Translation Bureau Benchmarking and Comparative Analysis. Final Report

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Translation

Bureau

Benchmarking

and Comparative

Analysis

Final Report

Final Report May 15, 2012

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1. Executive Summary

1.1. Background

The Government of Canada’s Translation Bureau (‘the Bureau’) engaged

PricewaterhouseCoopers LLP (‘PwC’) between January 16 and May 15, 2012 to conduct a

benchmarking and comparative analysis study. The objectives of the comparative analysis study were to provide:

• Information and analysis on the capacity of the Canadian industry to meet national and government demand; and

• Benchmarks for good practices in linguistic services with other organizations of comparable size at the national and international level.

PwC undertook the engagement in three stages:

1. Established a benchmarking framework from which to conduct the comparative analysis; 2. Conducted a review of literature pertaining to the linguistic services industry globally and

in Canada; and

3. Conduct comparative analysis for 5 linguistic service organizations in Canada and 3 international organizations.

1.2. Global Language Services Industry

The language services industry is global in nature, with over 25,000 organizations that provide Language Service Providers (LSPs) in 152 countries. The international industry has the

following characteristics:

• The market is highly fragmented, with the top 50 LSPs generating only US $4 billion of the US$31 billion market.

• The LSP market is growing at an annual rate of 7.41%, and is expected to reach US$38.96 billion in 2014. Most of the revenue generated remains associated with translation services.

• The market is very competitive on price. Almost 80% of providers charge less than $0.15 / word for their services.

The Translation Software market is estimated at approximately US$575.5 million in revenue for 2010, and is anticipated to reach US$3 billion by 2017. Use of technology by LSPs is sporadic. The use of technolinguistic tools requires both an investment to build and maintain

infrastructure as well as a significant repository of data in order for the tool to be effective. Both factors impede the adoption of these technologies by the small enterprises that represent the bulk of businesses within the industry.

1.2.1. Canadian Translation Services Environment

Canada is a leader in the translation market. With only 0.5% of the global population, it

represents approximately 10% of the $31 billion global translation market. Reflecting Canada’s official language status, it is estimated that approximately 90% of translation in Canada is between French and English.

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Some key characteristics of the Canadian labour market include:

• The average age of those working in translation is higher than the Canadian workforce as a whole.

• Statistics in Canada indicate that demand in the translation sector is higher than the national average with lower annual attrition rates.

• Demographics show a workforce with a higher than national average, post-secondary education and income.

• Approximately 62% of the translation workforce were in salaried positions, of which approximately 50% were full-time positions. This compares to approximately 33% of self-employed translators that are working in full-time positions.

While resources are fragmented, the supply of translation organizations and independent

translators appears to be stable relative to demand. These micro-enterprises have low overhead, and as such, are able to compete aggressively on the basis of price and speed. The primary effect of this is in the apparent commoditization of translation services and its effect at providing lower costs services. The emergence of a number of large, multinational organizations and their expansion through acquisition of small or medium organizations will likely have an impact on lessening the fragmentation of the Canadian supply and exerting further downward pressure on prices.

There are some indications that requirements for translation and interpretation services for other languages in Canada may emerge as Canada’s cultural diversity shifts and the degree to which the Canadian government focuses on international trade.

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1.3. Comparative Analysis

In order to gather data to support a comparative analysis, PwC contacted five Canadian and three international language services organizations. Table 1 provides an overview of key observations highlighted by our analysis.

Table 1 - Key Observations from Comparative Analysis

Area of

Focus Key Observations

Funding Model

Of the four public sector organizations, three are fully funded through an appropriation for the services that they provide. The linguistic services provided are considered essential to the operation of the parent

organization and the language service providers are therefore not required to engage in cost recovery from their clients.

Tools and Technology

Among many of the organizations that we interviewed, the use of

technolinguistic tools is optional, and at the discretion of the translator. This is, in large part, because there is cultural resistance by translation professionals to use these tools. They are seen as further automating and commoditizing a service that language professionals may feel is a creative exercise.

Technology has the potential to significantly affect the role of the translator, with focus shifting from translation to editing and revision.

Productivity

Based on data from 2010-2011, the Bureau’s productivity ratio was

approximately 250 words/hour. This was on the lower-middle end of the scale as compared to the organizations interviewed, which ranged from 195 – 333 words/hour.

The Bureau employs a graded scale to determine document complexity, which in turns influences the time allotted for the translation of a

document. A key differentiation between the comparator organizations and the Bureau was that complexity was not a factor for the external

organizations. Document length was seen as the primary driver for workload and costs.

Quality

Quality assurance often relies upon the skill of the translator, rather than being a separate function within the process. With some exceptions such as certified or legal documents, quality is not considered as important to clients as cost or speed. Importantly, quality is expected by clients and therefore not considered a differentiator.

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Area of Focus

Key Observations

Classified Documents

There is capacity within the private sector to provide translation of secure documents. The sole commercial language service provider that

participated in the study can provide services for Top Secret documents. This service was viewed as an investment that was necessary to secure work of this nature and there was no associated additional cost.

The remaining organizations rely on senior translators and adherence to internal security policy when managing the translation of secure

documents.

Social Media There is little evidence of the use of translation for social media. Responsibility for translation rests with the content creators, which is typically the organizations’ communications function.

Operating Model

All the organizations leverage a hybrid model that provides contingent capacity to meet additional demand. The exact blend of in-house vs. outsourced resources varies.

1.4. Conclusion

Some predominant themes have arisen from the work that we have carried out in conducting this study. While this is not meant to be comprehensive, the following are key themes for consideration by the Bureau.

1. Enhancing the Bureau’s contribution to innovation. Our studies and interviews exposed a lack of significant investment in the translation industry. The Bureau has an opportunity to examine the appropriate level of investment in activities that define and measure quality standards, as well as the further refinement of translation tools and technology.

2. Measuring and refining the Bureau’s contribution to ensuring a continuing

supply of quality translation professionals. The Bureau is Canada’s largest

translation service and does play a role in developing programs that encourage Canadians to consider becoming a translation professional.

