Worldwide, a pool of roughly 5,000 translation agencies with five or more employees sell language and related services to business customers. Last year we wrote that investment in technology was a pipe dream for most of these companies, but today we are in fact seeing small agencies in the US$2 million range taking on big-time translation management system (TMS) platforms like Across Language Server, and Beetext Flow, and Idiom WorldServer. Other technology vendors like Plunet and XTRF have jumped the North Atlantic and are now selling software for under US$10,000 — that price would have been unheard just 2 short years ago, for an application that included workflow.

The market is developing faster than we predicted. Many LSPs now see that they need some level of process automation to remain competitive. They have 3 basic choices: 1) build it; 2) buy it; or 3) be inefficient and see the market move away from them. Will translation agencies without a TMS go bankrupt this year? No, that’s not what we mean. But if they expect to be competitive in 2010, we recommend that they invest in process automation technology within the next twelve months.

Today, technology vendors find opportunities along the entire continuum of language service providers — from the tiniest to the biggest. Following SDL’s acquisition of Trados in mid-2005, Idiom held the leadership role in the LSP market for automating translation management. It had a relatively mature product offering in a market where many LSPs were reluctant to buy software from services rival SDL. However, SDL was a fast follower and initial reservations muted as LSPs found themselves buying SDL Trados upgrades anyway and considered the value of SDL TMS technologies. But just as Idiom and SDL were consolidating their places in the market, a whole new crop of TMS applications came to market, giving LSPs a wider range of options.

Two years ago when Idiom announced its program for translation agencies, we wrote that LSP Advantage would give the company and its solution greater exposure and more customer referrals. The program has worked like a charm — in fact, Moravia, SunFlare, VistaTEC, and Welocalize went “Platinum” in Idiom’s LSP program and, as of today, Idiom lists 33 LSP partners using its WorldServer TMS. Now Idiom’s competitors want to emulate that success. Across the pond across Systems GmbH boasts 36 LSP partners. While SDL’s TMS is not used by other LSPs, we believe that its Synergy workgroup product will grow to encompass more of the translation management functionalities required by LSPs and enterprise translation departments. Of course, with Trados enjoying the highest penetration of translation memory products within the LSP market, SDL is well positioned to support Trados-wielding translators simultaneously swarming on the same project. That market is SDL’s to lose, especially as TM alternatives from Alchemy, Kilgray, and Lingotek keep Trados-wielding shops in their crosshairs.

The big difference remains in Idiom’s pricing structure — it favors LSP partners and treats them as a marketing channel to enterprise customers rather than as a direct customer. Other TMS suppliers have not yet had this insight. To the extent that they view language service providers as their primary market, they cannot address it. Having discovered that LSPs constitute a large and growing direct market for its wares, it remains to be seen if Idiom will eventually ratchet up its LSP pricing to take full advantage of the market share it captures. If so, that will put a whole new spin on the “LSP Advantage” moniker.