Localization Bulletin: January 2010

2009 ends with hope for future growth

Language service providers around the globe have been heavily impacted by the economic downturn, but optimism for growth next year has increased substantially, according to the Globalization and Localization Association’s (GALA) most recent quarterly survey. For the seventh straight quarter, GALA asked its members (language services and technology providers) about the economy and its impact on business, allowing the association to draw a picture of the effect the recession has had on the language and localization industry.  

When GALA began tracking the impact of the recession on the industry in the second quarter of 2008, the economic downturn was not yet called a recession and was generally limited to North America. At that time, GALA members were growing significantly, sales were steady and outlooks were overwhelmingly positive. That view continued throughout 2008 and then took a dramatic downturn in the first quarter of this year. Overall, the surveys indicate that 2009 has been a very difficult year for the language services industry, but that 2010 will be a year of growth.  

As in past quarters, members were asked, “Is your business directly impacted by the current global financial crisis?” This quarter the response was again affirmative with 72 percent of respondents reporting a direct impact. This number continues to decrease ever so slightly – 75 percent reported a direct impact in the third quarter compared to 78 percent in the second quarter.  

Regionally the results were mixed. While the impact in Asia and South America continues to decrease (Asia: from a high of 85 percent in the second quarter, to 62 percent in the third quarter and 57 percent in the fourth quarter; South America: from 67 percent in the second quarter, up to 80 percent in the third quarter and then down to 57 percent in the fourth quarter), the impact on members in Europe is just about the same as in the third quarter (75 percent), and the impact is actually higher in North America (up three percentage points from the third quarter to 78 percent). Respondents from the Middle East and Africa have not seen a decrease in impact yet either, with all respondents from that region reporting that they continue to experience direct impact.  

There was, however, a positive indicator in the demand for language services or tools. Despite almost half of the respondents reporting reduced demand in the past three months, that number is significantly lower than in the past two quarters (a 30 point drop from the peak in the second quarter and a 16 point drop from the third quarter). Meanwhile there was a significant jump in demand. A full 39 percent of respondents reported somewhat or greatly increased demand, this is more than double the number in the third quarter (18 percent) and more than four times greater than the second quarter (nine percent). Regionally, demand was up the most in South America (43 percent reported an increase) and the Middle East/Africa (75 percent increase), while North American respondents still report relatively low demand (78 percent reported somewhat reduced or greatly reduced demand).

All regions anticipate an increase in demand in the next three months. Worldwide, more than 65 percent expect somewhat or greatly increased demand. More than 70 percent of respondents from all regions except Europe expect an increase in demand. European respondents were a bit gloomier. Sixty-two percent expect an increase in demand, but a full 25 percent in that region expect reduced demand – much higher than any other region.

Layoffs do continue to plague the industry. Nineteen percent of respondents reported layoffs in the last three months. That number is up significantly from the third quarter when layoffs had dipped to 13 percent after reaching 18 percent in the second quarter. Yet employment figures also show signs of improving. While 47 percent of respondents to last quarter’s survey said they planned to hire in the next three months, 55 percent of respondents this quarter said they actually did hire new workers. That is a steady increase from previous quarters this year. And employment growth in the next three months looks more positive with 58 percent of respondents planning to hire in the coming quarter. The most hiring is anticipated in Asia, with a full 93 percent of respondents reporting goals to bring on new workers. Hiring still is off from a year ago when a staggering 78 percent of member respondents reported expanding their workforce in the past year.  

The most encouraging news from the survey was the enormous increase in optimism. Two quarters ago, 44 percent of respondents were optimistic about the next six to twelve months, and 41 percent were uncertain. Last quarter there was a shift toward optimism with 66 percent feeling optimistic. But this quarter that number is even more solid with 71 percent of respondents feeling positive about the future of the business.