mania is back. After a break from the last round of
high profile mergers and acquisitions in 2002, the consolidation
seen in 2005 supports the premise that the localization
industry, only 20 years young, continues to mature and
become more sophisticated. Previous acquisitions, such
as those from Alpnet or Berlitz, expanded their acquirer's
client base and reduced redundant costs to enhance the
overall bottom line. Similarly, SDL's recent purchase
of TRADOS, the industry-leading TM tool, and Lionbridge's
acquisition of Logoport last year drastically increased
their capacity to provide technology and globalization
management solutions (GMS). Integrating these GMS solutions
into the globalization process will allow them to realistically
address important challenges they face in reducing costs.
More importantly, it will increase the flexibility and
integration of the 1st Generation, multi-level subcontracting
models they have built over the years. Their ability
to meet this challenge will change the industry's dynamics
we work in. Hopefully, only for the better.
generally speaking, consolidation is not always entirely
beneficial to clients. With buyers demanding more and
paying less, only the most dynamic companies with the
right product and service mix can satiate their long-term
needs. Lionbridge's purchase of Bowne Global Solutions
reduces the options buyers can choose from to a small
group of global localization vendors who can now easily
exert their market dominance. Of course, buyers can
also choose to work with a combination of smaller agencies
that fight over the contracts but which cannot always
offer the services, competencies or resources that a
one-stop vendor would. The goal of this article is not
to address the fears and impacts associated with market
consolidation in our industry. Instead, it will address
an important question buyers may be asking themselves
as they develop future localization planning: Are there
other solutions or providers besides these few major
players, or am I forced to choose from this handful?
answer is yes: the localization alliance model.
The 2nd Generation Localization Solution
A localization alliance model consists of fully independent
localization companies operating under the same business
model, project management workflow and quality standards.
The alliance is not a non-profit organization such as
GALA, but rather a for-profit entity that uses a single
brand to provide IT companies with an alternative for
their localization needs.
obvious difference between a localization alliance and
an MLV model is the fact that the alliance is a group
of financially independent companies, each located in
a different country, and which, by pooling their resources
together, integrate and structure their service offer.
On the other hand, an MLV is a single entity that has
to maintain a global production and sales infrastructure.
Each alliance member is not only selected by its best
blend of language skills, technology investment and
localization industry experience, but also for its ability
to adhere to the alliance's requirements and expectations.
This new business model commonly stipulates what these
expectations are, such as monthly volume, quality and
communication requirements. In doing so, the alliance
is able to commit to a high standard of professionalism.
alliance model also departs from the 1st Generation
subcontracting model due to the following facts:
The work is actually performed within the alliance
structure. Every member is an independent company
with its own staff and structure, with local project
managers, engineers and large linguistic teams to
satisfy the old cliché of “global and
Localization prices are normally based on the local
market rate for SLVs and not on freelancing or sub-contracting
Management fees are also lower than those of the more
traditional companies. Let us suppose that a typical
MLV structure allocates 30% of a project's value to
pay for management and overhead, where the other 60%
goes to the SLV (not including the PM fee). In an
alliance, the management fee may be as low as 5% because
the alliance is a lean organization, with each partner
supporting its own operation.
Alliance partners are not replaced or rotated easily,
especially because another agency offers a slightly
lower price per word. Furthermore, localization prices
are not inflated for certain languages or underrated
for others in detriment to quality, speed or reliability.
the client can expect that quality will remain consistent
because the same vendor is always performing the work.
As a result, the global project manager (GPM) of the
alliance and each member involved in the project develop
a unique and long-lasting relationship with the client,
one built on trust and which fosters the GPM's understanding
of the client's specific requirements. Clients see not
just price discounts, but also a streamlined production
process that improves the time-to-market results with
lower client-side management conditions.
The deeper an alliance spans worldwide, the more benefits
it can offer clients. By piecing together the core strengths
of each partner in an integrated, bottom-up approach,
both scalability and size can be built to develop a
localization solution to fit each client individually.
For example: suppose that the alliance's Italian partner
has extensive multilingual project management experience.
The Italian GPM will then serve as the vital and dedicated
link with the client and coordinate all the local project
managers within the alliance. The Chinese office has
extensive DTP skills and will serve as an outsourcing
hub for DTP projects, complemented by the Slovakian
partner, which has thorough software engineering and
testing expertise. Naturally, it is critical that the
alliance provide an open environment where each member
can trust and rely on the other. The milengo alliance,
for example, established the principal that there can
only be one linguistic partner for each language offered.
Doing so puts each partner at ease to exchange their
individual experience, techniques and unique understanding
of the various aspects of globalization projects.
Localization and Airline Companies
Strategic partnerships have become a catch phrase that
is often used when two companies collaborate at some
level. As a result, people may tend to take truly strategic
alliances with a grain of salt. This is because many
larger companies may form a “strategic partnership"
with a smaller company to provide a service that their
sales force has detected as missing from their service
offer. This hardly provides a true benefit for their
customers. At the same time, it is important to recognize
that there are real alliances out there. The advertising,
PR and airline industries make good use of strategic
alliances to help them meet the challenges involved
with building scale, resources and services worldwide.
localization and airline industry, interestingly enough,
share many similarities. Twenty years ago, airline companies
confronted the challenge that localization companies
now face in unmasking ways to improve and expand their
service levels and the options they offer to clients,
all at a lower cost.
frequent flyers expect to be taken anywhere in the world
with the same high level of commitment to quality, service
and safety. Twenty years ago, this was not the case.
Shortly after the deregulation of the US airline industry
in the late 1980s, so-called code-sharing alliances
between a US airline and a European national carrier
quickly took off. This partnership allows one airline
to sell seats on its partner plane as if they were its
own, allowing it to expand its route network without
adding any aircrafts. This further allows passengers
to check in at the airport and obtain their boarding
passes for their entire flight, simplifying the ticketing
In an environment where no competition exists, an alliance
member's own business is strengthened by the resources
and facilities of its partners. Members can develop agreements
that allow them to share, manage or jointly advance the
operation, management and sales/marketing resources that
would be too expensive for one company to manage by itself.
A Spanish airline, for example, could use the maintenance
facility of its US partner while servicing its customer
base in America , and vice versa. Both companies could
also combine the marketing activities for the route flown
in the two countries and expand their frequent flyer programs
and benefits to cover Spanish and US passengers. Frequent
flyer programs, while not widely used in the localization
industry, are among the projects to be designed and implemented
by milengo in the near future.
Goals for a Successful Takeoff
Because the airline industry has been around for the past
70 years or so, airline alliances are relatively better
developed than localization alliances. For these new alliances,
the biggest challenge ahead will be the successful integration
of common guidelines and procedure throughout the entire
globalization workflow. Integration only works when all
participants, including the top management, believe in
the purpose and success of the alliance so that all employees
are motivated and driven to invest the time, resources
and energy required for success. There are many hurdles
for such a business plan, but full-scale implementation
will be a differentiator between well-structured alliances
today and loosely formed partnerships in the future.
localization market will continue to develop to meet
IT client's ever-evolving needs. Some vendors have made
the decision to integrate proprietary technology into
their workflow. Others feel that continued specialization
in certain segments of the industry is their best move,
while still others have thought that an alliance is
the best way to provide clients with a reasonable alternative
to their localization needs. Because each client's requirements
are not universal in our market, an alliance model may
not be an appropriate solution for certain IT companies.
However, the option to choose from a range of solutions,
instead of only a handful shifts the control back from
autopilot to pilot. This is what will allow the new
alliance model to take off.