Dr. James Wei: The localization industry in China is a niche market. The total China localization outsourcing market is estimated to be USD 65 million for 2006, with about 2500 professionals working in the industry. Many people who are in this industry in China actually know each other. But it’s a growing industry. It has boomed over the last few years, with some companies maintaining higher than a 40% growth rate.

It’s also a hard business, and practitioners face great challenges. You have, actually, no way to find employees who have lots of experience in this industry – unless they work for one of your partners or competitors. Only a few universities and one or two companies are beginning to organize training for localization and project management. In general, experienced human resources will remain in short supply for the coming years. This means that companies will have to invest a lot in training to maintain their growth.

I think China’s localization industry is beginning to mature in terms of the capability and its supply chain, though. We’re trying to establish an association or committee similar to LISA, so that we have a communication platform. The Chinese government has begun to issue a certificate for qualified translators, and we also have a few training organizations. At the same time, many localization companies are competing and building up lots of expertise.

Some companies are striving to improve their company operations and project management skills. For example, our company has been developing a small, web-based ERP system, including localization project management, resource planning and management, PO/invoice tracking, knowledge management, employee performance management, a QA system and decisionmaking support.

I think China is prepared to become “Localize Central!”

I think China is prepared to become – this is my personal opinion – Localize Central or Localizing Central. Not only because of our capability to do Asian languages, but also because of the local companies that are building expertise in European languages. So … it’s exciting!

Anobile: And you personally have seen so much of this growth in China. In your opinion, what have been the most challenging aspects of this growth for the market here?

The cultural differences and the language barrier are still the main challenges for us

Wei: The marketing is the most challenging thing for us. Partially because Chinese people are still not confident and lack experience in international markets, and partially because they find it very hard to pass the language barrier. You know, we’re just not very good at other languages.

Our other main challenge is the cultural differences … we need to do more marketing in order to sell what’s unique about us, to communicate not only just the business, but also lots of other things, to people. So, I would say that the cultural differences and the language barrier are the main challenges for a Chinese company that needs to localize. They need to help promote themselves in the international market.

I also believe that, in the coming years, more Chinese companies will open offices in Europe and North America. At least in our company, we’ll do this. It’s not easy for us, but we will try to do this.

Anobile: Do you think you will do that through a partnership?

Wei: It’s better for us to partner, right? But it’s not easy to find the right partner. If we can’t find the right partner, we may just set up an office and send people to the West.

Anobile: Could you explain how your company is set up in China?

Wei: Of course. We started E-C in ’97, and we now have three production centers in China: Beijing, Shenyang and Chengdu. We have four sales offices: Singapore, the USA, Shanghai and Beijing. We also have a financial management center in Hong Kong and our R&D company in Beijing.

Anobile: How big is the company?

Wei: Totally, we have 162 people right now.

Anobile: And how much in revenues?

Wei: About USD 4 million in 2007.

Anobile: What is your background?

Wei: Actually, I have a technical background with an EE (Electronics Engineering) PhD. I originally worked for the largest research center in China, the China Academy of Launch Vehicle Technology. And after that, I worked for IT companies in Beijing. Several years later, I became the Managing Directors of these companies. And then I started my own business. It’s not so complex!

Anobile: Why languages? What attracted you?

Wei: As you know, I was CEO of a Chinese localization company at one time. After resigning from that company, I saw this opportunity. Actually, most of my jobs have been in management. This is what I’m mostly interested in, not language or engineering … I’m interested in managing businesses.

Of course, after working in localization for awhile, I found it very interesting because there were opportunities to experience different viewpoints from different cultures and different countries. That’s why I have stayed in this industry.

Anobile: So, in ten years, you’ve grown a USD 4 million business. You have clients all over the world?

Wei: It’s just a small business now, so I think we still have room to grow, especially considering the current high growth in the Chinese economy. It is estimated that China’s GDP will exceed Germany’s within four years, Japan’s by 2015 and the USA’s by 2039.

Anobile: How would you compare the Chinese localization market to the Japanese localization market?

Wei: When you compare the Chinese localization market with the Japanese localization market, we still have room to grow. In terms of the volume and market capacity, the Japanese market is really much bigger than China’s right now, but the Chinese localization market will catch up with the Japanese market soon.

Chinese is now a tier 1 language for software companies

Several years ago, many international companies didn’t even include Chinese in their tier 1 languages, but now, many of them do – at least Simplified Chinese. This means that if they launch a product, they localize it for the Chinese market right away. Many of our clients do this. Several years ago, this was not so. They just gave selective products to be localized into Chinese, but now all products are localized into Chinese.

Anobile: So what you’re saying is that more and more products are being localized, so the volume for China has increased. Have you done more work on your marketing analysis since you presented during the LISA Forum Asia CHINA FOCUS last year in March?