The Translation Bureau plays a leadership role in the Canadian linguistic service industry. It has made significant contributions to building industry capacity in Canada as witnessed by the use of Termium by Canadians and its efforts to attract new linguistic service professionals into the industry. Based upon our discussions with the comparator organizations and from the review of literature pertaining the global linguistic industry, the Bureau is not immune from the pressures on costs to delivery its services and the prices its clients are willing to pay.

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2. Introduction

2.1 Background

The Government of Canada’s Translation Bureau (the Bureau) has launched an initiative known as “Rethinking the Bureau”. The goal of this initiative is a review of the Bureau’s business

processes and service delivery model and is intended to secure the Bureau’s long term financial viability and maintain the quality of services provided to the Government of Canada.

PricewaterhouseCoopers LLP (PwC) was engaged to conduct a benchmarking and comparative analysis study parallel to this review. The objectives of the comparative analysis study are to provide:

• Information and analysis on the capacity of the Canadian industry to meet national and government demand; and

• Benchmarks for good practices in linguistic services with other organizations of comparable size at the national and international level.

2.2 Purpose and Structure of this Document

This document is the final report presenting PwC’s findings for the Benchmarking and Comparative Analysis study. The report documents data and key findings reviewed by PwC through:

• Document Reviews including key studies and reviews provided by the Bureau and/or participants;

• Internet and/or library research focused primarily on trend and industry information;

• Third Party Information from peer organizations, recognized industry associations or national research bodies; and

• Interviews completed to date with representatives from comparable organizations. The document is organized into the following sections:

• Section 3 - Translation and Interpretation Services Sector Profile, both

Canadian and international. This section includes a review of service offerings within the sector, as well as information on industry size, structure and trends within the sector; • Section 4 - Overview of Comparable Organizations, including a summary of the

interviews conducted with external organizations;

• Section 5 - Comparative Analysis, which addresses how the Translation Bureau compares with the external organizations in a number of key areas; and

• Section 6 - Key Observations, which draws some preliminary themes for consideration by the Bureau in assessing its strategic direction for the future. For your reference, a glossary of terms is included in Appendix A.

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2.3 Acknowledgements

PwC would like to acknowledge the time and effort of the organizations that participated in this study for sharing information on their practices, as well as for providing their views on a

number of the areas discussed within this report. Their contribution was essential to the completion of this study.

PwC also wishes to thank participants of the three Executive Workshops that were conducted over the course of this study. These workshops were valuable in providing input and validation of key points of the study. They would not have been successful without engaged participants, including representatives from the Translation Bureau, Public Works and Government Services Canada, Treasury Board of Canada Secretariat, and representatives from the comparator

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3. Canadian Translation and

Interpretation Services Sector

The following section provides an overview of the current state of the translation services sector, both within Canada and internationally. It provides a synthesis of information available through studies and publicly available sources, and highlights recent trends in translation services. Specifically, it includes:

• An industry overview;

• A description of labour force and business model characteristics; • A description of services offered;

• An overview of supply and demand factors; • Information regarding costs and pricing; • An overview of technology usage; and • A summary of key trends.

It is important to note that information specific to Canada is less readily available than information on the global market as a whole.

3.1 Industry Overview

As a result of its two official languages and the demographics of its population, Canada is a leader in the translation market. With only 0.5% of the global population, it nonetheless represents approximately 10% of the USD 31 billion global translation market1_{. Reflecting}

Canada’s official language status, it is estimated that approximately 90% of translation in Canada is between French and English2_.

As an employer, the Canadian language services industry is estimated to employ 15,000 translators, interpreters, terminologists, and localization specialists in 20103_.

As can be seen in Figure 1, while the public sector represents a significant portion (17%) of the Canadian workforce, the majority (83%) are employed with the private sector firms providing commercial translation services4_{. This suggests that there is significant capacity within the}

private sector, however a number of considerations need to be taken into account in order to validate this assertion:

• During our discussions with comparator organizations, they indicated their ability to increase capacity to meet additional demand by reaching out to a network of

independent contractors or by increasing staff compliment if demand could be assured. It is unclear whether the supply of independent contractors that is leveraged by the organizations is in fact, the same pool of experienced translators. While each provider may believe that they have access to this surge capacity, a significant increase in demand across the industry may absorb this capacity quickly.

1_Source:_{ATA Chronicle – American Translators Association – October 2010} 2_Source:_{Found in Translation – Job Postings Canada}

3_Source:_{ATA Chronicle – American Translators Association – October 2010}

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• The reliability and availability of these professionals would need to be examined as their preferences for when and how the work may not align with the needs of the clients. • This capacity represents a point in time. The current demographic profile of translation

professionals suggests that further pressure on supply will prevail in the near to medium term as these professionals retire. In effect, their older average age may be artificially creating a false sense of capacity because they are closer to retirement. If the number of new entrants into the industry continues to fall short of the annual increase in demand, and the supply of independent contractors cannot make up the gap, then managing supply will become more difficult and time consuming.

It is also important to note that an increasing supply of independent resources will continue to contribute to maintaining or increasing the fragmentation of the industry. This, in turn, will also increase the urgency and focus on establishing supply arrangements or contracting vehicles that would minimize the administrative burden to both the Translation Bureau and the various suppliers.

Figure 1 - Canadian Translation Sector Workforce

Within the public sector, the Government of Canada is by far the largest employer with 71% of the public sector translation workforce.

It is also interesting to note, as indicated in Figure 2, almost half of the Canadian workforce is concentrated within Quebec (49%) and almost a third in Ontario (31%). This is to be expected given the heavy focus of French and English translation within the Canadian market.

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Figure 2 - Canadian Workforce Breakdown by Region

The industry is global in nature 5 _{, with over 25,000 organizations that provide Language Service} Providers (LSPs) in 152 countries. The international industry has the following characteristics:

• The industry is distributed with pockets of concentration in Canada, the United States, Western Europe, Northern Europe, China, India and Japan. Each of these countries has more than 500 LSPs.

