The question of benefits is generally considered a taboo in the localization industry. To the knowledge of the author, no publication or any other public forum has presented a perspective on this issue. This article attempts to address this manque.Ce silence is strange, and perhaps also promising that the industry itself, with little open discussion and maturity vis-à-vis other services sectors, while especially when one takes into account the investment risk capital in companies locating in the past two years. As venture capitalists are highly rewarded by the discovery of profitable businesses and industrial niches, one can question their decision to invest in an industry that rarely speaks of profitability and that is not as profitable than most of the insiders of the industry and that public information dévoileraient.Cet article is recognize it, a hypothesis. His opinions are solely those of an insider of the industry. It is hoped that this conjecture will be properly justified by the prospects acquired by the author who led a prominent location for over 15 years. What a profit? The question is simple: “How a business location can be highly profitable? “This article discusses the benefits of primary importance from three perspectives: – gross profit – net profit – the evolution of profits in the sector in the analysis of these issues, this article refers mainly larger companies and best-known services location, sub-categories such as translation of documents and the internationalization of software being included in these services. It does not take into account the tens of thousands of businesses (such as self-employed and family operations) or small partnerships and employing a few workers who understand the vast majority of transactions representing the industry. These smaller organizations do not realize the benefits in terms of business because their annual revenues, and revenues in most cases, are largely or entirely consumed by the owners as compensation annuelle.Bien that the world is the location booming, with all types of service development in terms of quantity and total gross revenues, the result is less obvious and more doubtful if we perform this calculation in terms of percentage of total gross revenues. For example, during the last 10 years, although the location in the world has increased dramatically, the owners / stakeholders they earn more money than ten years ago? The answers to such questions are included in the analysis of trends below. It would be interesting to see if a trend exists in which a higher percentage of profits going to small rather than large organizations. The question of whether more work location is done by larger companies or if the chain of distribution is simply longer and more expensive, with increases (not necessarily adding value proportional to the work involved), explaining most margins is related to the subject. If indeed the global industry is changing the location to a chain of retail attenuated Japanese-style, with each layer adding cost and time but not necessarily the value, the industry will soon find it out of competition due to a company or a type of Amazon “localisation.com” that links buyers directly with warehouses of words, using on-time delivery, a high level of automation based on Web and a workforce highly flexible and virtual? Or industry has already changed at this point? Given the large amount spent on location of customers and huge investments of venture capitalists and other investors in the business location, the real scenario of benefits for sub – contractors of the location has real implications for the overall financial health of the great location, and more strategic issues such as those mentioned above dessus.Bénéfice brutLe gross profit is what remains after deducting the cost of such localization that the costs of the translator and the work of project management. In the experience of SimulTrans, costs and margins are reasonable and can summarize the situation of other international business location: the location of Recipes: 100% Working outsourced (external): 30% Direct Labor (internal ): 20% Other: 5% Cost of revenue: 55 %_________________________________ Gross profit (or gross margin): 45% These figures reflect the annual performance of the company and vary between companies. For example, businesses locating to perform most of their translations and other production work internally with their employees will have direct costs of higher labor and subcontracting costs lower. Whatever the model used (and this decision is ultimately a big difference, as shown below), the percentage of gross profits on a project and on an annual basis is a critical success. Gross margin projects and accounts individuelsSur the basis of a project, the health of gross profits depends on how incomes have been sold (ie, the work is complex or a formality, the client he wanted to basic services or quality?) and how the work has been done (for example, it was possible to avoid rework on the project because of the good glossaries and good translators been used, the company she used a powerful technology tools such as translation memory, project managers were they competent, either at the client side or subcontractors). Gross margins are improving along with familiarization with the customer and effective functioning. Similarly, it is more difficult to make profits if the project managers are poorly organized or if the type of work is new to the subcontractor. For example, a translation company whose main activity is related to the automotive industry may lose up to his last penny in undertaking a work placement in the IT sector, and vice versa.Sauf with good fortunes (such as customers and who pay too naive), it is almost impossible to achieve acceptable gross margins (reflecting a high degree of efficiency) if the client or subcontractor staff are unstable. In addition to the stability of customers and employees, the following points are important to achieve acceptable gross profit: – competent staff, particularly project managers, who put things right from the start – a proven process and quality oriented forcing team members to undertake projects with a lot of discipline – a technological infrastructure (eg, Lotus Notes, translation tools and test) that automates repetitive tasks and guides the staff less experienced – efficient business leaders who can be very persuasive in order to sell solutions complexes.En watching these criteria, an entrepreneur may think: “To further boost our growth, we must put our heads project level and pay more. “This improvement well known, such as those mentioned above, is only a partial