If you are a LISA Member, you can view Dr. Wei’s presentation, Analyzing China’s Localization Market, by logging onto the LISA web site and then clicking here.

Wei: It’s very limited because it is very hard to get actual marketing statistics because we have limited marketing resources ourselves. The change that we’re seeing at our company is an increase in Chinese to other languages.

We are focused on Chinese to European languages

Anobile: You’re also doing work for Chinese companies going into Western languages? Korean? Japanese?

Wei: Yes, we are. Mainly from European languages (English, German, French, Spanish) and some Japanese and Korean, into Chinese. Other Chinese localization companies may be focused on Asian languages, but our company is focused on Chinese to and from European languages.

Anobile: And how much of your business is into Western languages?

Chinese companies are beginning to pay good prices for localization

Wei: Compared with our total revenue, maybe not so big, less than 5%. But, the growth rate means lots. So, this is exciting. Several years ago, you know, most Chinese companies didn’t want to pay a good price, but now they seem to say, “Localizing is important,” so if the quality is good, they are willing to pay a good price.

Anobile: Are you doing the European languages? Or, do you have partners do the European languages?

Wei: We generally do the European languages internally, and then ask our clients to proof because it’s very hard to find translators in the European languages who are native speakers and who also speak Chinese.

Anobile: That’s a good formula.

Wei: Usually it’s costly because we have to explain the original Chinese meaning to the proofreaders since the European translators do not understand Chinese.

Anobile: But, presently, 90% of your business is into Chinese?

Wei: Not just into Chinese (both Simplified and Traditional), but also into Japanese, Korean and Southeast Asian languages, like Thai, Malay, Indonesian and Vietnamese.

Anobile: What percentage of your business are you translating into Asian languages?

Wei: About 95%. The other 5% or so is into Western languages. Asian languages to European languages, is of course, much more soft, but it is higher growth.

Anobile: Is most of your work in software, or is it also for other industries?

Wei: We cover software, automation, electronics, mechanical, life sciences, automotive and engineering. We provide software and web site localization, as well as technical translations and document formatting (DTP). We can do DTP for almost all languages with most of the popular DTP tools.

Anobile: What is the biggest sector for you?

Wei: Software.

Anobile: What percentage?

Wei: About 43%, with other technical translations representing 47%.

Anobile: And are you doing any software testing work?

Wei: Very little.

Anobile: How do you see the translation companies in China developing with respect to management?

It took Western companies many, many years to develop their current management skills

Wei: I think that management in large Chinese companies is good. And some is very good, compared to Western companies. But all levels taken together, I would say that the level of management skill is average. In small- and medium-sized companies, it’s not very good. They don’t use management tools or even some of the workflow they should. So the quality of management depends on which companies you’re talking about.

However, Western companies were only able to develop their own management skills over many, many years. It’s easy for them to hire managers. But in China, not many people have very much management experience. They just learn by practicing. Take myself as an example; I haven’t graduated from any business school! I was an engineer, so I learned by myself. This is really not easy, though. Even now, I keep reading everyday about economics and finance, human resource management, marketing and sales, company culture and strategy. Everything!

This situation applies to all industries in China – not only to the localization industry. It is very hard to find professional managers in any sector.

Anobile: Developing management capabilities, understanding how to manage people, how to manage systems – there just seems to be such an anomaly in the context of China’s huge growth vs. this dilemma of being under-managed.

Wei: That’s right. In today’s global economy, the Chinese economy is part of the world economy. This means that foreign companies are contributing a lot to China economy development, they not only invest money but also bring their management skills and teams to China. Of course, they make money here at the same time, so it is a win-win cooperation.

Anobile: But there’s such raw potential, and such a raw, aggressive capacity for growth, so that even poorly managed, China has made tremendous strides. Look at China over the past ten years. We first met in 1996/97, and ten years later, look at China. China’s completely different. Everyone is so much more prosperous, so much more successful. So I guess one can only imagine how the future will develop.

Chinese people learn fast and are much more open-minded than many of their neighbors

Wei: You know, Chinese people, they learn things fast. So they will be able to improve their management skills because they are open-minded, and they want to learn about new technology, about new areas of management. I think that all companies in all industries are now trying to become more professional in terms of management, technology, everything. We just need time … China just needs time to become professional in everything.

Chinese people are working hard and studying hard because we know that we are behind other developed nations. That is very important. This is different than other nations when they think, “We are the best nation.” The Chinese people were closed for so many, many years, so now, they are much more open when compared with other nations, such as Korea and Japan. They accept new things, new good things, good knowledge. Just go to any bookstore in China, and you will find lots of new books published almost everyday, and sales are very good. And there are many people to buy these books and to learn the new theories on management, technology, economics – everything!

