The U.S. government is in the midst of a “shoot-out” to pick a vendor to handle machine translation (MT) of Middle Eastern languages.

First, we had the U.S. economy coming back. This has given corporate America more money, some of which is being spent on translation and localization. Second, we now have translation and localization software embedded in enterprise software a la Documentum (now part of EMC). Third, we had the expansion of the European Community by ten languages, providing a potential of more than 400 language pairs. (And as a Latvian, I can tell you that we will enforce our language laws!) Fourth, the Middle East conflict has created more awareness for the need for more and better translation and localization. In fact, the U.S. government is in the midst of a “shoot-out” among several firms to pick a vendor to handle machine translation (MT) of Middle Eastern languages. Fifth, Lionbridge Technologies was able to raise US $67 million. The Internet bubble ended a lot of venture capital (VC) business, but all the developments in the translation and localization business led to a good investment climate. In all, 2003 can’t be said to have been a bad year.

One of the in-country Chinese language vendors will expand by buying or merging with a Western firm

So what are the big money trends for 2004? I see the Chinese economy continuing to boom, not only as the world’s factory floor, but also as a market for Western consumer goods. Together, this will lead to an increase in sales to China and a growth in business for Chinese language firms. I anticipate one of these single language vendors expanding its offerings by buying or merging with a Western firm.

Now that one major enterprise software firm has embedded translation and localization technology into its offering, you can bet we will see others. Of Documentum's move further into content globalization, Jessica Roland, Group Product Manager, commented, “[This move] was made easier by the fact that the existing Documentum technology already covered most globalization functionality (workflows, lifecycle management, security...) and that the only new functionality required was centralized Translation Memory (via the TRADOS partnership), with Lionbridge completing the picture via its globalization consulting services.”

I always thought it would be the big consulting firms that would do this, like KPMG or Accenture, but it is the documentation companies that are bringing this to the attention of corporate IT. To make its point, EMC on January 6th bought a two-page color spread in the Wall Street Journal, America’s leading business newspaper, to inform corporate America that it is in the “information lifecycle management business” (ILM). Start paying close attention to EMC’s stock. And those of FileNet, Mobius Management Systems, Interwoven and Stellant.

Money management will play a more important role.

Translation and localization outsourcing will continue, and increasingly, money management will play a more important role. The Euro has started the year with more than a 20% premium over the dollar. Great, if you are selling dollars, but not if you are buying Euros. This will add a whole new dimension to how services are bought and sold.

And finally, I received our first call from a single language vendor in Greece wanting to know if we were all set for our Greek translation needs, given that the Olympics are to be held in Athens in 2004.

So Much for the Big Picture

Believe it or not, the CIA has started a VC operation to invest in new technologies.

Lionbridge starts the year with its stock selling at around US$ 9 a share, and like it or not, it is now the bellwether for this industry. To show how much it has appreciated, LIOX started with its stock at less than $US 2 a share last year.

But as they say in New York, SDL International trading at around 85 pence isn’t exactly “chopped liver” either. It plans to expand its Chinese and Eastern European operations with two purchases it made last year.

Bowne Global Services continues to trade at US$ 14 a share and to consolidate the purchases made during 2003.

Systran is trading at 3€ Euros a share and hopes to win some bigger contracts from the U.S. government in Middle Eastern languages, just as it did with Russian during the Cold War. Believe it or not, the CIA has started a venture capital operation to invest in new technologies, including those involving languages. Intel also announced a new venture capital effort for US$ 200 million, but for new home technologies.

Welocalize had a record third quarter and again made KMPG’s list.

TRADOS has transferred its headquarters to Sunnyvale in the heart of Silicon Valley. This was done to be closer to its enterprise customers, as well as to sources of capital. I am sure we will be hearing something on this front.

Idiom raised US$ 6 million in 2003 and will now put that to work. It estimates that it takes six to nine months to land an average-sized contract of US$ 250,000.

The RWS group has undergone what can be described as a reverse buyout to more clearly distinguish its patent business from its translation and localization operations.

And Welocalize had a record third quarter and again made KMPG’s list as one of the fastest growing companies in the Washington, D.C. area.

More VC for MT

Language Weaver has gotten VC money from the CIA’s VC group.

Machine translation continues to fascinate people. More than thirteen years ago, we covered an explanation of what it is and can do in conjunction with a researcher at Pittsburgh’s Carnegie Mellon University. We got seven IBM language managers to attend a two-day session. Later, Caterpillar engaged a group from Carnegie Mellon to develop a MT system for itself that it would then license to others. It didn’t happen.

Today, another Carnegie Mellon researcher, now the founder of a company called Language Weaver, has landed VC money from the CIA’s VC group, In-Q-tel. All the elements are there. A researcher from Carnegie Mellon is the Founder, while the CEO is a Harvard MBA and another California venture capitalist. And the business development manager is a person with seventeen years in the MT business.

According to Language Weaver, its “breakthrough technology has the potential to overcome the limited commercial success for machine translation in the past.” It is in its second year of operations and has started with U.S. government contracts. On the commercial side, it has beta clients and has secured Series A investment financing.

Timing is everything. If the MT firm Logos had had strong and effective management during the Internet bubble, perhaps it might have raised as much money as eTranslate did during that time.

For those of you who thought that MT VC was dead, think again.

So what do the unbiased think about the Language Weaver concept? According to Lionel Mellet of Telelingua who has had close ties with the MT business for more than ten years: “My guarded opinion is that the statistical/cryptographical approach has significant advantages in how quickly you can develop a customized MT system; this in itself is huge, because a ‘plain Vanilla’ MT system is of little or no value; it must be customized.” This would explain why the U.S. government, desperate for Arabic-to-English language pairs, would be very interested in Language Weaver.” [Note: We also asked for comments from the company and others in the industry but did not receive them as of press time.]

But Language Weaver is not the only new MT firm on the block that has recently received MT money. Some of the original people involved in the Carnegie Mellon work for Caterpillar have resurfaced in a New York-based company called Meaningful Machines.This company was founded in 2000 to develop, patent and commercialize translation technologies. It subsequently received VC funding from Apple Core Holdings, a private New York investment company. In a December 2003 article in PC Magazine, Meaningful Machines is credited with having the same approach as Language Weaver. So for those of you who thought that MT VC was dead, think again.