solution to the challenge of establishing a profitable location. Improvements more subtle and more important include the strengthening of the brand of the company (so that customers feel more secure and are ready to put the price) and the recruitment of an expert in human resources (for that employees receive competitive compensation plans and are better protected against the versatile directors that characterize this industry). To maintain profitability, a location must meet dozens of other critères.D an outsider’s point of view, the firm’s ability to differentiate “good income” (with an appropriate benefit) of “bad income “(with a profit inappropriate) is extremely important. In this industry, caring for high-income accounts that generate gross margins more and more low can be fatal. For example, in its infancy, SimulTrans was the main subcontractor of the utmost account of location in the world, Microsoft, whose explicit policy was to reward the contractor for a gross margin of 10% of its millions of dollars turnover. A manager employed by this account on a given day the following advice: “Pay for Japanese students 15 dollars an hour to translate, and we will pay 16.50 dollars an hour. “Most people describe this sound strange or even thought of suicide, and it was suicidal for many subcontractors who worked for this account and whose names have fallen into obscurity in the annals of M & A. However, most of the largest subcontractors in the world have the opportunity to receive millions of dollars in this account, to learn quickly that two solutions available to them: go bankrupt or liquidated. To ensure his rear, then the account has orchestrated the consolidation of its ten largest subcontractors (subcontractors monolinguals) in two companies (subcontractors multilingual) founded by public corporations (Lernout & Hauspie and Bowne ) and their investors. That is the moral of this lesson, at least for this author: to survive and stand out, sub-contractors must abandon or rehabilitate clients generating excessive costs. On the other hand, customers in six digits well organized and cost are critical to the success of any subcontractor location. These customers deserve the royal treatment as they pay salaries, pay increases and consolidate the jobs of employees. This type of symbiotic relationship reward all partners with a long-term stability and improvements in treatment services. There are five or even ten years, customers were reasonable and benevolent extremely rare and most large customers treated as subcontractors of goods and negotiate rates lower than earth. Fortunately, this situation has improved over the past two years, with more and more important accounts entering the market, making the demand and therefore prices, up to sub-contractors fiables.Marge gross annuelleSur the basis of an annual percentage, the gross profit margin of a business location tends to be lower than the average cumulative gross profit margins of its projects, reduced costs difficult to allocate to individual projects. At SimulTrans for example, many projects achieve a gross margin of 60%, but this profit is higher in the final cut on a global level / year of these types of problems: – projects whose deadlines are modified, causing a decrease of productivity of staff who is still too busy to accept additional work – investment in technology and training that are not allocated to individual projects – the junior engineers, linguists and project managers who are less productive than planned – a big project that requires more work and effort – the failure of sending commands modified by customers poorly organized or correct billing of project management SimulTrans aims and is on track to achieve a gross margin of approximately 45% for the current fiscal year. This figure is higher than the average gross margin in the localization industry, but it is still realistic if the work is complex, well made and commissioned by customers. Indeed, if a subcontractor may retain a vast majority of its customers and its staff from one year to another, it must be able to achieve annual gross margins well above 50% due to experience which he enjoys. Surprisingly, this behavior would seem to be actually more the exception than the rule: many companies in the top 20 based growth, not on customer satisfaction, but rather on their acquisitions.Ces subcontractors are forced by their investors who want to see, in return for their investment, income growth. What these contractors do not realize is that income growth does not turn into an earnings growth unless the subcontractor has a program for safe production to meet customers. The location has nothing to do with the airline industry and major retailers that occupy large market shares: localization, no player can have more than one percent of the market. The percentage of market share has no value, quality is the real key. The possibilities are endless, making the process extremely important. More subcontractor develops its activity, the more he runs the risk of generating losses (of key customers or revenue) as managers, experts from business, lose contact with their customers and daily operations. For example, a few years ago, a major subcontractor European multilingual acquired a subcontractor monolingual high quality in Germany. Within a year, most customers of monolingual subcontractor ceased to use the services of the company and the majority of staff has resigned. In the localization industry, as in other specialized areas in the service sector, development of interpersonal relationships between employees and customers takes years and remains very fragile. A new method of management or any other clumsiness may disrupt these relationships and quickly destroy the investment required for any new acquisition. Mismanaged acquisitions are very expensive. This is one of the main reasons for the poor profitability of the industry. The simple translation of articles and patents for information is less profitable. Indeed, buyers of direct translations are increasingly turning to freelancers rather than through agencies and see their prices increase. However, the Internet will soon be unnecessary these “intermediary agencies” without any added value to the process of localization. Five to ten years ago, the best subcontractors, except for a delay, have sensed the need to move towards the companies in locating to survive on the translation market. However, most of these companies are still waiting to enjoy stable profits. The establishment of an efficient infrastructure for the location, was costly. Localization projects are more complex than translation projects