|  | Industry Experiences Continued Growth, Slight Slowdown in 2008 | | | The revenue data reveals that 2008 was a strong year for many suppliers in the language services industry. Among the Top 25 players that appeared in our 2007 ranking, the average year-over-year growth rate was 19.7 percent, a slight decrease from the previous year, in which the average was 26.68 percent. The change relates in part to revenue from a large-scale military linguist contract that shifted from L-3 Communications to Global Linguist Solutions, the new number one company in our ranking. Excluding L-3's 42 percent decrease in revenue, the average is 22.3 percent, closer to the previous year's numbers. Taking into account the somewhat less aggressive growth reported by LSPs in 2008 compared with 2007, we adjusted our market size projections (see Table 1). We predict that the market will reach US$22.5 billion by 2012, slightly less than our prior estimate of US$24 billion. That growth equates to a compound annual growth rate (CAGR) of 10.76 percent over the next five years. | Region | Market Share | 2009 US$ M | 2010 US$ M | 2011 US$ M | 2012 US$ M | 2013 US$ M | | Europe | 43% | 6,468 | 7,331 | 8,409 | 9,703 | 10,781 | | U.S. | 40% | 6,074 | 6,884 | 7,896 | 9,111 | 10,123 | | Asia | 12% | 1,735 | 1,965 | 2,255 | 2,601 | 2,891 | | ROW | 5% | 722 | 818 | 939 | 1,083 | 1,203 | | Growth Totals | | | 100% | 15,000 | 17,000 | 19,500 | 22,500 | 25,000 | | Table 1: Projected Language Services Revenues for 2009-2013 in U.S. Millions of Dollars Source: Common Sense Advisory, Inc. | | | | | | | | |  | How We Ranked the Companies | | | As always, Common Sense Advisory's ranking includes companies or divisions of companies that make most of their revenue by providing language services, be it in written or verbal form, on paper, over the web, in person, via video, inside software applications – anywhere around the globe. The list includes both public and private companies. However, not many publicly traded companies work in the language arena, so this ranking always involves a lot more legwork than producing a similar register for the automotive or telecommunications industries. § Public companies. About a third of the companies in our ranking are public. For most of these firms, we have the luxury of reviewing annual reports and official filings. However, some of these are large corporations with specialized business units for which they do not break out numbers. In those cases, we considered only the revenue from the unit providing language services. Getting these numbers can be a challenge. § Privately-held companies. These firms consume most of our time, because we approach 100-plus candidate companies to come up with our list of 30. We call their executives to find out what they earned in the preceding year, probe for the magic number, and then ask them for financial statements to confirm their data. Private firms in some countries are not obligated to release any data, so we can only check their financials to the extent that they allow us. Each year, new companies qualify for a spot in our ranking. Video interpreting provider Purple Communications catapulted onto this year's list due to the merger of several companies. Newcomers Crestec, (Japan), CBG Konsult (Sweden), SEPROTEC (Spain), and Telelingua (Belgium) also debut on this year's table. Various suppliers in the government and military contracting space – such as Allworld Language Consultants, CACI, CALNET, McNeil Technologies, Mission Essential Personnel, MPRI, SM Consulting, TCS Translations, and TRW – have also received language services contracts large enough for them to be contenders for the ranking. However, not all companies are forthcoming about the revenue derived from language services, making it difficult to uncover exact numbers. | | | | | | | | | The Top 30 List Remains Global in Nature | | | Our list for 2008 includes suppliers from 15 countries across the globe: the U.S. (9), U.K. (4), Belgium (2), Japan (2), Sweden (2), Switzerland (2) and China, Czech Republic, Finland, France, Ireland, Italy, Luxembourg, Netherlands, and Spain (one each). While American and British companies still dominate the rankings, Asia continues to expand its share of dominant players with a total of three LSPs from China and Japan. |  | | Figure 1: Geographic Distribution Top 30 Language Services Providers in Total Revenues Earned in U.S. Dollars