Siemens and Translation: Outsourcing vs. Insourcing

Large companies are in a constant state of flux about how to best manage translation. Should they do the work in house or should they outsource it to a translation agency? Ask any translation vendor and they will passionately tell you that outsourcing is the only way to go. Ask any in-house translation team and they will argue the opposite.

Some companies, such as Siemens, rely on a combination of both internal and external teams. As an $80 billion company, Siemens has plenty of translation work to go around. Although Siemens has had an internal translation division for years, it did not require its divisions to use them. Similarly, this internal translation team was not required to work only on Siemens projects; today, roughly 25% of its revenues are generated by non-Siemens work.

But this arrangement came to an end on April 7th, when Siemens formally spun off (or “carved out”) its translation agency. According to the press release, the move was part of Siemens’ “continuing strategy of concentrating on its core portfolio.” This new company is known as LS Language Services GmbH (www.ls-international.com). It has 20 employees and manages up to 70 different language pairs. In 2003, the company generated sales of 9 million euros — a very respectable figure for a firm this size.

I suspect that this move was largely driven by Siemens’ stated goal of reducing head count, but I also believe there are other factors at work here.

I spoke with Ilona Wallberg, head of sales and marketing at LS Language Services. Although LS Language Services is still owned by Siemens, she believes that it now has a degree of independence that will help it win new business. In the past, her company lost out on non-Siemens projects because of conflict-of-interest concerns. For instance, a telecoms vendor would naturally be reluctant to give translation work to a division of a company that it competes closely against.

Wallberg believes these concerns will be less of an issue now that her company has a new name and an independent business plan. She expects that in five years approximately 50% of the company’s revenues will be generated by non-Siemens work. She also believes her firm will expand its industry focus far beyond IT and telecoms.

So what does this development signify, if anything? Here are a few thoughts…

    Some skills may be better kept in house

    While I realize that companies are always looking for ways to reduce head count, I can’t help but wonder if Siemens is outsourcing a skill set that would be better off kept in house. Consider the value-added services that a translation division could provide to a large company, if it were effectively used. Translators and project managers could educate the many marketing and product development teams to better understand the cultural issues of each market and region. It could even provide high-level cultural and linguistic analysis of every new product name, color, positioning statement – just the types of services already being outsourced to naming and brand consultancies (many of which do not have global expertise).

    Granted, most in-house translation teams do not provide these types of services today. They translate text and manage print and electronic localization projects and that’s about it, which is why they are so easy to “carve out.” But I do believe these are the types of services that companies increasingly need and are not getting from their conventional translation agencies. This in turn opens the door to consultants (such as Byte Level Research).

    Who’s going to manage that Web site?

    LS Language Services is one of many handlers of the Siemens Web site. Wallberg notes that there are hundreds of people involved with updating content to the site and only a handful of those people are professional translators or project managers. Last year, in our Web Globalization Report Card, we gave the site a score of 62 on a scale of 1 to 100. The site clearly has room to improve, and I’m not convinced it will get there any faster by outsourcing all work. In fact, I believe it will be increasingly important to have full-time Web content managers in house to work hand-in-hand with product developers and marketing managers.

    Translation agencies are not viewed like advertising agencies – which is both good news and bad news for the industry

    In advertising, it is rare to find competitive companies using the same agency. For example, the agency that has the Verizon Wireless account won’t also have the AT&T Wireless account. Companies view their agencies as consultants or partners, privy to high-level strategic intelligence and planning.

    Now look at the translation industry. It is much more common for a translation agency to do work for competing companies simultaneously. Companies may have their concerns about such an arrangement, yet these concerns are not as frequently an issue. Non-disclosure agreements are signed, and that’s the end of it. On one hand, this is great news for a translation agency, as it can thrive by focusing on specific industries. But it is also bad news because it means that companies do not view translation agencies as highly as they view advertising agencies. In other words, a translation agency is akin to a print shop, not a partner.

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