so desperately to reach. It's really not terribly difficult once you realize that the GILT industry is simply expected to employ the same language and metrics used by the rest of the business world to justify its investments.

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The area where it probably makes most sense to start, especially in today's business climate, is with understanding and adopting ROI terminology. Why has this term become so important and almost a mantra among businesspeople? Because it helps to break down complicated processes into pieces to which a monetary value can be attached, and thus better understood by the people assigned to make informed business decisions about them. Most businesspeople do not understand localization and have no wish or need to. And that's fine, since that's what ROI is for.

Calculating the ROI on a specific localization project should be fairly straightforward since it allows an organization to enter new markets and/or further penetrate those that have heretofore only been serviced in a non-native language. Profits from these new revenue sources, as cost savings, are not difficult to measure over time.

However, if your goal over the long-term is to ensure that globalization, along with its localization component, gains its rightful place strategically within the organization, then the ROI assessment needs to go deeper and include stakeholders from all functional areas affected.

Terminology

With the latter in mind, let's define some terminology. For purposes of this article, ROI can be described as, "A general concept referring to Earnings from the Investment of Capital, where the earnings are expressed as a proportion of the outlay." 2

Profits can be measured in terms of profits, cost savings or even objectives such as increasing market share.

Defining and Measuring the 'I'

Right. So where do you start? By defining the pieces that will be measured as the investment. With a little digging, you can find the pieces and then help your organization and/or customers learn how to track down the missing information in the future to produce more accurate results.

Taking a web site localization project as our example, the table below includes seven possible components to measure for the 'I.' There are many more; the factors outlined below are only intended to send you off in the right direction.

Defining and Measuring the 'R'

Return can be measured by "hard" (usually financial) benefits that include items such as increased sales, cost savings, etc. that can be quantified easily. "Soft"(usually non-financial) benefits, such as increased brand awareness, tend to be difficult to define and/or quantify – even when being measured for non-localized ROI. Again, the benefits listed below are simply intended as examples to get you started.

The "Cake": Hard Benefits

1. Increased Sales, Revenues and Market Share

Assign a dollar value (or whatever currency applies) to the increased sales, revenues and market share over a specific period of time, that are directly attributable to your product/service being available outside of your home market in other languages. And, don't forget to factor in the additional sales that are generated in non-localized sales, due to your having the localized version available to meet the needs of a larger organization's local office(s).

2. Lowered Cost of Doing Business

Cost savings will be generated across the organization by implementing localized web sites. Work with accounting and individual functional managers in sales, marketing, support (this is always a big one!), operations, human resources (don't forget that you can recruit worldwide much more cheaply, while reaching a much wider and deeper field of candidates), etc. to calculate the cost savings in each area.

3. Faster Time to Market

Many argue that this factor cannot be quantified and should be qualified as a "soft" benefit. However, it is possible to postulate, for example, three different product/service launch dates. Estimate sales over a certain period of time, and then measure the differences between the scenarios. At the same time, take into account the activities of your competitors (both local and global), so that you can factor in sales that are either lost or gained due to timing.

The "Icing": Soft Benefits

1. Increased Marketing Reach and Brand Awareness

Under this category, track the additional number of potential customers reached through localized web sites. Poke around and work cross-functionally with sales and marketing to determine the increased sales and revenue. IT colleagues can provide numbers on the increased international traffic to your sites.

Everyone now understands the value of consistent marketing messages and value propositions. Localized sites, with local content, allow an organization to build and maintain this consistency without having to depend on overloaded local offices. How to measure its value? Difficult, unless you have budget to run focus groups, marketing studies, etc. However, if this knowledge is critical to your organization, then the ROI team can figure out how to measure it effectively.

2. Improved Customer Satisfaction

With a little detective work, this benefit can often by quantified in a variety of ways. Choose the factors that your company uses to define "improved customer satisfaction," e.g., less returned sales, a decreased number of support incidents, an increased number of visitors converted to purchasers, etc. Once defined, measure them through web surveys, support reps, etc. Don't forget to include people who make decisions within the home office of some of your global customers . . . their satisfaction will be greatly increased as their stress level decreases. This is because their local offices will now be much happier implementing centrally-made purchasing decisions on localized web sites.

