2020 ALC Report Indicates Resilience and Active Outreach Among Respondents
by Elena Langdon
The last two years have been life-changing for everyone around the globe, and the American Language Companies (ALC) 2021 Survey Report reflects this in multiple ways. Perhaps not unsurprisingly, the response rate from language service companies (LSC) decreased by a third (from 175 to 117 companies). Its design was different, too: In 2020 a new section was added to the survey about the impact of the COVID-19 pandemic, and for the 2021 survey a new section focused on recovery and impact.
In many ways, the language industry is in fact recovering. Some of the results are unsurprising to most of us (hello, remote and hybrid work!), while others are less straightforward (I’m thinking of the interpreting market here). Below is a summary of the key points of the survey’s report, produced by Nimdzi for the ALC.
While the survey was conducted from July to September 2021, responses about revenue, growth, salaries, and employee numbers pertain to 2020 figures, and business strategies and challenges relate to 2021.
1. 2020 was a mixed bag for company revenue, but better than 2019
As the report states, “35% of companies [who responded to the survey] reported that they retained or increased their revenues in 2020.” The breakdown is actually more positive for smaller businesses — in this survey, defined as those that earn less than $1 million per year — than for those whose revenue is more than $1 million, as seen in figure 1 below. This is not to say that the picture was rosy: Half of all LSCs based in the US reported a decline in revenue of more than 15%, and for one-third it was over 25%. This is considerably better than what was reported for 2019, the first year of the pandemic, in which 42% of respondents’ revenue was cut in half.
All companies grew significantly less in 2020 when compared to 2019, and they reported more negative growth as well. That said, smaller companies had less of a gap in their growth numbers than medium- to large-sized companies.
2. On the (long) road to recovery from COVID-19
Experiences have not been uniform across the world when it comes to COVID-19 recovery. It is unclear whether US companies were hit harder or have simply taken longer to recover, but more than half (57.1%) of the US companies surveyed reported that they have not yet returned to pre-COVID-19 growth and revenue levels. For non-US companies, this is only reported by 20% of participants. The companies who did not see a return to their previous revenue level foresee the road to complete recovery taking them well into 2022.
3. Interest in M&A is picking up again
In 2019, nearly 55% of respondents said they were not interested in mergers and acquisitions (M&A), but in 2020 things changed quite a bit, with 52% of surveyed companies stating they are either on the lookout for opportunities or willing to hear offers. This makes sense given the surge in high-profile deals in the second half of 2021, and the numbers in the survey reflect the fact that the language industry has attracted investors’ attention.
Figure 1: Percentage of growing US companies
4. Regulated industries continue to drive language work
Regulated industries — healthcare, financial, legal, and the public sector, among others — remain the drivers of language-related work. The drop-off in demand in sectors such as travel and tourism has largely been compensated by more demand coming from clients in the regulated industries. The legal and healthcare sectors are the two most important ones for companies who responded to the sector — 74% and 70% of them provide services in the legal or healthcare field, respectively. For healthcare, the focus is on interpreting, and respondents said that roughly 40% of their revenue comes from this sector.
5. Interpreting is becoming more profitable for LSCs
Compared to previous years, the range for gross margins for interpreting services is widening (30-50%) as interpreting is becoming a more profitable line of business for the companies surveyed. In 2020, interpreting rates have increased for nearly all different types of interpreting and languages on offer. The survey does not target practitioners, so it is not known whether any increases have been passed on to interpreters.
The biggest jump in prices has been seen among LSCs offering onsite community interpreting — depending on the language, prices for that modality have grown as much as 120% year-on-year. This could be due to the increased demand and perceived value and/or the decreased supply, given the difficulty of getting interpreters to meet in person for work, because of the risks of COVID-19 exposure.
Sadly, interpreting rates are noticeably lower for Spanish, by far the most requested language in the US. This is true especially for onsite conference and community interpreting, and for over-the-phone interpreting, for which rates are approximately 1.3 times lower. For video remote interpreting and remote simultaneous interpreting, the rates are 1.1 and 1.2 times lower, respectively.
Figure 2: Key client verticals
Figure 3: Gross margins by line of business (%)
6. Downward trend in translation rates did not accelerate with pandemic
Price has not been a lever used by LSCs to attract new business in times of crisis: On average, they decreased only by some 4%. However, compared to 2010, prices have dropped by 23% on average.
7. The future workplace is hybrid
While 94% of LSCs completely shifted to remote operations with the onset of the pandemic, the majority will be opting for a hybrid solution of remote and onsite operations moving forward. It’s looking quite likely that there will not be any turning back to return to a 100% onsite model.
