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Rising to Economic Challenges

Software internationalization projects got canceled after the financial crashWhen publicly traded companies lose a third to half of their market value within the space of a month, it’s a little naïve to think that it won’t have some kind of effect on our industry, yet in polling many owners of companies on the vendor side, there’s been only anecdotal evidence of lost business so far. As industry professionals, whether on the client or vendor perspectives, we have the opportunity to provide globalization leadership, adding value across our respective organizations.

MultiLingual Computings’ illustrious editor, Katie Botkin contacted me a few weeks ago, asking me to write my next column relating to the current worldwide economic mess. What can we say about a financial market that nosedived, and at this writing is fluctuating hundreds of points daily? My fear is that by the time this article gets published and distributed, it will be hopelessly out of date due to the latest maelstrom or recovery.

“Politics is the art of looking for trouble, finding it, misdiagnosing it, and then misapplying the wrong remedies” – Groucho Marx

I won’t bother going into various contributing causes and tales of financial greedy miscreants and cronies, but suffer me to say that this situation didn’t come out of nowhere. My wife, who runs Lingoport’s operations, has been telling me for over a year that a crash was coming, as she reads some fairly sophisticated financial newsletters and publications, and thankfully she had us prepared for it. Being an optimist, I wanted to ignore her. So how come, Henry Paulson had to hastily cobble together a 3 page insult to democracy that he sold as the basis for a rescue plan? Hopefully that sort of institutional incompetence will be at least curtailed come inauguration day, January 20th. Enough of my ranting, this article is about the economic effect on our industry and what we can actually do about it.

“Who are you going to believe, me or your own lying eyes.” – Groucho Marx

Firstly, do we have a problem here? I posed a question to the L10N group on LinkedIn asking if members were experiencing any signs, anecdotal or otherwise, of the economy in their work, and if and how that was changing planning. I got a number of very interesting answers, most of which expressed concern, and a consensus reporting business has been quite strong. No one was reporting any actual lost business due to corporate cutbacks, but it was a small and unscientific sample.

Paraphrasing Serge Gladoff of Logrus, “fear often is capable of creating its own reality.” He has a point. He also added that we are in one industry that may actually even still grow under the current circumstances as companies look for opportunities in new markets.

One respondent from France had this to say: “In the long run, I’m still very confident and this crisis will probably help to clean up the actual economy and allow it to rebound on much more reliable basics.”

Michael Gavin, an industry consultant had this to say: “For service providers I believe the strategy for success will be based on their ability to innovate their offerings, their business model and engage with other market sectors outside of their traditional comfort zone of IT and Software.”

I had similar flavors of responses when I asked people about the economy and their business at Localization World. People reported that they hadn’t directly experienced any slowdown in their localization businesses, but admitted it may be early yet to judge things and they were bracing for possible storms to come.

“The milk of innovation doesn’t flow from cash cows” – David Isenberg

This market reaction seems very different towards globalization than the tech crash after September 11, 2001. While that crash was already in motion, the terrorist attack was cliff jump which froze many of my customers in their tracks. Back then, I had only started up Lingoport half a year earlier. I had my first larger i18n construction project under way, which was promptly killed on September 12th. I had the unlucky break that this client served the airline industry. Many other smaller prospects halted their plans as well. All this pain forced me to regroup and innovate, as I had several engineers and few customers. So we worked on the early version of what became our Globalyzer product, now a market leading software internationalization tool. Like Michael Gavin said, the situation encouraged and rewarded innovation.

I also suspect this time around, globalization has further matured in terms of the planning mindset of business minds. As companies earn more and more of their revenues from global clients, the emphasis on spending, even within a defensive posture, is likely to include supporting and growing those global revenues. I’m glad we are all ultimately selling revenue growth (if you think you are providing translation, guess again) rather than big cars, fancy cell phones or furniture.

At Lingoport, I always feel we are an especially good bellwether because we focus on internationalization, rather than localization. Internationalization always involves expansion and looking for new opportunities, while localization can often simply be generated by maintaining products over existing global sales networks. Many companies also initially perceive that they can tackle internationalization engineering internally if times are tough, whereas they may be a little less likely to have skilled translators on staff (excepting the erroneous idea that the sales associate is qualified to translate because he/she grew up speaking Spanish at home). When companies are being defensive, new expenses like a large scale engineering effort can stick out on financial projections. One easy way for companies to cut expenses is to just kill budgets on any new initiative. This is at least some logic that I’ve seen in other slowdowns. It can be hard for companies to think about expansion if they are in a defensive position. But what I’ve also seen, is that as financial planning stabilizes globalization needs are still right there, needing attention.

Two opposing real world examples at Lingoport have been one repeat customer who asked us to take on more work and accelerate efforts (more money) and another repeat customer who was planning on extending some work, but got budget frozen (presumably indiscriminately and for an indefinite period) the day he was ready to give us a new order. I asked the expanding company about their corporate mindset, and they were extremely bullish on expanding globally in the face of market adversity and recession. They felt now more than ever was the time to move and grab a growing share of worldwide revenues.

This brings me to what we can all do to help our respective situations. We’ll all be expected to do what we do better, faster, cheaper and more efficiently. I don’t have to act like much of a pundit in saying that. Specifically here are three concepts worth special emphasis:

1) Gross Margin rules: For those of you new to the term, Gross Margin is income divided by net sales expressed as a percentage. It reveals how profitable a company or endeavor is outside of taxes and many other factors which can include research and development and marketing. Gross Margin is so important because it determines the power of your sustainable cash arsenal to do those things that differentiate your company.

    a. Whether you are on the client or vendor side – be persistent in finding ways to maximize and measure how any effort you undergo contributes to your company’s gross margin.
    b. Remember that if you already have sales efforts going on outside of your native borders, quality internationalization and globalization can’t help but improve your gross margin as your product becomes more competitive.
    c. Look to enhance global relationships which positively impact global revenues.
    d. On the vendor side, mind your customers, projects and project volume like never before. Work to minimize past due receivables which in turn improves cash. Through very symbiotic methods with our customers, Lingoport has an average receivable cycle of only 21 days. It’s rare for us to have a receivable go unpaid for more than 45 days, and it’s not because we are being pesky.
    e. Remember this management truth: what gets measured has a way of getting done, as well as improving.

2) Innovating tasks and processes that are important but not urgent tend to differentiate companies. It’s that extra effort to make product or services that have some repeatable benefit outside of the ordinary that you need to spend some time on. This can be particularly challenging when you are asked to do more with less and flooded with the emergency du jour, but it is also the most important time to reserve attention for innovations. If you can meaningfully improve something that’s “always been done that way” do it. Then note item 1a, and how your innovation saves time/money or reduces the overhang of iterative work.

3) Don’t take the attitude that you know all this and its common sense. You are actually correct, but how often do we really live what we know. Action is its own reward when we follow common sense and make real improvements. So avoid going negative or being overwhelmed by the possibility of future disasters, and live and work like you mean to put “common sense” to good use.

“Don’t worry about the world coming to an end today. It’s already tomorrow in Australia.” – Charles M. Shultz

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