3. Keeping Ahead of the Competition

Localized web sites allow you to more easily track what customers outside of your domestic market require in terms of new product features, service and support, etc., allowing you to stay one or two steps ahead of the competition. Again, this can be measured rather inexpensively through sales and support reps, by performing short surveys on your sites, etc. This is the case, even if your competitors have localized web sites. That's because many companies still don't capture this information nor use it effectively.

In conclusion, it is important to remember that there are probably several more benefits, both soft and hard that will come to light during your work on setting up the initial ROI analysis, e.g., improved information access internally for your own organization. With input from the rest of the ROI team, you can decide which to measure and factor into your formula(s).

A Simplified ROI Calculation

Once you have gathered all of this information, what do you do with it? The simplest ROI analysis is probably the straight payback calculation, based on projected costs and benefits. 3 Here is one possible way to analyze the information and provide it in a format that financial controllers/directors and strategic decisionmakers can understand and process.

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Benio Ltd. achieved worldwide profits of US$ 20 million during their last fiscal year. US$ 1.8 million (about 9%) of this was generated by four newly localized web sites for China, France, Germany and Japan. The total cost to localize the web sites during the same period was US$ 1,000,000 (including the installation of a new GCMS system). The ROI team also calculated that the company realized US$ 375,000 in cost savings from marketing, pre-sales support, catalog printing and customer support.

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Plugging in our formula from above:

A variation on this formula allows you to estimate how fast your investment will be paid off:

You can factor in as much information and as many variables as you want (don't forget leveraging here!). However, it is essential to construct a presentation that abides by the cultural norms of your organization. For example, in some groups, "less is more," while in others, lots of supporting documentation is expected. 4

A variation on this theme is to compare the localization cost to the cost and consequences of not localizing, or localizing in a reduced number of languages. As mentioned before, a fellow colleague from IT should be able to help you analyze the international traffic to your site(s). From there, you can extrapolate the percentage of sales and revenue that your organization may have lost because potential buyers could not understand the marketing message or, even worse, were prevented from buying.

The Importance of Collaboration: The ROI Team

Now that you have an idea of the type of information that must be collected to measure ROI, what is the most effective way to gather it?

Identify and recruit at least one upper manager willing to act as your champion (this person does not need to be in your department). Globalization decisions obviously touch all functional areas of an organization. Together, the two of you can identify a stakeholder at the appropriate level in each of the functional areas from which you need input. It is key to keep the stakeholders engaged in the process until the information needed for ROI is automatically generated and available to anyone who may need it. Continuous monitoring over a specified period of time is required to track and measure improvements in customer service, brand equity, market penetration, etc.

If anything has been learned from all of the ROI work done by our IT colleagues, it is that collaboration is the true payoff from this type of exercise. A disciplined approach to calculating ROI with the "right people in the room" will naturally highlight areas where business processes may need to be modified. This is an important benefit of ROI assessment since the evaluation itself costs the organization money by requiring time from employees that is diverted from other tasks.

Here is just one example that is still all too common, unfortunately. An organization invests partially in globalization by localizing a product or service, but leaves the purchase mechanism on its web site for later. An ROI assessment will quickly uncover this partial investment as an inconsistency that "leaves revenue on the table," and worse yet, creates dissatisfied customers. With an ROI team in place, the right people are already drawn together to correct the situation before more revenue and/or market share is lost.

Shortening the ROI Learning Curve To shorten the learning curve and to confirm which pieces of information are easily available and which are not, take time to speak with the accounting and IT managers responsible for ROI assessments within your own organization. They can provide valuable guidance specific to your situation, the most important of which is how best to approach strategic decisionmakers. They can also save you precious time by providing pointers on how to win (or at least do better) at the internal competition for scarce budgetary resources and how to deal with corporate politics. To further avoid reinventing the wheel, you can go to external professional organizations such as LISA. There, you can bounce your ideas and problems off of colleagues who may have already surmounted some of the same challenges facing your organization. At the least, they can advise you as to what mistakes not to make!

