Friday, July 16, 2010

Is SDL Getting Serious About MT? Does It Matter?

When I turned on my PC yesterday morning,  I was immediately greeted by a message joking, (I think), that I was fortunate not be working for SDL, "I bet you are desolate this morning - you could be working for SDL!" since I used to work for Language Weaver some time ago. :) In fact I was the VP Sales & Marketing for almost 3 years.

Before I knew it, Twitter and the blogosphere were abuzz with the “news” that SDL had acquired Language Weaver. The most interesting blog comments came from the politically correct
Common Sense Advisory, the skeptical Renato Beninatto and the surprised and slightly far out ruminations of Dave Grunwald. Of course, I could not leave out the succinct and ever insightful Ultan aka @localization who said: “Out of touch L10n news #1: Still digesting the industry impact of SDL acquiring Amptran in 1995, and now this LanguageBeaver thing.” (He of course offers this branding advice at no cost to SDL.)

There were also
comments from Forrester which state how important MT has become, but completely miss the ambivalence and uncertainty that many in the professional translation industry feel about any SDL owned technology and the SDL partner (sic) model in general. They seem to miss the fact  that it does not generally make sense to buy strategic and core production technology from a competitor.

Some of my favorite comments from these blogs (emphasis mine) starting with CSA:

On the reasons Tapling gave for selling to SDL: “a “sincere” offer to the market, focused on giving customers a real choice of a single vendor (doesn’t choice mean at least two options? and this sincerity is somewhat insincere ;-)) with both technology and service competencies;”  and
“Tapling said that Language Weaver… didn’t have to be acquired by SDL.” (Does that mean he was going to do a lot better on his own but decided just to be nice and hand over the reins? Also, there really is not much of a story to tell VCs is there? Hmmm maybe he did have to be acquired.) 
”we figure that the current venture capitalists, …. were like many investors whose patience beyond a five-year investment horizon was getting thin.;” (And most of them did make a respectable if not spectacular return on their investment.)
Renato had some zingers in his blog:
“I have been thanking SDL for the great job that they are doing at alienating their technology customers by providing sub-par customer service and support.” (Yes a highly developed “customer hostile” strategy that is a model for others who hate their customers.)
Language Weaver's main client is the US government and the main language pair is Arabic-English. In fact, the announcement points out that in 2009, the company had a loss of $1 million for revenues of $12.2 million.” ( Yes Mark, what's "good enough for government work" is often crap to the global enterprise. I wonder how many commercial market customers are using the Arabic system. Pray do tell.)
Dave asked some great questions in his blog:
”My first thought was “what, only 42 million? Why so little? Shouldn’t they be worth more? What does this mean for the MT industry as a whole?” (Yes unfortunately not a great valuation in the world at large, but pretty good for MT, especially MT that is not particularly competitive quality wise.Tapling should be commended for getting it that high. Guess who was the better negotiator? Tapling and a few others will walk away with a significant bundle of cash.)
Why is the CIA bailing on Language Weaver? (Was it ever their responsibility to keep them afloat? Now that they have Moses and access to the best Arabic TM around, do they really need LW? Moses is hard to use but they could find people that do it for them. They are probably painfully aware of the Google vs. LW quality differences and if they could get private access to Google MT quality guess what they would choose? The Feds like any rational users will choose quality if it is available though they do tend to like to buy American.)
Firstly, is this really a surprise? The writing was on the wall when they announced the “partnership”, and this was always one of the possibilities of the relationship, especially given LWs limited business success outside of the US government. They have never done well in markets where translation quality really mattered, hence their quiet exit from the localization and professional translation world a few years ago.

So does selling the company now make sense? I think so, from what I can see, this is probably a peak valuation event for them. As the MT market heats up, customers are doing much more comparison shopping and I am sure that many are realizing that there are several solutions in the market that produce better MT quality than Language Weaver. I have always believed that quality is the real driver of expansion of the overall MT market and that this happens most often with cooperative human linguist involvement.
(I felt strongly enough about this that I joined Asia Online, who also believed this). So, SDL does make sense for LW.  A company (LW) that decides to avoid regular interaction with professional translation companies is not likely to advance very far in terms of quality. As painful as it is, MT vendors need to talk to professional translators to understand how to make the technology better and more useful. This constant and ongoing feedback is essential to continuing improvements in MT quality. This is something that Language Weaver has consciously avoided for the last few years. Also, if after 9  years in business you get to $12M revenue (with a $1M loss) and are basically an Arabic to English translation solution for US government and G7 countries, maybe you should consider options other than doing more of the same. (I also know firsthand that the revenue expectations in 2008 when I was last there were SIGNIFICANTLY HIGHER than $12 million.) So we have a company that has been in a virtual revenue growth standstill for 3 years. In spite of doubling manpower and sales focused resources. Not to mention that it is has become increasingly clear that Google has better baseline systems,  Try it and see. Clearly 85% of the investors thought something along these lines.