• The market is highly fragmented, with the top 50 LSPs generating only US $4 billion of the US$31 billion market. Although we have as yet been unable to locate similar data for the Canadian market, this perspective has been supported anecdotally in PwC’s

discussions with industry.

• 63.4% of LSPs expect to remain independent and grow organically, which suggests that industry fragmentation will continue. It is interesting to note that while only 18% of LSPs would like to make one or more acquisitions in the near or mid-term, 50.9% are open to business combinations (i.e. mergers, acquisitions) that would make them stronger in the marketplace.

The LSP market is growing at an annual rate of 7.41%, and is expected to reach US$38.96 billion in 2014. Although technology is changing the revenue landscape of the industry, most of the revenue generated remains associated with translation services. Fifty-one percent (51%) of LSPs earn more than 70% percent of their revenue from translation. The fastest growing services, in descending order, are:

• translation;

• website globalization; • software localization; • on-site interpreting; and • multimedia localization.

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Figure 3 and Figure 4 illustrate the distribution of LSPs by geographic market, as well as the distribution of market share. The majority of LSPs are located in Europe, with North America representing almost 20%. Between the two regions, they account for almost 90% of global market share. This is to be expected given their economic size, and the linkage between translation demand and global trade.

Figure 3 - Regional Distribution of Language Service Providers (2011)

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3.2 Labour Force / Business Model Characteristics

Within the Translation Services labour market, career opportunities arise primarily from the need to replace professionals who are retiring and growth in demand. Some key characteristics of the Canadian labour market include:

• The average age of those working in translation is higher than the Canadian workforce as a whole. In 2006, 22% of the translation workforce was aged 55 or older as compared to 15% for the Canadian workforce as a whole.6

• Statistics in Canada indicate that demand in the translation sector is higher than the national average with lower annual attrition rates.

• Demographics show a workforce with a higher than national average, post-secondary education and income. Figure 5 highlights some key characteristics of the Canadian translation labour market.

• Approximately 62% of the translation workforce were in salaried positions, of which approximately 50% were full-time positions. This compares to approximately 33% of self-employed translators that are working in full-time positions.

Figure 5 - Translators, Terminologists and Interpreters Statistics in Canada7 Main Labour Market Indicators All occupations

Employment, average 2007-2009 9,350 3,859,200 Claimants in 2009 70 168,350 Average Annual Growth Rate 2010-2014 1.5% 0.9%

Annual Employment Variation 2010-2014 150 36,650 Annual Attrition 2010-2014 350 122,850 Total Annual Needs 2010-2014 500 159,500

Average Annual Employment

Income (Full-time, Full-Year) All occupations

Full-time, full year 47.3% 53.2% Average Income 49,988 45,157 0 - 19999$ 8.8% 16.5% 20000 - 49999$ 44.3% 52.4% 50000$ and over 46.8% 31.1%

Employment Distribution by

Highest Level of Schooling All occupations

Less than high-school 0.9% 14.1% High-school 3.2% 21.9% Post secondary 17.9% 43.1% Bachelors 78.1% 20.9%

6_Source:_{Translators, Terminologists and Interpreters – Service Canada – December 2010} 7_{Source: http://www.servicecanada.gc.ca/eng/qc/job_futures/statistics/5125.shtml}

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Internationally, the majority of LSPs possess very small employee bases: • 69.3% have 5 full-time employees or less.

• 92.4% have 20 full-time employees or less. • 0.6% have more than 100 full-time employees.

Approximately 57% of LSPs have been in business 5 years or less, while only 6.4% have more than 20 years of experience. As would be expected for a fragmented industry, and supporting the notion that many of the LSPs are small micro-enterprises, 78.4% of LSPs are run by their founding owner.

3.3 Services

The Canadian Translation Services industry is predominantly segmented into 3 areas8: • Translation, interpretation and terminology;

• Language training; and • Language technologies.

Of these three areas, there is very little activity in the language technologies space. While exact data is not available for the Canadian market specifically, Table 2 represents, at a global level, the size and market percentage of the major services that comprise the language services sector. As can be seen from the table, translation services represent by far the largest service by

revenue.

Table 2- Market Size and Revenue by Service

Service Percent 2010 Percent 2011

Total Market Opportunity 2011 (US$ M) Translation 43.3% 45.7% 13,370.18 On-Site Interpreting 13.0% 14.4% 4,226.32 Software Localization 7.1% 6.6% 1,917.95 Website Globalization 4.9% 4.7% 1,380.33 Multimedia Localization 4.0% 3.3% 957.91 Translation Tools & Software 3.6% 4.0% 1,169.12 Telephone Interpreting 3.3% 3.4% 994.18 International Testing / QA 3.1% 2.4% 686.96 Machine Translation Post-editing 2.8% 2.3% 680.56 Internationalization Services 2.7% 2.3% 669.90 Business Process Outsourcing 2.5% 2.3% 659.23 Voice-over / Dubbing / Narration 2.5% 2.4% 689.10

Transcreation 2.4% 1.9% 554.69

Subtitling 2.1% 2.0% 586.69

Interpreting Tools / Software 1.6% 1.6% 465.09 Video Interpreting 1.2% 0.9% 260.28

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Table 3 details the percentage of global LSPs that derive revenue from the specific service area (e.g. 24.7% of LSPs derive 91-100% of their revenue from Translation service). There are a few key observations that can be made from this data:

• Most LSPs are generating the 70% or more of their revenue from translation services. • Beyond translation many other LSPs generated less than 10% of their revenue from other

service areas.

• Software localization (21.4% of LSPs), website globalization (15.5% of LSPs), on-site interpreting (27.9% of LSPs) and multimedia localization (9.1% of LSPs) are the only other service areas that have a material portion of LSPs generating over 10% of their revenue from a service outside of translation.

• Few, if any LSPs offer a full suite of services, with many “boutique” operations providing unique and/or specialized services.

