The impact of COVID-19 on the language service industry was, just as with every other industry, one of paralyzing uncertainty followed by vertiginous change. While there were some who adjusted better than others, the language sector as a whole had a better performance in 2020 than other industries. In this article, we summarize the main conclusions to be drawn from last year’s lessons, along with three main forecast scenarios for 2021.
Understanding the effects of 2020 on the language sector is essential in trying to prepare for challenges and opportunities ahead. The good news, researchers have found, is that when viewed through the lens of data-driven analysis, the future looks much more hopeful than we would have imagined a few months ago. This 8-minute read is chock full of nuggets of information your LSP business needs to prepare for 2021.
How did Language Service Providers perform during 2020?
The language industry was hardly hit during the pandemic crisis last year; that may come as no surprise. However, the bottom line was not as negative as it was for other industries, which goes to show the sector’s readiness to enter the “digital era.” Although COVID-19’s resilience was not the same across the board, some experts and business leaders are optimistic about what this could mean for the future of LSPs.
But what are these conclusions based on? And who are the experts? CSA Research, an independent market research consultant has been tracking our sector and reporting on its trends for two decades. In 2020, their yearly growth report took a different spin, as they too needed to adjust to uncertainties stemming from the pandemic. Their approach was to conduct quarterly surveys and interview market leaders on a regular basis. Their findings showed a much more optimistic scenario than expected.
But let’s start with the bad news. CSA Research has reported that 44% of their 113 listed LSPs had a drop in revenue in 2020, both due to the pandemic and to other factors affecting the market. But when comparing business growth to that of previous years, these same providers showed a 4% improvement from 2019 to 2020. And even when we are talking about market leaders who usually perform better than the rest of the industry, the experts say this is the sign of a positive trend for all.
Profits were higher
Let’s carry on to more good news, shall we? While 44% of LSPs had lower revenue, CSA Research’s report shows that 52% of their surveyed businesses were in fact more profitable in 2020. A further 17% said their profits showed no difference, while 32% had lower profits than the previous year. This can be explained by looking at cost savings in categories such as travel and office space, along with other market changes caused by COVID-19. Areas such as online retail and emergency communications were in fact much more profitable in 2020 due to the pandemic. LSPs that responded to these changes quickly enough, were able to make a profitable difference.
Some existing trends were reinforced
As with many other sectors, the language service market had a major shift towards remote work. Although working from home was already the case for about 30% of the surveyed LSP members, 2020 saw a steep increase of up to 70% of home-office. Even when this was forced by mandatory lock-downs and the closure of all but essential businesses, many lessons were learned, and CSA Research foresees a future where there are more remote online meetings and fewer flights and conferences. While we have been witnessing the digitalization of the language industry for several years, COVID-19 has been a catalyst in the direction of fully digitized processes.
The use of Machine Translation also grew by 11% in 2020, but the specialists do not attribute this to the pandemic as much as to an existing trend. The types of content most frequently translated via MT are: technical, internal communications, external third-party related content, user-generated, legal or regulatory and software or apps.
The industry has been fully digitized and the sky is the limit
In having to rethink the way we worked and, most importantly, the way LSPs interact with their clients and projects, CSA Research has found that the industry has had a major transformation. Many interviewed CEOs say they have been pushed to shift their relationship with automation, venture into new markets and expand their offering. Many of these changes were executed swiftly in an attempt to adjust to last year’s crisis, but the experts believe the structural transformation is now here to stay.
Take for example the case of interpreting services for legal or medical interactions. These are areas of utmost priority in times of a pandemic, so major investments had to be made to ensure video technology was available and interpreting services were provided remotely. This is also the case with other areas of technological improvement. CSA Research has found that 84% of LSPs have invested or plan to invest in online marketing, while 70% are doing the same with project management or business automation.
A digital transformation due to COVID-19
As CEOs and analysts explain it, the digital transformation we were all expecting has been accelerated as a result of COVID-19, condensing a five-year-long progression into a five-month-long shift. Algorithms can now assist LSPs in predicting business outcomes as well as project risks and quality. For some, this means the industry has reached unparalleled potential for growth. True enough, there are still old challenges to overcome, along with a possible COVID-20 outbreak to surf through, but CSA Research analysts are optimistic. Their estimate for the next five years bears three possible scenarios, but they are hopeful that the industry’s growth will match and surpass the GDP (gross domestic product) curve. Why surpass? Well, because the language sector has historically been top of its class, outperforming many other industries.
If you were hesitant in the past, this article should have you convinced of the power of data and research in understanding business decisions in a changing environment.