8. The dawn of the brand-conscious LSC
Since the pandemic began, LSCs have been tapping into alternative channels to generate new business opportunities and maximize their online presence and visibility. Companies still have work to do in the brand awareness department, and leveraging the social media marketing area is a whole new arena, but a more concerted marketing effort is yielding results for those who commit to it.
Both medium-sized and larger companies are planning an increase in projected marketing spend for 2021, which is a noticeable change in the LSCs’ approach to marketing activities. The picture was quite different last year — companies were planning to reduce the projected marketing spending for 2020, making budgetary cuts due to COVID-19. There is optimism for marketing departments moving forward.
Marketing strategies used by respondents included email campaign tools (90%, up by 14% since the 2020 survey), search engine optimization (SEO) (64%), content and inbound marketing (64%), and pay-per-click advertising (53%). Of those tools, SEO and content and inbound marketing were the most successful in generating new business opportunities (although not all companies track this).
Figure 4: Marketing channel performance
Figure 5: Effect of legislation on business
9. Even in this burgeoning language technology landscape, good old spreadsheets aren’t going away
Today, there are more language technology solutions available on the market than ever before. Overall, the march toward cloud-based technology continues, but one surprising element is the persistent survivability of spreadsheets. There will always be that one client who will want to manage their translations in Excel.
10. Machine translation adoption is growing, but there (still) isn’t a lot of money in it
One of the key takeaways last year was that machine translation (MT) is not a significant revenue driver for LSCs. This hasn’t changed. Nevertheless, spurred by their clients’ enthusiasm for the technology, LSCs are continuing to add MT-related services to their portfolios.
In addition to the above points from the report’s own executive summary, here are a few more
It was a big year for legislative challenges and advocacy.
Several state and federal laws challenged LSCs in 2020-2021 in both the US and Europe. Of the three in the US, two are from California. All readers are probably familiar with AB 5, the California law that passed in January 2020 and was later changed due to efforts of the quickly assembled Coalition of Practicing Translators and Interpreters (CoPTIC), along with efforts by the American Translators Association (ATA) and other professional associations. The other CA law is a consumer protection law, similar to the EU’s General Data Protection Regulation (GDPR).
In Europe, LSCs also had to contend with the Medical Device Regulation (MDR), which requires device manufacturers to invest in quality management systems to ensure compliance of products and services. This is an enormous logistical undertaking if the inevitable cost and effort to localize all related documentation is factored in. Depending on the client, some LSCs might experience a dip in production if clients divest entire product lines. On the other hand, tech-savvy LSCs could seize the opportunity and accommodate the inevitable increase in content.
In the US, one potential challenge is a proposed federal law that would expand labor laws allowing employees to organize and collectively bargain in the workplace. The Protecting the Right to Organize Act (PROAct), if passed, would prevent employers from counteracting labor organizations and strengthen the rights of employees to join trade unions. In addition, the bill proposes to permit trade unions to encourage solidarity action (secondary strikes).
Figure 6: Preferences in interpreting technology
Figure 7: Compensation levels for key LSC roles, US only
Regarding the platforms that the surveyed LSCs use, a surprising 31% use custom tools for scheduling and remote interpreting. Among turnkey solutions, the two most popular ones mentioned were Interpreter Intelligence (27%) and Boostlingo (7%). Both serve as tools for remote interpreting as well as management and scheduling, and both were used mostly by companies that cater to the healthcare and legal industries. The wider range of functionality of these tools makes them more resource-intensive, which is why they are more commonly used in larger LSCs.
The conference interpreting and remote simultaneous interpretation (RSI) tools that were mentioned most often were KUDO and Lango, although the percentage is only 3% for each of these, with 29 respondents. As a result of the pandemic, the RSI market is booming, and there are a variety of tools, including well-established video conferencing apps like Zoom (and as of November 2021, Webex) that have simultaneous add-ons and are much less costly for users than dedicated RSI platforms.
Translators/Interpreters are (still) at the bottom of the totem pole in compensation
Within US-based companies, average salaries have increased since last year for all managerial roles (executives, mid-level managers, and project managers), as well as for salespeople. Technology/software engineers and linguists have been less fortunate, with reported cuts to their compensation rates. The silver lining for technology/software engineers is a small increase to their average incentive share, where many other roles saw cuts in this area. For language professionals, the maximum salaries are 2-7.5 times lower than any other position. (The sample size is low for this position, but the responses reflect a general low financial regard for the people actually doing the language conversion.)
Overall, as reported to Nimdzi, while LSCs were not unfazed by the pandemic financially nor structurally, many of them are showing signs of recovery, adaptability, and agility in this ever-changing market. And even though we all certainly want to see an end to the pandemic and its negative effects, more likely than not, the 2022 survey will still be all about the unprecedented global health crisis caused by the original SARS-CoV-2 virus and its variants.
Elena Langdon is a staff writer for MultiLingual