Source: Common Sense Advisory, Inc. | Given that the companies on our Top 30 list report revenue in an array of currencies, we convert them into a baseline unit – the U.S. dollar – to allow for a direct comparison. For non-U.S. companies outside the United States, we divide revenue in local currency by the average exchange rate for the 365 days of the firm's fiscal year. Thus, the average exchange rate for twelfth-ranked RWS Holdings was US$1.9731 per pound sterling (GBP) for the fiscal year ended on 30 September 2008. Fourth-ranked SDL, reporting its results on a calendar year, is affected by the devaluation of the pound against the dollar for the balance of 2008, with the pound quoted at US$1.8551. | | | | | | | | | Three Tiers of Language Services Suppliers Comprise the Top 30 | | | The market for translation, localization, and interpreting services is organized into three major tiers (see Table 2). The six highest-ranked companies on the list report annual revenue in excess of US$200 million. The second tier includes seven companies in the US$106-166 million range. The bottom half of the list includes companies that report US$20-60 million in revenue. | Rank | Company | HQ Country | Revenue in US$M | Employees | Offices | Status | | 1 | Global Linguist Solutions, LLC* | US | 691.00 | 6500 | 6 | Private | | 2 | Lionbridge Technologies | US | 461.00 | 4500 | 40 | Public | | 3 | L-3 Communications (LOTS) | US | 434.59 | 1049 | 1 | Public | | 4 | SDL International | UK | 294.54 | 1981 | 55 | Public | | 5 | Language Line Holdings | US | 212.64 | 4719 | 7 | Private | | 6 | Transperfect / Translations.com | US | 204.77 | 1115 | 56 | Private | | 7 | STAR Group* | CH | 164.83 | 910 | 42 | Private | | 8 | SDI Media Group | US | 140.00 | 800 | 1 | Private | | 9 | Purple Communications, Inc. | US | 130.08 | 577 | 5 | Public | | 10 | euroscript international S.A. | LU | 129.03 | 1267 | 32 | Private | | 11 | Xerox Global Services* | UK | 113.74 | 506 | 9 | Public | | 12 | RWS Holdings PLC | UK | 106.76 | 451 | 12 | Public | | 13 | CLS Communication | CH | 57.62 | 360 | 14 | Private | | 14 | Manpower Business Solutions | NL | 55.91 | 150 | 7 | Private | | 15 | Semantix A/B | SE | 53.26 | 160 | 10 | Private | | 16 | Logos Group | IT | 50.22 | 135 | 17 | Private | | 17 | thebigword Group | UK | 49.90 | 270 | 9 | Private | | 18 | Welocalize, Inc. | US | 49.86 | 402 | 12 | Private | | 19 | AAC Global Corporation | FI | 48.99 | 304 | 14 | Public | | 20 | Moravia Worldwide | CZ | 42.80 | 446 | 12 | Private | | 21 | Honyaku Center Inc. | JP | 42.68 | 193 | 7 | Public | | 22 | Jonckers Translation & Engineering s.a. | BE | 37.21 | 280 | 13 | Private | | 23 | hiSoft Technology International Ltd. | ZH | 35.10 | 926 | 16 | Private | | 24 | HP ACG | FR | 30.06 | 150 | 9 | Public | | 25 | Merrill-Brink International | US | 30.02 | 100 | 4 | Private | | 26 | Crestec, Inc. | JP | 28.56 | 511 | 22 | Private | | 27 | CBG Konsult AB | SE | 28.54 | 180 | 9 | Private | | 28 | VistaTEC Ltd. | IR | 27.23 | 102 | 5 | Private | | 29 | Telelingua Group | BE | 21.98 | 135 | 5 | Private | | 30 | SEPROTEC Translations | ES | 20.12 | 358 | 15 | Private | | Table 2: Top 30 Language Service Providers Worldwide for 2008 (* estimated) Source: Cited Companies and Common Sense Advisory, Inc. | | | | | | | | | | The Market for Language Services Remains Fragmented | | | In previous research, we've noted how little of the overall language revenue is earned by the largest language service providers. This trend remained consistent in 2008, with the top 30 booking just 26.6 percent of the market total (see Figure 2). |  | | Figure 2: Top 30 Aggregate Revenue for 2008 as a Percentage of Total Language Services Market Size in U.S. Dollars Source: Common Sense Advisory, Inc. | Finally, to determine whether this fragmentation is getting worse or consolidation increasing too much, we apply the Herfindahl-Hirschman Index (HHI) to gauge industry concentration and competition in the marketplace. The HHI calculates a weighted average market share (which is represented by the sum of the squares of the market shares of each individual firm). The scores range from 0 to 10,000. Low numbers indicate a very large amount of very small firms, while a large number correlates to a single, monopolistic producer. The language services industry has an extremely low HHI concentration. Although the consolidation has increased slightly