only, and many contractors have seen their gross margins chuter.Revenus by employéBien that most localization projects are much larger than the translation projects and can lead to higher profits, the profit shown on the financial results are negligible. Why? In addition to equipment and software cost, the location requires the skills of more better-paid employees such as engineers, project managers, localization (including wages in the United States is generally double that of Heads of translation project, endangered), experts in management information system managers and intermediaries. Location requires the effective implementation of internal control increased, leaving little room for outsourcing which is anyway difficult to find. Thus, localization companies tend to maintain staffing at a high level in order to cope with periods of high activity. However, sub-contractors have a sufficient number of employees in times of average or high activity are faced with problems during periods of low or delayed projects (inevitable in the software industry). If the numbers are higher than incomes over a long period and no outside income is found, the company might faillite.Ainsi this year [1999], in April, another major merger was announced between two major players of high reputation in the world of location, ILE and International Communications. The new entity claims to have joined the growing ranks of the “five largest companies in the world of globalization.” According to the press release, “now with more than 600 employees [...] the company expects an annual income of more than $ 60 million (about EUR 45 million) for the next fiscal year.” If you divide the annual income by the total, we get a “per employee” of about 100 000 dollars (about 78 000 euros) per year. It is a low figure, at least in the United States (though most employees were located in India or China, it would be a good ratio). In the United States, an employee localization costs on average $ 100 000 per year (rental fees, equipment and benefits included), leaving no funds for the items listed below dessous.Pourcentage income (hypothetical ) outsourced Translations: 20% Time death of Employee: 10% Projects problematic: 10% Marketing Costs: 2% Investment in infrastructure management information system (MIS): 5% Human Resources / Training: 2% These figures do not even consider other basic needs leading to relatively high costs. If employees are less well paid, they share their dissatisfaction by leaving the company and join employers who pay davantage.De many law firms and accounting firms realize revenue per employee close to 300 000 U.S. $ (250 000 €), manufacturers often make even higher ratios, and the target SimulTrans this year is U.S. $ 200 000 (€ 166 000), target almost achieved in the last fiscal year. For a business location in the United States, a ratio of revenue per employee of U.S. $ 100 000 (€ 83 000) is simply not viable unless the investors of the company to show infinite patience (which is certainly not the case with the classic venture capitalist). A month of high revenue is likely to produce a net occasionally, but the trend is not necessarily pink. This ratio is implying that the business model is of fundamental importance for the profitability of the company. A company that appreciates the importance of its staff exposed to its own loss, as the author has chosen a very painful experience. The key to success in the localization industry, as in many other industries, is to minimize the enumeration staff, to define what is essential and outsource the rest, and work as intelligently as possible, using a high level of automation tools for memory, a virtual workforce, continuous improvement processes, high-quality partners and compensation plans that reward the excellent résultats.Bénéfice NETL net profit is what remains after deducting the gross profit selling, general and administrative expenses. Net income is what shareholders can opt out of the company, or invest in the company, after taxes and other frais.Certaines localization companies try to create very flat organizations to minimize the costs, General and administrative, it is usually due to the fact that their gross margins are close or that the founders consider these costs as a loss. While it is commendable to restrict the selling, general and administrative expenses should be considered vital to the extent that they strengthen the foundation of the company. For example, SimulTrans is known to have invested the proportions below its income in the following facilities: Gross margin: 45% services: 5% Accounting: 5% Human Resources and Training: 2% Marketing: 2% Sales: 12 % New programs: 5% Total selling, general and administrative 31 %_________________________________ Net income (before taxes): 14% These figures are obviously subject to variation. For example, in fiscal year 1998, SimulTrans a net profit after taxes of about 16%, which seems to be above the industry average (this benefit is due to better results than expected in the gross margin and selling, general and administrative). A professional who had seen outside the books of account of a large number of localization states that with regard to net income before taxes, 5% is quite common, 7 to 8% is good, 9 to 10% very good, and beyond 10% is excellent. In the mid 90, Mendez, the predecessor of L & H, did everything to achieve a profit level unmatched in the industry of 15%. Net income is the index measuring device to determine the health management clients, personnel, operations and subsidiaries by the Director General and his management team. Most companies listed in the “top 20″ companies currently localization sacrifice much of their net profits in the short term to establish the infrastructure of their company, the heavy volume and revenue, often by acquiring competitors less important in order to achieve revenue, as mentioned above. However, as infrastructure costs money and the benefits of localization are usually relatively low, most of these large firms seeking money from investors to first class, general business capital risk or diversified holdings. These external investors have led to the belief that once sufficient infrastructure is in place, if their companies become profitable and therefore attractive for other investors to second class (eg, through an introduction Cap or issue shares to the public) that the first class of investors can monetize benefits considérables.Cet article, proposed by Mark Homnack, CEO of SimulTrans LLC, was published in Language International (August 1999 edition). All documents (c) Language International. Reprinted with permission.