Table 3 – Revenue Breakdown by Services Area

Service Area % o f R e v. T ra n sl at io n S o ft w a re L o cal iz at io n Web si te G lo b a liz a ti o n T ra ns la ti o n T o o ls & S o ft w a re M a ch ine T ra ns la ti o n P o st -E d it in g T ran sc re at io n On -S it e I n te rp re tin g T e le ph o n e I n te rpr e ti n g V id e o I n te rp re tin g In te rpr e ti n g T oo ls & S o ft w a re M u lt im e d ia L oc a liz a tio n V o ic e -O v e r / D u b b in g / N arra ti o n S u b tit lin g In te rn at io n a li za tio n S er vi ces In te rn a ti on a l T e sti n g & QA 0% 5.7 36.5 35.5 67.0 62.3 62.3 38.0 66.3 75.2 81.0 44.4 55.5 59.7 61.7 62.4 1-10% 6.8 32.9 38.4 13.8 21.3 19.4 27.3 17.2 12.6 4.6 36.0 27.6 25.1 20.3 20.4 11-20% 4.2 10.0 9.6 2.2 3.1 2.3 4.9 2.3 1.2 1.5 6.1 3.3 2.6 3.8 3.0 21-30% 3.1 3.9 2.7 0.5 0.3 0.3 2.4 1.2 0.4 0.1 0.8 1.1 1.0 0.5 1.1 31-40% 4.2 2.4 1.0 0.8 0.3 0.3 1.6 1.0 0.1 0.1 0.4 0.5 0.1 0.8 0.8 41-50% 6.5 1.9 0.5 0.4 0.3 0.3 2.8 1.2 0.0 0.3 0.5 0.4 0.4 0.4 0.5 51-60% 6.6 1.0 0.4 0.4 0.3 0.4 1.2 0.1 0.1 0.0 0.3 0.0 0.1 0.1 0.0 61-70% 7.7 0.5 0.5 0.7 0.1 0.3 1.6 0.3 0.0 0.0 0.1 0.0 0.0 0.1 0.4 71-80% 12.0 0.5 0.1 0.5 0.4 0.1 1.5 0.1 0.1 0.0 0.3 0.1 0.1 0.0 0.0 81-90% 14.3 0.5 0.4 0.0 0.3 0.3 3.2 0.4 0.0 0.0 0.3 0.4 0.1 0.5 0.4 91-100% 24.7 0.7 0.3 2.3 0.4 0.1 8.7 1.4 0.1 1.4 0.3 0.3 0.4 0.1 0.1 No Data 4.3 9.1 10.6 11.4 11.1 14.1 6.8 8.5 10.0 11.1 10.6 10.8 10.3 11.5 10.8

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3.4 Supply and Demand

A significant proportion of translation services are consumed by public sector organizations within Canada and internationally. In line with this, most translation services within Canada and internationally are provided internally by various government agencies. Within the

Canadian market, the Translation Bureau represents the largest single supplier by volume and size.

Specifically, for the private sector organizations providing translation services, Table 4 outlines the top ten global translation and interpretation companies9:

Table 4 - Top Ten Global Translation and Interpretation Companies

Company HQ Country 2010 Rev. US$M Employees Offices Status

1 Mission Essential Personnel US 588.00 7,494 20 Private 2 HP ACG FR 460.00 4,200 15 Public 3 Global Linguistic Solutions US 435.00 339 9 Private 4 Lionbridge Technologies US 405.20 4,500 40 Public 5 Transperfect/Translations.com US 252.44 1,268 66 Private 6 SDL UK 245.09 1,800 60 Public 7 L-3 Linguist Operations & Technical

Support US 167.00 1,016 1 Public 8 STAR Group CH 145.00 850 43 Private 9 Euroscript International S.A. LU 124.13 1,350 16 Private 10 ManpowerGroup US 101.11 324 11 Public

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3.5 Cost and Pricing

Specific quantitative data on industry costs and prices has thus far been largely difficult to obtain or unavailable. Figure 6 illustrates the distribution of cost per word for translation services globally10_{. As can be seen from this data, almost 80% of providers charge less than} $0.15 / word for their services.

Figure 6 - Cost of Translation Services per word (USD)

3.6 Technology

According to a 2008 Study by the American Translators Association11_{, the three most commonly} used technology tools are:

1. Word Processing Applications (98% usage); 2. Translation Memory (47% usage); and

3. Terminology Management Software (27% usage).

Some key data and trends in translation technology and technolinguistic tools are:

• The Translation Software market represents US$575.5 million of the market in 2010 – revenues are anticipated to reach US$3 billion by 201712_.

• Word processors notwithstanding, translation memory remains the most commonly used technology and will be for the foreseeable future as quality concerns around other

technologies prevent widespread adoption. It is worth noting however that translation memory is still not universally adopted, leaving the industry with a high reliance on human labour.

10_{Source: The Language Services Market: 2011 – Common Sense Advisory – May 2011}

11_{Source : Summary of ATA’s Latest Translation and Interpreting Compensation Survey - 2007}

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• Machine translation, although a key productivity enhancing tool, is generally not considered to produce a level of quality sufficient to correctly convey a full message in another language, and its output must be reviewed by a qualified translator13_{. As a result} of the significant post process editing, machine translation is not widely adopted. It is generally used for large volume translations with an accuracy rate of 75% to 85%. • Human Assisted Machine Translation (HAMT) is growing in usage. A 2009 study by

Common Sense Advisory indicated that HAMT doubled the translation output that humans could do alone and was 45% cheaper.

In general, innovation in the industry is extremely limited as fragmentation prevents

collaboration and investment in key transformational technology. Translation service buyers are acting as the driving force for technology changes. Broadband and web proliferation is opening the market to a larger pool of translators providing on-line translation services assisted by machine translation. The aggregated effect is a downward pressure on translation prices as more suppliers enter the market14_{. Appendix B provides an outline of some}

common linguistic tools.

3.7 Trends

A number of important trends and challenges are emerging within the translation industry which are affecting how services are delivered, as well as the cost of delivering these services. We have grouped the trends into three main components;

• Technology;

• Services and resources; and • Translation languages.