It’s a good time right now for Chinese companies to acquire each other

Anobile: What are your feelings about the recent acquisitions in the localization industry? Over the past year or so, thebigword purchased Rainbow Network, and Welocalize purchased Transco.

Wei: Actually, right now is a good time for Chinese companies to acquire each other because their cultures are similar. We have been contacted by some Western companies to discuss the possibility of merging. However, the differences in culture and the value evaluation method have been too big.

Anobile: If I understand you correctly then, acquisitions are not the main goal for small Chinese companies because of the cultural challenges primarily, i.e., understanding the differences in terms of work ethics, economic models, etc. An American would think that it’s a good strategy, i.e., take five years, maybe have USD 2 million in revenue, decent clients, quality production capability, and sell it. I make a million dollars.

Building up a company and selling it is the American way, but perhaps not the Chinese way …

Wei: That’s right! That’s the “American way,” but it won’t happen here.

Anobile: Why not?

Wei: For several reasons. One reason is that the Chinese venture capital market is different than the American one. Another reason is the business model. Many of the founders are saying they would like to keep their companies. And I think it’s the best thing. They actually enjoy running their operations. Maybe they don’t care about getting the money out of it, I don’t know.

The cultural differences are another reason. For American people, they think, “I sell the company, I get big money, I can retire, I can enjoy life.” But many Chinese would rather continue to operate their company – maybe because they want to prepare it for their son.

For my own business, I would have to find the right partners before I would sell.

Anobile: Do you think that the local Chinese business community is ready for localization?

Wei: I think that clients in China have begun to realize that this is important for them when they enter international markets. But the vendors, the localization service providers, also need time to promote their services, so that the clients know that there are local Chinese vendors who can provide these services.

In China, there are no localization forums or conferences organized by local associations. We have TAC (Translators Association of China), but they never organize vendors and clients to meet together to communicate. They only organize a government meeting once or twice a year, but they’re not very helpful, so we don’t even attend them.

I should explain that it is very hard to apply to register an association without a government connection. That is the reason that we have no localization association or similar organization. We need to have an organization here in China for the localization community.

Anobile: What I understand you to be saying is that there is not enough promotion of the industry by the one organization that is legally mandated to promote the industry, and that is TAC.

Wei: That’s right.

Anobile: So, is it feasible for the Chinese vendor network to collaborate with each other enough to organize regular localization interest meetings? LISA has about 35 vendor Members in China.

Wei: Actually, the founders and owners have tried several times as vendors to get together – one time at least every year. Last time, about ten of us got together to discuss the development of the industry, our challenges and feasible solutions. I find it useful, but the limitation is that we can’t promote the meeting.

Anobile: Why not?

Wei: Because if you’re not a registered legal organization, you are not supposed to organize meetings.

Anobile: So, can LISA organize a meeting?

Wei: Theoretically, no. Not unless you register with the government.

Anobile: So, all of the LISA meetings are illegal?

Wei: I don’t know. Actually, based on my understanding of the law here in China, you must register with the government and tell them, “OK, I would like to have a meeting.”

Anobile: So, if we call it a training meeting, is it different than organizing another kind of meeting? Am I allowed to come and give a training course?

We (both vendor and client) need to focus on training, training, training

Wei: People will come. The last time we organized a day of training was in October of 2006. About 30-40 people, mostly freelancers, came.

Anobile: So, training is crucial. What could hurt the industry? What would be bad for business here in China?

Wei: I think that human resources are still a big barrier for both the vendor and the client. It’s the inability to hire a qualified Translator or Project Manager when you need them. The industry is growing fast, but developing people takes time. That’s why I think training is urgent for the Chinese localization industry.

Anobile: What would be the most important positions or skills requiring training within a small- or medium-sized company?

Wei: Of course, the localization technology, tools skills for localization. How to process resource files, how to do DTP, how to prepare files for translation, how to organize a project. I think mostly the basic knowledge about localization. Localization is very new, so our clients don’t know how to do it. This is for the client side.

But for the vendor side, I think it’s very important to focus on management training as well, since technology is not the barrier now. Many localization companies now have the localization technology, the knowledge and the skills for how to localize. But, they lack good project management skills – how to communicate with clients; how to manage tasks and time; how to control quality; understanding quality standards. I think these are the challenges that the vendor side has to face.

We (both vendor and client) need to focus on training, training, training to ensure that the industry can meet future demand.

---

Dr. James Wei is President of E-C Translation Ltd. and one of the pioneers of the Chinese localization industry. After a successful career as an Electronics Engineer for the China Academy of Launch Vehicle Technology (CALVT) and a manager in the IT sector, he founded E-C in 1997 to meet the increasing market demand for language services in China. Wei is passionate about sharing his knowledge of the Chinese market with the localization community worldwide. He can be reached at james@ectranslate.com.cn.