Is this good for customers? In a word, NO. Remember that SDL is a company with three TMS products where data cannot be interchanged without some loss. Remember that Idiom used be the “Switzerland of TMS” which meant they were neutral and open and relatively transparent. It made their customers feel safe. Data could be moved around as needed. That day has come and gone and
it is now difficult for products not owned by SDL to get data in and out of any SDL software infrastructure. Does anybody believe this is going to get any easier with this new arrangement? The Idiom user experience is probably a good model for what might happen. It is not all bad, but not good either.

While customers who do want an all-SDL solution may not care, most of us live in world where non-SDL components exist and are necessary. Best-of-breed is much more acceptable nowadays, than one-stop-shopping. The demands of business translation in the future will require always-on, rapid response to streams of content that come from many different content creating products and Web 2.0 environments that are not owned by SDL. Openness, data interchange and transparency have
become increasingly important but SDL cannot even provide standard data interchange between their own products. So quite possibly we are heading into a bigger software roach motel where you check in but you never check out. At least not with your legs intact. Standards and easy data interchange are going to become critical and I think you should always be thinking how safe and portable your data is when you choose a vendor.

So is this all bad news? Not really, I think there is some possibility that they raise the profile of MT in general now that they have just spent $42M on it. This is about twice the amount they spent on Idiom. This does suggest that they think this is 2X as important (or that they seriously overpaid, which I think is the case here).  Possibly they could even get a couple of key content production components really tightly integrated, so the market begins to understand the value of integration. It is even remotely possible that SDL opens up and provides clear APIs to enable data to easily enter and exit SDL software environments for the benefit of their customers. (Umm probably not). MT technology can be a powerful tool in the hands of motivated and skillful users and perhaps SDL will learn to use this technology to maximum benefit. If they do, they could develop a long-term and enduring competitive cost advantage with their technology, especially in dynamic data environments. However, MT is complex and requires new kinds of thinking and many would say that SDL has not had a good track record with complex products or with out-of-the-box thinking.

Across, Globalsight, Andra and other TMS systems have benefited from the Idiom acquisition and it is quite likely that all the MT competition, especially Asia Online will benefit from this acquisition, as they are committed to a professional translation partnership model. The larger MLVs should be concerned about this latest SDL move, since they will face serious price pressure if SDL eventually figures out how to build functioning translation production lines and raise internal productivity on a regular and consistent basis. It would be prudent to explore your MT options now so that you are not marginalized or left out of many of the “new” kinds of translation work that will be coming in the near future.

I am also skeptical that this provides any leverage for SDL in the US government market. The spend on MT is miniscule compared to what the Feds spend on human translation and SDL has little or no share in the huge HT spend. So how does LW change this? Government procurement is a very specialized world that will require new partnerships, and we already know SDL does not do this well even if FOCI is not an issue. Also the government has already had unsatisfactory SDL experiences with Trados and Idiom and are unlikely to want to expand on this experience. Playing well others is an important skill here and the SDL lads just don't do that.

Some humorous asides:  The folks at the Examiner needs to re-examine themselves as they actually state that SDL/LW will be a threat to Google Translate.(Really !?! SNL Style)

Mark Lancaster maybe should have done his homework better and get his facts 
straight. He actually states that Franz Och was a founder of LW in this interview. Wrong. He was not, even though he had a short stint there and chose to go to Google instead of staying at LW for a tiny share of equity. (And Mark, just because somebody says I am best-of-breed it does not mean it's true. You do have to check this. They call it Due Diligence and they sometimes teach it at CEO school)

Here is a video discussion on the issue as well:

Also, I was asked by SDL PR representatives if eMpTy Pages
(apparently an influential industry blog) wanted to interview Mark & Mark. :-)  So what will happen next? Who knows really, it is too early to tell. I think SDL will find out that what I say above (especially about the fundamental quality issues) is true over the next few years. Regardless, this is one more sign that MT is strategic and it is worth your attention to figure out what your strategy is. Somebody is going to get MT right one of these days.


  1. LW wasn't very good software (scaling and control issues) to begin with and now they are going to be integrated with SDL?

  2. Kirti added his valuable insights. We agree. SDL probably overpaid, but their $42 million may make a market for SMT that will benefit others. We think pre-edit with Controlled English for commercial translation is still a lower-cost and better approach.

  3. Where to now for SDL with acquisitions? The information quality space?

  4. Great post and many valid points, I think the biggest benefit of all of this is that it will push the MT momentum along and for those of us offering MT/PEMT it will create more opportunity