3.7.1 Technology

It is interesting to note that many of the identified trends are all either directly or indirectly linked to technology. Significantly, these trends continue to evolve as the applications and technologies expand and mature. Tools such as translation memory are now significant enablers supporting translation services and driving greater efficiencies. In addition to improving machine translation, a number of community and on-line services are becoming more broadly utilized. Table 5 highlights some of these key trends in the industry.

13_Source:_{Canadian Translators, Terminologists and Interpreters Council} 14_{Source: State of the Translation Industry - MyGengo - 2009}

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Table 5 - Key Emerging Trends15

Machine Translation

• Has been around for over 50 years.

• Not considered sufficiently mature to provide the desired level of accuracy and reliability. • Low cost – many free services are available (e.g. Google Translate, BabelFish).

• Deemed effective for many informal situations.

• Technological advances have improved quality and accuracy and machine translation is increasingly being incorporated into traditional translation processes as an enabler of increased efficiency.

Hybrid

translation / “post-editing”

• Technological advances have improved quality and accuracy and machine translation is increasingly being incorporated into traditional translation processes as an enabler of increased efficiency.

• Increased demand for “post-editing” services where translators proofread and edit automated translation results.

Community and “crowd-sourced” translations

• Proliferation of volunteer-based translation sites – provides near-perfect translation at no cost.

• Machine translation websites are leveraging their communities to improve the quality of translations via providing options for users to “contribute a better translation”.

The expanding pie

• Translation services are being demanded by a much larger group of customers. o Services are more accessible.

o Users want different forms of content translated – emails, blogs, tweets. • Last decade has seen an explosion of informal content published and shared online –

content not well served by traditional lines of service because of its volume, informal nature, and lower commercial value.

• Increasing need from users to balance efficiency, easy integration and price.

3.7.2 Services and Resources

The Canadian translation sector continues to face challenges. Industry fragmentation continues to be prevalent. It would appear that the combination of low visibility for the industry and individual choices by translators to work independently has created challenges in the recruitment of new resources to fill vacancies created by retiring translators. In terms of workforce demographics, the labour market appears to be transitioning year over year from salaried to self-employed.

Given the supply and demand for translation and linguistic services, there appears to be an insufficient level of investment in research and development to strengthen the infrastructure (tools, technology, and resource development) in Canada. This can be directly attributed to the under-investment based upon the fragmented nature of the industry and the difficulty for small “mom-and-pop shops” to invest in the necessary tools and technology.

Table 6 outlines some of the key service and resource related challenges.

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Table 6 - Key Industry Challenges

Industry

Fragmentation

• Estimated number of translators, interpreters, terminologists, and localization specialists - 15,000.

• Majority of industry are small enterprises. • A large number of small contracts.

• Globalization will reduce fragmentation, but not for the near-term.

Lack of visibility • Canada's language industries are largely unknown in Canada and abroad. _{• Low level of knowledge about employment opportunities in the field.} Workforce Churn • Approximately 1,000 new translators are needed each year to meet demand and _{replace retirees.} Investment in

research and development

• Under-investment in research and development.

• Lack of economies of scale (i.e. fragmentation) does not support the financial benefits needed to support the investment required.

• Global organizations are able to make the necessary investments in tools and training.

• Canada risks losing its linguistic infrastructure without investment.

Individual choices and motivation

• Low profile of industry experiences challenges in attracting talent. • Occupational profiles and education programs not widely promoted.

Dynamics of supply and demand

• Predominantly influenced by the public sector as it is the major consumer of translation services.

• Inconsistent revenue streams and complicated management requirements

attributed to government acquisition policies that are complex, has resulted in few private sector suppliers to supplement in-house work performed by the government and a general focus of private sector suppliers on private sector demand.

3.7.3 Translation Languages

Internationally, there has been significant growth in multilingual translation and in

localization16_{. The industry is expected to grow at an annual rate of 7.4%. International trade} and the growth of global content, such as for websites and multimedia, remain strongly

correlated to high-growth industry sectors and language pairs (e.g. Chinese to English). Chinese translators in particular are in high demand.

Specific to Canada, the country’s increased diversity is increasing the demand for languages other than French and English17_.

3.8 Conclusion

There continues to be increase in the demand for translators despite the use of automated translation and increased productivity18_{of existing professionals.}

Both globally and in the Canadian market, demand for less common languages is increasing and will continue to drive growth, as will demand for web and multimedia services. Suppliers face increased time pressures from translation service buyers.

Although industry fragmentation will be the norm for years to come, industry consolidation is, and will continue to be, significant. More mid-sized and small LSPs (i.e. revenue of US$5

16_{Source: The Language Services Market: 2011 – Common Sense Advisory – May 2011} 17_Source:_{Found in Translation – Job Postings Canada}

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million per annum) are initiating consolidation activity. Globalization continues within the industry with more and more small and medium size LSPs diversifying globally.

It is expected that industries depending on quality, service and confidentiality, such as the public sector and regulated industries, will continue to rely on traditional translation services. Their focus will be on streamlining the translation process and implementing enabling

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4. Overview of Comparator

Organizations

In order to collect data on other organizations with which the Translation Bureau could be compared and benchmarked, representatives from a selection of Canadian and international language service providers were interviewed. Interviews were conducted with five Canadian and three international organizations. This section is intended to provide an overview of the output of those interviews. Table 7 provides a profile of the eight organizations that were interviewed as well as a profile of the Translation Bureau.

4.1 Services

The primary focus of the organizations interviewed is the delivery of translation services, with some revision, editing and localization. Interpretive services are offered within Organization #7 and Organization #8, however in the case of the Organization #7, they are managed by an

entirely separate group. While Organization #5 does not provide interpretive services, the group does manage contracts for the provision of interpreters for the organization.

Other services offered included:

• Preparation and delivery of summary translations; • Terminology;

• Translation for websites; and

• Issuance of opinion on third party translations.

Only two of the organizations interviewed provide services to external parties, and of those, only one could truly be considered a commercial service. Organization #1 provides translation

services within the firm, as well as to clients of the firm. Their services are not commercially available to other third parties.

The volume of work ranged from 650,000 words to over 600 million words. As one would expect, the organizations within Canada predominately managed translation between French and English, whereas the international organizations were required to manage translation between the official languages of their respective organizations.