since last year, it remains on the lower end of the HHI scale. In fact, even if the 10 biggest companies in the industry merged to form a US$3 billion company, it is unlikely that it would be challenged by anti-trust authorities in the United States. | | | | | | | | | Most Large Providers Exceed Ten Percent Revenue Growth | | | Acquisitions continued to fuel the growth of companies like AAC Global, SDL, and Welocalize. However, most companies report significant organic growth from the increased demand for their language services. L-3's language services division reported negative growth due to the loss of a contract to provide linguist support in combat zones for the United States military. The number for LCJ EEIG (now Jonckers) shrank after the merger of three member companies due to the fact that it no longer reports revenue for Logoscript. | Company | Revenue Growth (Reduction) from 2007 to 2008 | | hiSoft Technology International Ltd. | 59.5% | | AAC Global Group | 54.7% | | thebigword Group | 51.1% | | Welocalize, Inc. | 48.0% | | Manpower Business Solutions | 44.0% | | Transperfect / Translations.com | 31.3% | | Hewlett-Packard ACG | 30.7% | | SDL International | 25.3% | | VistaTEC | 24.9% | | Semantix | 21.8% | | Honyaku Centre | 17.6% | | RWS Group | 17.4% | | CLS Communication | 17.1% | | SDI Media Group | 16.9% | | Language Line Holdings | 16.1% | | Xerox Global Services | 15.0% | | Moravia Worldwide | 12.0% | | Logos Group | 8.0% | | euroscript International S.A. | 6.7% | | Amesto Translation Holding A/S | 3.8% | | Lionbridge Technologies | 2.0% | | STAR Group | 1.9% | | Jonckers Translation & Engineering s.a. | (2.2%) | | L-3 Communications Linguist Operations & Technical Support Division | (42.3%) | | Table 3: Revenue Growth (Reduction) by Company from 2007 to 2008 Source: Common Sense Advisory, Inc. | | | | | | | | | | The Biggest LSPs Trail in Revenue per Employee | | | Revenue per employee is a measure of how efficiently a particular company is using its workers. In general, rising revenue per employee shows that the company is using its workers more efficiently. Some of the companies with the most employees – such as Global Linguist Solutions, Language Line, and Lionbridge – are among the least efficient (see Table 4). L-3 Communications, on the other hand, made reductions to its workforce, boosting its efficiency to claim the top spot. The top providers showed a marked improvement in average efficiency this year (US$191,897.71) compared to the previous year (US$162,914.48). | Ranking by Revenue per Employee | Ranking by Number of Employees | Company | Number of Employees | Revenue by Employee in USD | | 1 | 7 | L-3 Communications (LOTS) | 1049 | 414,289.80 | | 2 | 25 | Manpower Business Solutions | 150 | 372,729.33 | | 3 | 27 | Logos Group | 135 | 371,966.44 | | 4 | 24 | Semantix A/B | 160 | 332,903.13 | | 5 | 30 | Merrill-Brink | 100 | 300,200.00 | | 6 | 12 | Crestec, Inc. | 511 | 270,878.67 | | 7 | 29 | VistaTEC Ltd. | 102 | 266,911.76 | | 8 | 14 | RWS Holdings PLC | 451 | 236,728.25 | | 9 | 11 | Purple Communications, Inc. | 577 | 225,443.67 | | 10 | 13 | Xerox Global Services | 506 | 224,772.73 | | 11 | 22 | Honyaku Center Inc. | 193 | 221,139.90 | | 12 | 26 | HP ACG | 150 | 200,400.00 | | 13 | 21 | thebigword Group | 270 | 184,822.93 | | 14 | 6 | Transperfect / Translations.com | 1115 | 183,650.22 | | 15 | 9 | STAR Group | 910 | 181,131.56 | | 16 | 10 | SDI Media Group | 800 | 175,000.00 | | 17 | 28 | Telelingua Group | 135 | 162,845.66 | | 18 | 19 | AAC Global Corporation | 304 | 161,165.43 | | 19 | 17 | CLS Communication | 360 | 160,061.33 | | 20 | 23 | CBG Konsult AB | 180 | 158,553.33 | | 21 | 4 | SDL International | 1981 | 148,684.25 | | 22 | 20 | Jonckers Translation & Engineering s.a. | 280 | 132,889.92 | | 23 | 16 | Welocalize, Inc. | 402 | 124,029.85 | | 24 | 1 | Global Linguist Solutions, LLC | 6500 | 106,307.69 | | 25 | 3 | Lionbridge Technologies | 4500 | 102,444.44 | | 26 | 5 | euroscript international S.A. | 1267 | 101,841.37 | | 27 | 15 | Moravia Worldwide | 446 | 95,964.13 | | 28 | 18 | SEPROTEC Translations | 358 | 56,209.41 | | 29 | 2 | Language Line Holdings | 4719 | 45,061.24 | | 30 | 8 | hiSoft Technology International Ltd. | 926 | 37,904.97 | | Average of Top 30 Companies | 984.5 | 191,897.71 | | Table 4: Top 30 Language Services Companies Ranked by Revenue per Employee Source: Common Sense Advisory, Inc. | | | | | | | | |