Choosing a Localization Vendor: Main Street or Wall Street?

Many Translation Company Gems You Can Stumble Upon

Localization vendorThe largest public localization company, Lionbridge, reported last week below expectations net earnings and recently lost a third of its market capitalization. In a drive to become the number one localization vendor, Lionbridge grew since its IPO by buying companies like Bowne Global Solutions opens in a new window, International Communications, Mentorix and Data Dimensions. They financed their expansions with public money.

Wall Street Localization Vendor

To retain their newly bought clients and aggressive revenue growth projections, Lionbridge consistently spent millions of dollars every year on sales and marketing. They also lavishly spent significant administrative costs to operate their public company and became heavily dependent on public financing. The combined costs (26% of revenue) cut deep into profit margins and return to investors. New business continues to stream in but at the expense of profitability.

Looking at their financial performance over eight years in public life, one cannot avoid noticing so far a struggle to streamline divisions, create efficiencies and reduce costs. These tasks are not easily accomplished in a service industry heavily dependent on a global labor force costing 65 cents for each earned dollar.

This leaves them with 9 cents on the dollar to cover R&D, depreciation & amortization, interest, restructuring costs, employee stock compensation and yes, the elusive profit as well.

Main Street Localization Vendor

While this Wall Street company enjoyed fast revenue growth, Main Street companies labored for long term viability and healthy margins. Without access to public funds, they cannot spend liberally on administrative expenditures, marketing, sales or acquisitions. They focus instead on building solid business processes generating sustainable margins permitting them to invest in organic growth, thus ensuring their clients’ long term success and retention.

Chasing market share is a virtue and remains at the heart of our capitalistic society. But successful businesses must work toward sustainable profitability, not just sustainable market growth.

Next time you need a localization vendor, take a stroll down Main Street and try to balance size vs. service; the gems you stumble on will surprise you!

How to Plan & Budget Translation Projects Whitepaper

Whitepaper – How to Plan & Budget for Translation & Localization Projects? opens in a new window

This whitepaper presents you with straight forward metrics that will help you determine the budget and schedules needed for translation and localization projects. Don’t request a bid without reading it first! Get it now for free!!

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