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Table 7 - Comparable Organizations Interviewed

Organization Relevance to Study Language # of

Professionals Services Annual Volume of Work (Millions of Words) % of Work Delivered by External Suppliers Canadian Organization #1

• Large service provider • Translation of financial and

regulatory documents ≤ 50

• Translation

(English → French) 18.5 67% Organization

#2 • Translation of legal documents ≤ 5 • Translation (English ↔ French) 0.65 33% Organization

#3

• Large internal service provider • Translation of financial and

legal documents ≤25

• Translation (English →

French) 20 20%

Organization

#4 • Large service provider ≤75

• Translation (English ↔ French) • Text revision • Localization • Editing 35 variable Organization #5

• Public Sector organization • Translation of financial and

insurance documents ≤25 • Translation (English ↔ French) • Editing • Proofreading • Concordance check • Linguistic advice • Co-ordinate foreign languages

• Manage contracts for interpretation services

10 40%

International Organization

#6 • Public sector organization • Translates laws and reports ≤50 • Translation • Interpretation 6.4 20%

Organization #7

• Public sector organization • Translates laws, policy papers,

and reports ≥500 • Translation • Interpretation • Verbatim Reporting • Editing • Proofreading • Copy preparation • Summary records 113 25% Organization #8

• Public sector organization • Translates laws, policy papers,

and reports ≥1000 • Translation • Summaries of documents • Oral summaries • Terminology services • Web services 686 27% Translation Bureau Translation Bureau

• Public sector organization • Translates laws, policy papers, and reports

• Largest provider of translation services within Canada

1200 • Translation • Editing • Revision • Proofreading • Interpretation • Terminology • Professional and Administrative Services 420 43%

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4.2 Operating Model

The organizations also have a similar approach to their operating model, operating in a hybrid model. All retain an in-house capacity, and maintain a roster of external suppliers that allow them to increase their contingent capacity to meet additional demand or to respond to specific requests. The exact blend of in-house vs. outsourced resources does vary between

organizations; however they are generally consistent in their overall approach to the use of external resources:

• Documents that are classified, or may be considered highly sensitive are usually delivered through the use of in-house capacity.

• Whenever possible, the priority is to ensure that in-house resources are engaged in translation work before using external suppliers to provide capacity on demand.

Table 8 provides further detail on the criteria that the organizations use in determining when to engage external resources. Organizations not listed in the table did not provide specific criteria for using external resources beyond the approach outlined above.

Table 8 - Criteria for Use of External Resources Organization Criteria

Organization #1

Explicitly expressed a preference for outsourcing as much as possible as it provided significant cost savings.

Targets the use of in-house resources for approximately one-third of its work and staffed accordingly.

Organization #4

A number of factors are considered including the customer, deadline, and competency or special knowledge required for the translation, however there is no standard policy.

Organization #5

A number of factors are considered including the availability of internal capacity, complexity, length, and deadline.

The organization has made an effort to eliminate overtime in order to support work/life balance for employees; if a translation order has a short deadline that can’t be moved, the organization will rely on freelancers in order to avoid overtime.

If a piece of work requires special knowledge or expertise, it is usually done in-house by employees that possess the organizational understanding to complete the work.

Organization #6

Demand drives usage; external suppliers are used to deal with peak periods. External resources are used to support translation of a specific set of reports where cost reduction was explicitly requested.

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Organization #7

Maintains a target for its use of external resources. The policy is based on capacity.

Policy is that internal resources were to never operate at full capacity. Internal resource utilization is set at 80%, to be supplemented by temporary resources as required. This allows the organization to maintain internal flex capacity. The ability to secure additional resources is not considered a major impediment, with most organizations feeling that they could easily accommodate at least a 10% increase in demand. In one case, a service provider felt that they could increase capacity by over 50% because of a strong subcontractor network. Staff complements of the organizations that were interviewed ranged from 3 to over 1400 FTEs.

Depending on the organization, and the document that is being translated, the translated document may be reviewed for style, accuracy and terminology. A key observation is that there is a significant amount of variation in how each organization manages its quality assurance function. In some cases, quality assurance often relies upon the skill of the translator, rather than being a separate function within the process. With some exceptions such as certified or legal documents, quality is not considered as important to clients as cost. In these instances, quality is expected by clients and therefore it is not considered a differentiator. At the other end of the spectrum, for legal or certified documents, quality is critical and clients are often willing to pay a premium to ensure quality. It is also important to note that each of the organizations does track the quality performance of its outsourced suppliers and often give priority to its preferred suppliers based on the quality of past work.

4.3 Price and Performance

Collection of quantitative data regarding organizational costs and prices has proven to be a challenge. Of the eight organizations interviewed, five were unable or unwilling to share their cost and price data.

Despite this gap, there is an important observation worth noting with respect to how the organizations manage the pricing and funding of their services. Four of the eight organizations mandate that their translation service be used by the business units in order to translate

documents. As such, those four translation services are fully funded, and do not engage in chargeback to the client for any translation.

The three organizations that were able to provide pricing information billed clients in the range of approximately $0.23 - $0.65 / word, with two of the organizations being at the high end of that rate. This was acknowledged as being above the market rate, however these are both organizations that exclusively deal with specialized documents or documents that require certification, hence the rationale for the higher-than-market rate

Despite the challenges collecting cost data, performance data was collected from the

organizations. This data reflects the productivity that is expected by the organization from its translation professions. The data was normalized to reflect words/hour for an “intermediate”- level interpreter. The productivity values range from 195 words/hour to 333 words/hour as outlined in Table 9.

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Table 9 - Productivity Ratios at Comparable Organizations

Organization Productivity Ratio (Words / _hour)

Canadian Organization #1 250 Organization #2 ₃₃₃ Organization #3 ₂₆₇ Organization #4 ₃₃₃ Organization #5 _~195 International Organization #6 300 Organization #7 ₂₄₂ Organization #8 N/A

4.4 Specialized Documents

Only two Canadian organizations handle classified government documents. One organization’s facility is site cleared to Top Secret, and the cost of that facility has been amortized over a long period of time. Both organizations employ translators that have been security cleared to the required level, and translators working on classified documents are required to work within the office, or at the client’s site rather than working from a home office. There is no price or cost difference applied for the translation of these documents.

