With nearly US$113 million in revenue for 2006, Translations.com finished the year as the fifth-largest LSP. We spoke with CEO Phil Shawe about the ISP merger, his acquisition philosophy, and other aspects of the company he developed with business partner Liz Elting. We asked him why they bought ISP:

• Service fit. ISP has experience with bigger software firms like Adobe and Autodesk, while TDC’s work with bigger technology projects has been outside the high-tech area in finance, travel, and other non-IT verticals. The ISP expertise lines TDC up for bidding on contracts from tech firms Microsoft and SAP.
• Cultural fit. TDC feels comfortable with ISP managing director Martijn Heertje and his team. At TDC this fit counts for a lot because Shawe gives executives like Hans Fenstermacher (ArchiText) and Marc Miller (Crimson) a lot of autonomy. The ability to interact with the mothership is critical.
• Enhanced global footprint and business opportunities. TDC already had production centers in Barcelona and London, focused on websites and documentation. The ISP acquisition adds centers in Amsterdam and Beijing with software localization skills. Shawe said he’s also looking to establish a production center in lower-cost central or eastern Europe. Most of TDC’s business today originates in the United States, but Europe is becoming a bigger piece of the company’s revenue mix.

While we had him on the phone, we also quizzed Shawe on his software business and exit strategy:

• Software business. TDC sells a translation management system. Unlike other LSPs with their own offering (SDL excepted), it lets customers buy just the software without services. Shawe said that the company has been getting more traction with CMS partnerships since SDL acquired Tridion earlier this year. While he understands SDL’s desire to climb up the information life cycle food chain, he’s not convinced that SDL can do it. He’s aiming for tighter integration with other CMS players. Most other LSPs have outsourced the development of their TMS, but Shawe has kept most of the product work inside TDC — after acquiring developers that had been working on competing products such as Transware’s GlobalSight.
• Exit strategy. We always ask this question about the founders’ plan to IPO, sell, or exit — and we’re encouraged that we keep getting the same answer year after year. Shawe said that he used TDC’s cash to pay for the purchase and that the company has no debt now and didn’t take on any for this or any earlier purchase. We asked what would make him change that strategy? If he had a deal that required a lot of money, “I would look at raising capital or an IPO. We had partners at Translations.com, but we bought them out of the company. It’s convenient operating without outside investors.”

The strategy seems to be working. It has kept TransPerfect/Translations.com in our list of the top 5 LSPs for the last couple of years, spawned an imitator in the form of Welocalize and its plan to acquire its way to the top, and began a march toward a global services capability.