Where Do We Go From Here?

Make the ROI measurement process as simple as possible and only track those factors that have a real impact. And most important, build and work with your cross-functional team!

One final word of encouragement... don't despair when trying to gather your ROI data and build your formulas. Most primary and secondary international markets are extremely lucrative when entered with the right foresight and planning. It's worth it to learn the language that our business peers speak. Developing an effective approach to calculating the ROI on localization projects is all part of the process of guiding people in developing their "globalization reflexes." The big payoff will come when more and more of these processes are integrated into your organization's business practices, rather than retrofitted as they are today.

Postscript: Some Helpful Resources and Recommended Links

You can take the ROI analysis many steps further, depending on the needs of your organization and the level of detail required. If you are interested in ROI theory and statistical modeling as used in the IT sector, visit some of the following sites: Alinean, CIOview, Gartner, Hubbard Decision Research, ITCentrix, Giga Information Group. 5

Here are some additional links where you can learn more about how to build the appropriate GILT-specific ROI formula(s) for your organization:

GILT-Specific Articles/Research/White Papers/Presentations

(in alphabetical order by company name)
 

Laurie Kamerer, "The Business Case for Enterprise Terminology: It's About Money, Not Words!" Cisco Systems. LISA Forum Europe, November 2002. Presentation available to LISA members under "Members Domain" on the LISA website.

Kara Warburton, "Language Resource Management for Enterprise Communications: The ROI," IBM Software Group. March 2002, LISA Global Strategies Summit USA. Presentation available to LISA members under "Members Domain" on the LISA website.

Ben Martin, "Maximizing the ROI of Your Linguistic Resources," JD Edwards. March 2002, LISA Global Strategies Summit USA. Presentation available to LISA members under "Members Domain" on the LISA website.

Benjamin B. Sargent, "Calculating ROI," available on the Lionbridge web site (registration required).

"Calculating ROI," available on the Rubric web site (registration required).

Herbert Illgner, "Multilingual Content Creation and Software Development Lifecycle: Purpose and ROI of Standards," SAP. November 2002, LISA Forum Europe. Presentation available to LISA members under "Members Domain" on the LISA website.

Adam Jones, "Localization Return-on-Investment, Parts 1 and 2," available on the SimulTrans web site.

Matthias Heyn, "The Value of Translation Memory Technology," Trados, March 2002, LISA Global Strategies Summit USA. Presentation available to LISA members under "Members Domain" on the LISA website.

Matthias Heyn, "If I Can Make Your Speak My Language," Trados, November 2001, LISA Forum Europe. Presentation available to LISA members. Presentation available to LISA members under "Members Domain" on the LISA website.

Thilo Schueller, "Standards Make Money: The Business Case for Implementing OSCAR Standards," Welocalize. November 2002, LISA Forum Europe. Presentation available to LISA members under "Members Domain" on the LISA website.

GILT-Specific ROI Courses/Courseware

1. XenCraft will be offering a workshop, ROI - Cost-effective Localization, at the LISA Global Strategies Summit on March 3, 2003 in Foster City, California, USA.

2. The Silicon Valley Localization Forum offers an online course, Localization Business Aspects.

Generic IT ROI Articles/Web Sites

Scott Berinato, "Calculated Risk," CSO Magazine, December 2002.

Peter Hennigan, "The Quantity Is in the Quality," Tech Republic, October 21, 2002. Click here.

Resource Management Systems, Inc. at www.rms.net.

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1 My thanks to Bill Sullivan, Program Director for Globalization at IBM and LISA's Strategic Supervisory member, for sharing this proverb.

2 David W. Pearce, Editor, The Dictionary of Modern Economics, 4th Edition. For a more detailed discussion of what each term may encompass, please click here.

3 Peter Hennigan, "The Quantity Is in the Quality," Tech Republic, October 21, 2002.

4 For a simplified illustration of how to apply the concepts of Payback Period, Net Present Value (NPV) and the Internal Rate of Return (IRR), click here.

5 "ROI: The Process," Global IT Knowledge Forum, December 16, 2002.