Why Isn’t Lionbridge King of the Globalization Jungle?

5/28/08Follow @wroush

Being the leader of the pride, it seems, doesn’t guarantee you a nice meal everyday. Waltham, MA-based Lionbridge Technologies (NASDAQ: LIOX) may be the world’s largest provider of localization services, helping hundreds of other companies from Microsoft to Merrill Lynch to Pfizer go global by translating their websites, product manuals, software programs, and drug warnings into other languages. But it sure isn’t getting rich doing it: On May 6 the company reported a net loss of $4.4 million for the first quarter—its third straight quarterly loss—and last Friday Lionbridge stock dipped to $2.37 per share, its lowest point in more than five years, and down 61 percent compared to a year ago.

That’s lower than even the most pessimistic analysts were predicting at the beginning of 2008. As the financial website 24/7 Wall Street put it in a catty post recently, “It looks like the lion’s roar is a meow, at best.”

Lionbridge CEO Rory CowanIt’s a frustrating reversal for a company whose CEO, Rory Cowan, was being lionized (that’s the last cat pun, I promise) just three years ago for putting together a $180 million deal to buy one of its main competitors, the Global Solutions unit of New York-based Bowne & Company. That acquisition vaulted Lionbridge into the ranks of Boston’s 60 largest companies. And it’s a puzzling state of affairs, given that the company’s revenues are large and growing—a record $117 million in the first quarter, up more than 8 percent from a year earlier. But no matter how high the company’s revenues go, its expenses seem to go higher.

One answer to the puzzle seems to be that Lionbridge’s expansion has put it at the mercy of the same twin forces—technology and globalization—that drive demand for its services.

Analysts who follow localization services—a $12 billion industry in 2007—point out that translation is still a labor-intensive process, and that Lionbridge’s strategy of employing hundreds of managers, engineers, and translators in expensive regions like Europe may be backfiring with the weakness of the U.S. dollar against the Euro and many other currencies.

And while Lionbridge has made a significant investment in technology—especially on work-flow automation and memory systems that save labor by identifying material that’s already been translated—it hasn’t really profited from that spending. “What has happened is that the benefits of the efficiency gain that Lionbridge has been able to produce through the use of technology have been handed right to the client” in the form of prices that have stayed flat despite global inflation, says Ben Sargent, content globalization strategist at Common Sense Advisory, a localization market research firm in Lowell, MA.

It wasn’t supposed to be this way. Lionbridge, founded in 1996, has spent hundreds of millions of dollars on acquisitions and other growth strategies, and has the client list (Bayer, Cisco, DuPont, GE, Google, IBM, Merck, Merrill Lynch, Microsoft, Morgan Stanley, Nokia, Pfizer, Sony, and Wal-Mart are a few of the big names) and revenues ($452 million in 2007) to show for it. With 4,600 employees in 45 offices around the world and a network of 25,000 freelance translators skilled in more than 200 languages, the company is three times the size of … Next Page »

Wade Roush is Chief Correspondent and Editor At Large at Xconomy. You can subscribe to his Google Group or e-mail him at wroush@xconomy.com. Follow @wroush

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  • mpotvin

    Hi I just want to comment on Kathleen Bostick statement which is that LionBridge has the “industry’s only Web-accessible translation services platform” this simply is a false statement companies like Sajan have had a on-demand solution for years please check out http://www.sajan.com for more info or consult industry experts like Common Sense Advisory for additional industry facts. I am surprised that Kathleen is not aware of the other translation vendors who offer an on-demand solution?

  • freelancer

    Another reason is that unlike other labor-intensive industries, translation – by its very nature – is extremely difficult to outsource to cheaper countries. Unlike building machines or making toys, where A is attached to B and then affixed to block C, the skills required for translating complex texts are highly specialized and go beyond simply knowing the language. I doubt Lionbridge can find enough, say, German or Italian native speakers with the requisite technical background to meet demand if they limited their search to India or China, or even the United States. Someone who does a great job translating computer documentation for Microsoft will probably be rubbish at translating Pfizer’s clinical trial results – the fields are too far apart.
    (Ask a doctor to read a highly sophisticated report on the latest financial instruments out there – chances are she’d be as lost as the credit analyst asked to read the new study published in the New England Journal of Medicine.) Add to this the factor of doing so in a foreign tongue.
    In addition to outsourcing directly to freelancers, Lionbridge also outsources most of its translation work to smaller agencies, who in turn outsource to even smaller ones. There can be 4 or more middlemen – each taking a cut – before the project actually reaches the translator doing the grunt work. Needless to say, it does not enjoy a wonderful reputation in the freelance world. The good ones don’t want to work for them, and most projects end up in the hands of unqualified “translators” who do shoddy jobs. Lionbridge then has to spend valuable UNPAID working hours to rectify the errors.
    They’re in a bind because they can’t find enough reliable freelancers willing to work at the rates offered, and many of their clients don’t understand the nature of tranlation, treating it as something akin to ordering pencils for the Japan office. (This is partly their fault, because they also marketed translation as a commodity like any other.)

  • freelancer 2

    I am a freelancer too and I was contacted by Lionbridge a long time ago. They stink. Rates were ridiculously low already and I’ve seen complaints in specific forums by translators who were having a hard time getting paid after the work had been done. Hordes of translators have turned their back on Lionbridge. Only the most unexperienced and hard up for cash will venture working for them.

