The State of the German Language Industry
Qualitätssprachendienste Deutschlands (QSD) has released its first report on the state of the German language industry. Compiled from national statistics authority data and the responses of more than 100 companies, the report reviews market size, translation and interpreting prices, common client verticals, machine translation (MT) adoption strategies and technology development. It also lists Germany’s top language services providers and analyzes industry growth over a nine-year period, as well as job creation. An additional section looks at how the global covid-19 pandemic has affected the sector.
According to the organization — which is a conglomerate of DIN EN ISO 9001 and ISO 17100 certified translation providers — the German market is unique in that it is even more highly fragmented “at the top” than in other western European countries. To show this fragmentation, the report maps multi-language vendors (MLVs), estimating market shares for each. It also claims foreign companies win more translation business in Germany than national leaders combined — which QSD believes will eventually lead to the sale of many of these providers.
According to the fiscal data aggregated by Eurostat, LSPs in Germany generated over €1.25 billion in sales of translation and interpreting services, or about 19% of the EU market overall. The only countries in the world that can produce similar volumes are the United States, China, and Japan. Despite this immense opportunity, Germany has not produced a single LSP with a revenue over €100 million.
Germany is the most important market for language services and technology in Europe. It is the largest in revenue, and it is from here that many of the cornerstone translation technologies used everywhere around the world originate. The language cluster in Germany is responsible for more than 25,000 diverse, knowledge-based jobs – from innovation in language AI to supporting German exports globally. This market is on the cusp of transformation. This year, it is feeling the effects of the COVID crisis – with some businesses reeling and others seeing a record amount of work. In the next three years, it will consolidate at the top, shift towards more language services for the IT sector, and will witness rapid digitization of the Mittelstand, the medium-sized businesses that make up the core of the industry.
The largest customer vertical in the German market is technical translation for manufacturing and automotive companies, defined as “Industry” in the chart. Life sciences (primarily medical device companies) and software sectors are growth areas. The distribution in this chart is based on a sample of euro €165 million generated by more than 100 companies. The sample did not include many public sector providers, so the demand from government and municipal institutions is somewhat underrepresented. Unlike the UK or the Nordics, public sector procurement is not centralized in Germany, and it is common to see self-employed professionals win contracts worth hundreds of thousands or even millions of euros.
There is no sign of AI killing jobs. German translation and interpreting companies employ more than 16,000 professionals. This number has been increasing steadily over the years as the language sector grows in importance and creates more and more jobs. Despite advances in automation, translators have continued to flourish.
The 16,000 jobs created by translation companies are just a small part of the whole picture. Language professionals are employed by enterprises in many different sectors: education, manufacturing, software. We estimate that there are more than 40,000 people involved in the industry on a regular basis and more than 200,000 professionals in Germany with relevant skills.
Average growth: ≈7.1% per year
Fiscal data clearly shows strong growth. The market size increased 84% from 2009 to 2017 and has probably doubled over a span of ten years. Larger firms increased their share of the market over this period of time. Freelancer revenue grew by 68%, and sales at companies with more than 20 employees increased 158%.
COVID impact on language business: –6% growth in 2020
6 out 7 companies experienced a downturn.
The COVID epidemic had a strong economic impact. In this chart, each column represents a company and shows the change in sales compared to the prior year (measurement taken in July/August). Different companies were affected to different degrees. Smaller companies experienced severe downturns because small clients cut costs faster. The effect on larger companies on the right end of the chart was muted. Life sciences specialists have experienced growth due to urgent pandemic- and MDR-related work.
The German market is unique in its level of fragmentation
Sector growth feeds thousands of small businesses – and not just a few behemoth enterprises. Over half of the workforce comprise single enterprises, most of which are freelancers. Additionally, close to 5,000 professionals are employed by small companies that have two to nine people on staff.
The German market is unique in its level of fragmentation. In France and the Nordics, waves of investment, mergers and acquisitions, and the consolidation processes have created huge language companies in the €100 million revenue range such as Semantix and Acolad. Many medium-sized private companies have been acquired, creating a vacuum in the middle. Represented graphically, France and the Nordics look like an hourglass. These markets are waiting for new medium-sized companies to rise from the bottom, seize the initiative, and take on the establishment. The market in Germany remains a strong pyramid. At the top are the largest local companies, such as Kern AG, t’works, and Wieners+Wieners. Next up, the local branches of foreign translation companies, which we call MLVs (multilingual vendors). Together, these two groups make up 40% of the market. Then come a few hundred medium-sized companies, the Mittelstand, the micro-enterprises, and the more than 8,000 freelancers. They still generate the majority of business.
Technology and knowledge-transfer cluster
The translation technology sector in Germany has produced some of the most popular tools in the world: Trados, Plunet, Acrolinx, DeepL, and so on. It creates more than 1,000 jobs and close to €80 million in sales. For the translation companies, technology represents a new battlefield. As digital transformation rolls in, the new generation of clients can no longer be swayed by the promise of high quality and many years of experience: they want shiny, new tech. It is clear that the leader in the next ten years should have a mix of digital prowess and rigorous linguistic expertise. The question is: “What’s the right combination?” German translation companies are hiring dozens of developers and spending millions in search of the answer.
Technology acquired: “nein” to the cloud
German clients are unusually sensitive to data security, which led to low penetration of cloud-based translation tools. The combination of Plunet + SDL, Across, or memoQ remains the most popular solution even in 2020. Translation companies in Germany are reluctant to adopt cloud tools like Memsource and Smartcat, or localization tools for developers such as Phrase, Transifex, and Crowdin. An estimated one in five established LSPs use outdated technologies.
Price niches: sales in € million and number of players per niche
This graph compares prices for German-to-English technical translations (without editing) against the volume of business generated by companies in the respective price niche. The finding: although €0.15 per word is most common, €0.17 to €0.20 per word generates the most business. Larger and more established companies price higher than freelancers and charge a premium for reliability and the capacity for quality at scale. Marketing, legal, and medical translations were priced he highest. This finding is in line with similar studies conducted in other countries: they show that the price segment just above the mid-market is typically the most lucrative. Lowering rates is not the best strategy to get a high volume of business.
Revenue per project manager
€0.4 million per PM per year. The average revenue per project manager for German companies that work with large direct clients.
€0.15 million per PM per year. Average for Central European LSPs with good automation and average pricing.
€0.18 million per PM per year. Average for companies that primarily work with other LSPs.
The Association “Qualitätssprachendienste Deutschlands (QSD) e.V.” was founded in the spring of 1998. QSD e. V. has brought together quality-conscious translation companies with their own audited quality assurance systems certified according to DIN EN ISO 9001 or ISO 17100, or proven quality assurance in line with the QSD quality guidelines. The members of QSD as a whole play an important role in the German translation market.
More information is available at https://multilingual.com/state-of-german-industry-report-released/