If historical growth and acquisition trends hold, who you buy translation and localization from in 2013 could be quite different from who you buy it from today (although the sales rep may still be the same, have the same phone number, and may even sit in the same cubicle). Let’s take a walk down translation memory lane to learn from the history of the language industry.

• In 2000 the 5 biggest language service providers were Berlitz, Bowne Global, Lernout & Hauspie, Lionbridge, and ALPNET. For those keeping score, only Lionbridge is still in business — Bowne bought Berlitz and L&H, and SDL acquired ALPNET.
• By mid-2005 mergers and acquisitions had changed the Top 5 to Lionbridge, L-3, SDL, TransPerfect/Translations.com (TDC), and RWS. Lionbridge bought Bowne in June 2005.
• By mid-2007 our Top 20 ranking of translation companies found that the inner circle had morphed yet again, with military translation specialist L-3 grabbing the top spot, followed by Lionbridge, SDL, Language Line, and TransPerfect. Growth was both organic and by acquisition. For example, TransPerfect made several acquisitions over that period, but grew mostly by bringing in new business.
• Late last year the U.S. Government reversed itself on a 5-year US$4+ billion deal, so L-3 will drop out of the Top 5 after 2007 to be replaced by DynCorp International. Meanwhile, SDL exceeded analyst projections for 2007, RWS announced record sales and profits for the first 9 months of 2007, Welocalize is hell-bent on being the third biggest LSP by 2010, TransPerfect did US$156 million in revenue for 2007, and Lionbridge is still looking to get its groove back.

This volatility prompted us to consider which companies will lead the revenue parade 5 years from now. We did some quick back-of-the-Macbook calculations and extrapolations factoring in historic growth rates for the companies in our sample over the 3 years we’ve monitored their financials. First, the fine print:

• Errors and omissions. We thought about adding (but left out of the model) some SWAGs about organic and inorganic growth; preferences for build vs. buy at these companies; the difficulty of continued high growth rates as companies become bigger; excluding software sales; and the potential for private equity, sovereign funds, or venture capital activity to accelerate or redirect growth plans. We discussed these landscape-changing possibilities in our September 2007 report on consolidation in the language services market.
• Absence of direct comparables. We have long characterized LSPs as Human-Delivered Services Companies in our search for comparables in an industry with few publicly-traded firms. In our next report on the topic, we’ll update our predictions about LSP growth rates based on comparably-sized accountancies and payroll firms that deliver services through a combination of wetware (that is, human power) plus automation.
• Reality check. We also saved some “what if?” scenarios for that next report. Therefore, we don’t calculate the all too frequent result of mergers that result in 1 + 1 = 1.7 rather than 2.0. We don’t factor in stealthy growth companies like Arancho (Italy), Sajan (U.S.), Semantix (Sweden). And we don’t break out translation from the other services these LSPs might deliver.
• Politics. We decided not to include DynCorp (or L-3) in the calculations, figuring either: 1) the U.S. Government might change its mind again; or 2) Iraq, Afghanistan, and Guantanamo Bay will not require so much Defense Department translation services after 20 January 2009. Some portion of that money might find its way to other “strategic language initiatives.”

So the bottom line is that we simply predicted future growth based on past performance, which may — but most likely will not — continue. That pesky detail aside, which companies will be the Top 5 in 2013? The envelope, please: 1) TransPerfect (TDC), 2) Moravia, 3) Lionbridge, 4) SDL, and 5) SDI. Five years out, Welocalize squeaks into sixth place (not third). Of course, 2013 is a long way away and much will happen between now and then. For a checkpoint on the market, look for our update on the Top 20 in April.