The international organizations also handle sensitive or classified security documents. One organization’s approach is similar to that of the Canadian firm, with special facilities in which the translation must be completed. The other two relied on their in-house employees for sensitive documents, with documents of a particularly sensitive nature being assigned to very senior resources with the requisite experience and context.

A common theme among all the participating organizations was that document complexity was not a factor in either cost or productivity. Document length was considered the primary driver for cost. As stated above, the organizations have productivity thresholds that their translators are expected to meet. The background and experience of the individual translators is relied upon to provide the specialized knowledge to translate more ‘complex’ documents rather than

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4.5 Technology / Linguistic Tools

Adoption of technology among the organizations varies significantly. Given the cost and effort required to build and maintain the tools, and the variance in organization size and budget, there is an emerging theme that only the larger organizations invest in developing or acquiring

technology and tools.

Translation memory is used within a number of the organizations in order to improve

productivity and is considered successful. However, most organizations have not yet moved to incorporate machine translation into their processes. Most do not foresee machine translation becoming a part of their translation process in the near term, as it has not sufficiently advanced to the point where it is can be used reliably. However, there was a general acknowledgment that as little as five years ago, translation memory was viewed with the same perception.

All the organizations maintained or used some form of terminology repository, with “Termium” being specifically identified as a repository that was used by at least one of the Canadian firms. With the growth of global organizations, and the projected six-fold increase in the size of the translation software market, it is reasonable to expect that there will be significant increase in the uptake of technolinguistic tools within the market as a whole. This has the potential to significantly impact the role of the translator, with the translation becoming less of a creative process and more of an editorial endeavour where the translator spends the majority of his or her effort revising machine translated output.

Use of these tools is currently at the discretion of the translator, however the trend is to formally integrate them into existing process to drive consistency of translation as well as improve

translator efficiency.

4.6 Emerging Trends

The following are some of the key trends that were identified by the interviewees:

• The influence from large global translation firms appears to be increasing and could be driving prices down. In addition, these organizations have resources and infrastructure to invest in and maintain stable and reliable translation resources and services on a global scale. They are often able to deliver in a timely, cost-effective manner.

• Quality is assumed within the market, and is not seen as a differentiator between

suppliers, except in limited circumstances such as certified documents, legal documents or documents with a high degree of visibility or sensitivity. To a large extent, the onus has been placed on the translator to self-monitor and deliver a high–quality document, and on the client to identify issues in lieu of a robust quality assurance function.

• There is an improvement in the quality of machine translation and translation memory. While not yet ubiquitous, the tools are seeing greater adoption but not at the expense of human resources. The profile of the translator over the next five years will be someone who can combine linguistic skills and computer skills. The belief is that the model is “translator and machine” rather than “translator or machine”.

• Within Canada, it is felt that competition is increasing, resulting in downward pressure on rates, while the level of quality is improving. Commercial service providers find

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themselves in a position where they are delivering a higher quality product faster, but with lower revenue.

• At present, PwC did not find any provision of translation services for social media. The organizations interviewed indicated that the translation responsibility rests with the organization that was creating the content and not with the translation services group. This is generally the communications group of the organization.

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5. Comparative Analysis

The purpose of this section is to review the information collected from both the Translation Bureau and the participating organizations in order to provide the Translation Bureau with a comparative analysis between its practices and those of the other organizations. This

comparison focuses on seven key areas: • Organizational Mandate;

• Organizational Funding Model; • Price and Performance ;

• Tools and Technology; • Information Security; • Multilingual Services; and • Social Media.

5.1 Organizational Mandate

The mandate of the Translation Bureau is to provide translation, interpretation and terminology services to the Parliament of Canada, and federal departments and agencies. The service is currently provided as an optional service on a cost recovery basis to the rest of the Government of Canada. Departments and agencies are not required to engage the Bureau for its services, and can opt to secure their own linguistic services. Today, the Translation Bureau handles

approximately 72% of the Government of Canada’s translation services.

Among the international comparator organizations, all three linguistic service providers had similar mandates to provide services within their own public sector organization. An important difference, however, is that use of the comparator organization’s linguistic services is mandatory for those organizations.

Among the Canadian organizations, three provide services exclusively to internal clients. Organization #1 provides translation services within the firm, as well as to clients of the firm. Their services are not commercially available to other third parties. Only Organization #4 provides translation services on a purely commercial basis, and 85% of its volume is with the public sector. Of the five Canadian organizations, only Organization #3 has mandated that its internal translation service must be used by the lines of business.

5.2 Organizational Funding Model

Since 1995, the Translation Bureau has been a Special Operating Agency retaining its mandate as the exclusive supplier of services to Parliament and the exclusive authority for terminology standardization, but an optional service provider for federal departments and agencies. The Bureau’s funding model reflects this duality of mandate. The Bureau receives budgetary funding for its services to Parliament as well as for Termium. For services provided to federal departments and agencies, the Bureau operates through cost recovery.

Among the eight comparator organizations, four organizations, including all three international organizations, are fully funded and do not engage in any chargeback to the business for their

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services. Organization #5 is the only public sector organization that operates in a cost recovery mode similar to the Translation Bureau. Organization #4, as a commercial service provider, is not funded, and charges fully for its services. Organizations #1 and #2 operate through a combination of internal cost recovery and billing to external clients.

5.3 Price and Performance

As stated in Section 4.3, collection of cost and pricing information from the comparator organizations was a challenge. Productivity data was determined to be a suitable substitute in order to provide a basis for quantitative comparison between the Translation Bureau and the external organizations. This data reflects the productivity that is expected by the organization from its translation professions. The data was normalized to reflect words/hour for an

“intermediate”- level interpreter. The productivity values range from 195 words / hour to 333 words / hour as outlined in Table 10. The Translation Bureau’s productivity ratio is 250 words / hour, which places it in the lower-mid range of the comparator organizations.