  • http://lionbridge.zsp.net.pl Spurious Spore

    The pressure for lowering rates is felt not only by outsourced freelancers, but by employees as well. Lionbridge does not tolerate trade-unions in its own ranks. The story of a fired trade-union organizer in Poland is telling in this regard. More about this in the Irish Translator’s Bulletin: http://translatorsassociation.ie/component/option,com_docman/task,doc_download/gid,36/Itemid,16/
    and on the Irish Indymedia: http://ireland.indymedia.org/article/88156

    Quite obviously, change will not come from corporate headquarters, concerned solely with desperately falling share prices. Profit is the only language spoken there.

    Coordinated efforts by unionized Project Managers and freelancers are needed to bring the situation back to normal.

  • freelancer 3

    I’m no great lover of multinationals or Lionbridge, but some of the comments here about Lionbridge are harsh to say the least. i’ve been in the translation business for over 20 years, and the rates they pay me (10 to 12 eurocents in France) are the highest of any agency I work with. Also I’ve never had any payment issues with them. Perhaps I’m missing out on some agencies that pay more? Certainly to judge by sites like Proz.com many apparently competent translators located in Europe are perfectly willing to be paid less than half that rate, so they must be unbelievably bad according to the rationale being set out in the comments here. I guess it all depends on what you think is a low rate; for me 10 eurocents is not ridiculously low.

  • freelancer

    freelancer3: I’ve worked with at least two French agencies who pay 25 eurocents. Also, Lionbridge – a multi-language vendor – may pay relatively decent rates (i.e. 10 to 12 cents, as you said) to people who work directly for them, but since they usually farm out work to single language vendors (i.e. agencies)who act as middlemen, there are often 3 or 4 layers separating the freelancer from the end client. So Lionbridge sells its translations at 28 cents, the freelancer gets 6 cents or less, and the rest is gobbled up in between. There is no incentive for the freelancer to provide sterling work, and Lionbridge finds itself having to repair botched translations for no extra pay.

  • Freelancer

    Businesses should open their eyes and establish direct relationships with reliable and experienced freelancers. After all, they are the expert hands and brains that make all this possible. Agencies and big translation multinationals have corrupted both the customer and the markets by going after their one and only goal, MONEY.
    Translation is art, knowledge, experience, all combined in the linguistic artist, not the profiteering corporation.

  • ex-freelancer Ed

    Freelancer:

    Re: “Businesses should… establish direct relationships with reliable and experienced freelancers” you are right, of course, that it’s the only solution – in an ideal world. But businesses are themselves often short-staffed. How do you build up, nurture, manage and monitor vendor relationships with freelance translators if you’re a 3-person company? Or even a 300-person company? It is a very risky path to take, and the only guaranteed outcome is that your (non-linguist) admin staff will learn a lot (more than you want them to) about the theory and practice of translation, about the quirks and joys of dealing with freelancers, how to tell a good Chinese translator from a bad one when you don’t speak the language, etc. etc.

    THAT, in a nutshell, is the reason why agencies prosper. If you can figure out a way of solving that problem for them without becoming an agency, then Lionbridge and its ilk should start to tremble.

    The major exception to this is of course medium-size companies that produce a steady, but not excessive flow of text requiring translation. If they can latch onto a decent translator without wasting too much time and money and losing customers in the process, they can build a beautiful friendship that will leave both parties happy and panting for more.

    THAT, in my experience, is the best way for a freelancer to prosper.

  • Anonimous

    The problem with Lionbridge, as with most of the other big localization companies, is how cheap they are. They do not give their employees the means to do their jobs in a proper manner, their processes are mostly inneficient and they do not encourage, on the contrary they discourage, their employees to drive improvement.
    On top of that, their salaries are around the lowest among tech companies, which does not make them the best employer for talented people.
    If you add to that the situation of the localization industry in general, where the customer absolutely sets the rules, and many times even the prices, it kind surprises me that things are not even worse for Liox, and many other big companies in the localization industry.

  • Freelancer

    I went through a long series of tests before being accepted as a Spanish to English translator for Lionbridge.

    However, since my acceptance by Lionbridge I have not performed a single translation for the company. This is despite the fact that they continuously send me projects to look at with a view to translating.

    However, the rate they offer is simply crazy (5 eurocents a word). As well as very low rates, they expect the translations to be performed on their own quirky online system, and the deadlines are always extremely tight.

    I really should tell them to stop contacting me, but at the back of my mind I can’t help thinking – if all else fails, there is always Lionbridge.

    I suppose that Lionbridge has become my client of last resort.

  • http://simmer-lossner.blogspot.com/ Kevin Lossner

    “You pay peanuts, you get monkeys” is a common saying in the translation industry. I have never worked for Lionbridge and never will, but I have had dealings with project managers who were trained by Lionbridge. These people weren’t stupid, but it was obvious that they had not mastered the skills needed to be effective, and they often appeared to be out of their depth dealing with simple issues of resource management and client relations. A good company imprints the people who work for it in a positive way, and what I saw did little to inspire respect for this “industry leader”.

  • MerrillBrink

    their salaries are around the lowest among tech companies, which does not make them the best employer for talented people.

    Merrill Brink –http://www.merrillbrink.com