Money Talks

We have asked a few people around the industry to comment on what the acquisitions mean strategically. Two trends emerged from their comments, summarized by Pierre Cadieux, President of i18N Inc.:

"The best news out of these acquisitions is that the language services industry has finally accepted that language and technology are equal parts of the same problem, and thus the same solution.

"Open standards are now more important than ever."

Philippe de Sainte Maresville, LMC Director for HP, reflects the attitude of many clients, upon hearing news of both acquisitions:

"As a language services client, I am going to adopt a wait-and-see attitude with regards to the technology involved in the acquisition of TRADOS by SDL. There is no clear message yet as to how SDL will market these two different businesses, and I believe that there is a risk. Obviously, this acquisition makes open standards even more important – now, more than ever, users will want to safeguard their freedom to switch tools, without losing their language assets.

"With the multi-vendor policy of some big companies, I believe that the Lionbridge acquisition of BGS presents a good growth opportunity for smaller language services providers."

And one of those providers, Günther Höser, Managing Director of WH&P, has an interesting perspective on the SDL acquisition:

"On the one hand, SDL has always been committed officially to open standards and is an active participant in OASIS and OSCAR. But on the other hand, SDL and TRADOS have both been moving up-market toward GIS (Global Information Systems), which allow for high, end-user license fees, as well as profitable maintenance and support contracts – the latter probably being the ultimate aim.

"Now, recent industry trends toward CMS/GMS and parsed tagged formats are enabling less costly localization tools development. In this market, SDL faces Asian suppliers who are rapidly developing localization tools based on open standards. Some of those that we have been testing lately are serious attempts to bring alternative, more cost-effective tools to the market. They have all the high-end bells and whistles of commercial software, but at a tiny fraction of the cost.

"Mark Lancaster is a smart businessman – certainly better informed than most of us. So why does he buy TRADOS. Is it an act ad hominem or per dira necessitas?"

Editor’s Note: For more insights into Lancaster and where he’s going, read Mark Lancaster: Process and Technology Are the Name of His Game.

Andrzej Zydroń, CTO of xml-Intl Ltd. and Chair of the OSCAR Steering Committee, is looking forward to good news on the technology front as a result of the acquisitions.

"SDL and TRADOS have both shown enthusiastic support for open industry standards, which benefit both customers and suppliers. I have no doubt that the newly enlarged SDL will continue to support open standards initiatives and provide assistance and resources in helping to get them established."

Pierre Cadieux, President of i18N Inc. had this to say about the acquisitions: "The best news out of these acquisitions is that the language services industry has finally accepted that language and technology are equal parts of the same problem, and thus the same solution. This is a very good thing for customers. With these acquisitions, it will become much easier for translators and technologists to start collaborating for real. "What has made SDL special so far is that it has a unique, proven track record of balancing service and technology. The two visions will now have to merge even further, but there will be a fairly large team creating this new generation of technology, pushed by a large, internal service group to “do the right thing.” I’m a strong advocate of people who use their own products/services – chefs should always taste their own mousse! "Lionbridge, on the other hand, has faced challenges in balancing the two in the past. It has a strong technology infrastructure, and BGS has strong language skills. I think that the two groups need each other, and that they will merge well. "Open standards are now more important than ever, since many language service providers will be purchasing their TRADOS licenses from a competitor. TRADOS was already on the verge of doing a complete product redesign, and SDL already has a machine translation-translation memory collaboration. Therefore, I think that we’re going to see some major steps forward in terms of technology. "SDL has always supported open standards in a big way. The smartest move it could make now is to ensure that both products are compatible with each other. Standards almost always lag the real world, so TMX, for example, probably doesn’t have everything. However, this is a tremendous opportunity for SDL to take the lead in creating an entire product family based on open standards. "Merging technologies is incredibly difficult, but it can be done. What SDL should do is to maintain both products and eventually merge them. It can start by making the next versions more compatible. Of course, this investment will be to SDL’s benefit as well, since seamless integration will allow them to keep and increase both customer bases."

Here’s my own take, from a financial standpoint:

Leaving aside all the strategy that is being talked about surrounding the acquisitions, TRADOS garnered all of its recent outside investment from venture capitalists who hoped to launch an IPO to get their money – and then some – back. However, hi-tech IPOs have continued to be moribund, save for Google. And since TRADOS was really only a player in a small US $75 million translation software niche, this was not large enough to attract investor interest.

In reviewing what other software firms required in terms of capital (Idiom and Global Sight, now part of Transware, each needed around $40 million), Joe Campbell (CEO at TRADOS) decided it was best to shop. Four out of the seven TRADOS directors were from the venture capital community anyway, so it seemed to make sense. In the end, SDL paid a good price, and TRADOS’ venture capitalist owners got bought out. The deal is for SDL to pay a maximum of US $60 million for certain intellectual property and all outstanding issued shares of the company.

SDL thus eliminates a competitor in TRADOS and, at the same time, gets the chance to combine technology, R&D, customer relationships, and sales and marketing capabilities. It will be interesting to watch how all the brands, product positionings and market segments are played out. TRADOS has a strong brand presence, but that could well disappear. I once owned a Datsun and thought that Nissan was crazy to eliminate the Datsun name just to use one name around the world. But now, when I tell people I once owned a Datsun, they look at me and ask, “Datsun, what’s that?”

And for the yet more than competent smaller firms in the market like WH&P, Jonckers, McElroy and Welocalize, it means focusing even more on what they are good at, i.e. the relationships they have built and the vertical markets they serve.

And with the SDL acquisition, what actions will Lionbridge take? Both BGS and Lionbridge had partnerships with TRADOS. But now that it’s part of SDL, will they want to be tied to a competitor – and one as formidable as SDL?

They say that translation is the second oldest profession, but these acquisitions prove that we are not averse to change.

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John Freivalds is Managing Director of JFA Marketing and publisher of The Periodic Tables (Languages, Money, First Class and Toasts). He can be reached at jfa@direcway.com.