Table 10 - Productivity Ratios

Organization Productivity Ratio (Words / hour)

Canadian Organization #1 250 Organization #2 ₃₃₃ Organization #3 ₂₆₇ Organization #4 ₃₃₃ Organization #5 _~195 International Organization #6 ₃₀₀ Organization #7 ₂₄₂ Organization #8 N/A Translation Bureau ₂₅₀

In addition to the price information provided by the three comparator organizations, PwC was able to collect an additional data point with respect to prices. Organization #5 provided the range of prices it is charged by its suppliers. Analysis of the Translation Bureau’s pricing, calculated using a workload-weighted average of the Bureau’s productivity ratio, as it compares to the available data is presented in Table 11 .

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Table 11 - Price Structure

Organization Price ($ / hour) Price ($ / word)

Organization #1 N/A $0.42

Organization #5 Suppliers (General and

financial/legal documents) N/A $0.17 - $0.30

Organization #5 Suppliers (Insurance and

securitization documents) N/A $0.18 - $0.30

Organization #5 Suppliers

(Technical documents) N/A $0.17 - $0.32

Translation Bureau All translation services, including revision and

proofreading $77.64 $0.37

Translation only $77.02 $0.37

Revision and Proofreading $91.21 $0.44

5.4 Tools and Technology

The Translation Bureau utilizes a number of tools as it processes a translation order. These tools have been deployed to help standardize processes and increase productivity.

In terms of process and the management of translation jobs, the Bureau’s Integrated Information System (IIS) is used to manage the translation workflow from business intake through to invoicing. This is similar to other organizations that also use a workflow

management system to track their jobs from intake through to delivery.

In terms of technolinguistic tools, Table 12 outlines the major tools that the Bureau has introduced into its translation workflow.

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Table 12 - Use of Technolinguistic Tools at the Translation Bureau Technolinguistic Tool Translation Bureau Usage

Translation Memory A database is maintained containing all translated documents delivered by the _{Translation Bureau for all clients. This enables staff to undertake a search when}

translation requests come in to see if the material has been previously translated. This addresses the fact that when managers make translation service requests they are not in a position to know whether a document has previously been translated. Currently, the search of the database is manual and optional and it is used when documents are pre-existing and/or originate from outside the client business unit that is requesting the translation service. Under this approach, 25% of documents are found to have been previously wholly or partially translated. This reduces the translation efforts and client billings.

Enhancements to the software and database are underway. The Translation Bureau will be undertaking an automated search of all documents for which translation is requested to identify if any parts of the documents have been previously translated.

Machine Translation (“Portage”).

The Translation Bureau uses the software product titled “Portage” which has been developed and is supported by National Research Council of Canada as the toolset for machine based translation.

Terminology repository (“Termium”)

The Translation Bureau maintains a database of terms for which French and English versions have been established and to assure consistency, should not be freely translated. Examples of such terms include the titles of organizations, business units, projects and initiatives, personnel titles, committee names and other terms. A database for such terms is maintained per client department as well as for overall Government of Canada. The maintenance of a database of established terms is a key tool in ensuring quality in translation services. Currently the Translation Bureau maintains these databases through the system titled “Termium”. Through Termium, content is continuously added to a database by Translation Bureau translators and, through its web-tool, these terms can be searched by anyone.

Enhancements to the Termium software are underway to enable full documents to be searched, so that all established terms can be identified and searched

automatically. At the same time, changes to the software and support are

underway to enable non-translation bureau personnel to recommend additions to client specific and government-wide terms.

Among the comparator organizations, the following key points were noted: • Use of the tools remains optional and at the discretion of the translator.

• The tools have not been integrated into any automatic workflow as is currently planned by the Translation Bureau.

• All organizations use some form of terminology repository. Organization #2 specifically referenced Termium as a repository that it used for its translation.

• With the exception of Organization #2, all the organizations employed translation memory.

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• Of the eight organizations interviewed, only the three international organizations use machine translation, with Organizations #7 and #8 using custom solutions for their machine translation.

• In terms of benefits, the use of these tools is generally felt to have provided a tangible increase in productivity. A slightly more intangible benefit was an increase in the consistency of translation.

5.5 Information Security

The Translation Bureau manages the translation of documents classified up to and including ‘Top Secret’ level. This is done primarily through the use of internal language professionals. The Bureau has also invested considerably in building specific facilities that meet the necessary security requirements.

Of the eight participating organizations, two handle translation of Government of Canada classified documents. Organization #4 is particularly interesting as it is a commercial service provider that has received a facility cleared to ‘Top Secret’ and all its translators are cleared up to at least ‘Secret’. In the interview, the CEO of the organization indicated that there is no difference in their approach to translation of classified documents. There is no extra charge to clients for providing this service. His organization’s perspective was that this service was considered as essential in order to have access to this segment of the public sector market and serves as a competitive differentiator. The cost of the facility clearance has been amortized over a long period and is included in the overhead of the organization.

Although not all of the organizations handled Government of Canada classified documents, each did have measures and guidelines in place for handling secure or highly sensitive documents. These measures were consistent between organizations, and included:

• Secure or highly sensitive documents were generally translated by in-house resources; • When necessary, translation was managed by senior resources, up to and including the

head of the organization;

• Staff possessed the requisite level of security clearance, or had signed some form of confidentiality clause or non-disclosure agreements. These requirements were usually extended to suppliers as well;

• Restrictions on where the translation work could be performed (i.e. on-site rather than working from home); and

• Where a document has an official security classification, policy around access and

transmission of the information are followed (i.e. document encryption, no transmission via e-mail, work performed on a secure workstation).

5.6 Multilingual Services

Although the majority of its volume is between English and French, the Bureau does provide services in over 100 languages and dialects, including Aboriginal languages. This service is managed primarily through the use of external suppliers. Estimated to be less than 5%, it does not represent a significant percentage of the Bureau’s current volume.

Among the comparator organizations, three of the organizations did not deal with multilingual translation at all. Three of the remaining organizations only dealt with multilingual translation