Report by Sarah Hickey. Table of contents What is this report about? If you follow Nimdzi, you know that every year we publish a report called The Nimdzi 100 that ranks the 100 largest language service providers (LSPs) in the world. It’s an important indicator that tells us a great deal about how the global market for language services has developed in the latest financial year, and historical data gathered over the years further allows us to generate trend lines and consider industry growth over a longer period of time. That being said, it is just ONE indicator. And while we know that the top 100 LSPs concentrate just under 20% of total market revenue, we also know that the market is highly fragmented and predominantly made up of companies smaller than USD 10 million. In fact, Nimdzi estimates that there are about 22,500 LSPs with revenues below USD 10 million in the world, plus an additional 650,000 freelancers and one-person businesses (source: https://www.nimdzi.com/how-many-language-service-providers/). So, it seems high time we shine a light on the next in line — the mid-market players, the welterweight division, the ones who have their ears closest to the ground and are keeping this industry afloat by being both large enough to cover a significant range of services and languages and yet niche enough to fill gaps for the big providers when it comes to languages of lesser diffusion, specializations, and access to local talent pools. The “premier mid-market providers” that are the engine this industry runs on. Our ranking is a live document and therefore subject to change. Notes: (FY) fiscal year, figures for the latest financial year (verified with financial reports) (v) verified, data provided by companies (e) estimated revenue, based on extensive industry research The ranking starts with position 101 to highlight that there are another 100 LSPs that are larger in terms of revenue but not listed here. There are six companies (3x2) who share the same ranking position (numbers 105, 126, and 144) because their reported revenues were exactly the same. In these cases, the ranking number was repeated. This means that our ranking lists a total of 59 companies in 56 ranking positions. Several other companies appear to have the same revenue due to currency rounding. However, (aside from the six cases outlined above) the ranking order is accurate considering the second decimal. Methodology In this ranking, we are listing LSPs that did not make the cut for the Nimdzi 100 despite technically being large enough (USD 10 million or more in revenue). Within the Nimdzi 100 report we list these same companies in our “Close, but no cigar” honorary ranking. The ranking further includes LSPs with revenues between USD 3 and 10 million in revenue. We’re listing full company revenue, not just language services revenue. It is impossible to separate these in external sources of information, such as annual reports, press releases, and stock listings, which provide the foundation for our work. We use data from the latest fiscal year for each company. This means the numbers for some companies will not reflect 2022 calendar year revenues. Our definition of language services includes: Translation, localization, transcreation, multilingual desktop publishing (DTP), language quality assurance, linguistic testing, multilingual copywriting, multilingual technical writing, language project management, interpreting, video remote interpreting, telephone interpreting, linguist verification and staffing, media localization, versioning, adaptation, subtitling, voiceover, dubbing, machine translation (MT), training machine translation engines, cultural consulting, data services, and related services. Growth rates are calculated in USD. We use average annual currency conversion rates to US dollars, published by the Internal Revenue Service of the United States for each day of trading in 2022. Most importantly: This ranking does not claim to be a comprehensive list of all LSPs that fall into the USD 3 to 10 million revenue bracket. As our estimate of the number of LSPs in the world shows, we expect that there are at least 2,500 companies that potentially qualify for this ranking. So what this ranking provides is a snapshot and a starting point that honors those LSPs that provided their company data to us in recent Nimdzi surveys. Are you missing from the list? Probably. Well, let’s fix that shall we? We encourage anyone who wants to be part of our rankings to provide their data here. We expect this mid-market ranking to grow significantly in the coming years, so make sure you put your company on the map! The mid-market by the numbers The data show that, when it comes to growth, the year 2022 was a mixed bag for the mid-market players on our ranking. Out of 59 companies, 26 reported various degrees of growth, 25 had negative growth, and revenues remained flat for two companies (six companies did not report their 2021 revenues to allow for growth calculations). This demonstrates a big difference compared to the top 100 largest LSPs, of which 65 reported various degrees of growth and 35 companies had negative growth. When it comes to average growth rate, the premier mid-market providers on our ranking grew 6.4% in 2022 when converted to USD, and 11.6% when calculated in their reporting currencies. This difference is not surprising. For all our global rankings and market sizing estimations, much like other industries, we use the US dollar as a common denominator. As a result, depending on the currency, growth figures for individual companies may vary significantly when calculated in their local currency as compared to results converted to USD. This is always the case, but particularly worth highlighting this year as many world currencies experienced significant devaluations against a strong US dollar in 2022. This had a stronger than usual impact on the growth of individual LSPs and the industry as a whole. There is also a notable difference when we compare these results to the ones for the top 100 largest LSPs in the industry. In this year’s Nimdzi 100 ranking, companies grew 18.7% on average when calculated in US dollars, and 26.5% when calculated in their reporting currencies. That being said, the premier mid-market providers’ average growth rate of 6.4% is still well within a healthy range and close to the compound annual growth rate (CAGR) of 7.0% we predicted for the global market as a whole for the coming years in our Nimdzi 100 market analysis. Growth by company size When calculating the growth by company size we opted for the median instead of the average to allow for a more accurate picture. Looking at the results, at first glance it appears that companies with a higher number of employees came out on top. When we look at the graph below, the best growth results were achieved for companies with 250 to 499 employees (43.6%), followed by companies with 500 to 999 people on staff (14.3%). However, this creates a false impression because only two companies on the ranking fall into the 250 to 499 bracket and only one company into the 500 to 999 size class. This is not surprising. Among mid-sized LSPs, the vast majority employ between 25 and 250 people. Any more is a rare sight. So, if we consider the larger portion of companies who operate in these brackets, the results are quite different. In the size classes of 25 to 49, 50 to 99, and 99 to 249 the median growth in 2022 was 0.6%, 2.1%, and -3.4%, respectively. The graph below shows the median growth in 2022 per company size class and compares the results for both the premier mid-market provider ranking of medium-sized LSPs and the Nimdzi 100 ranking of the largest LSPs in the world. The 10 fastest-growing mid-market LSPs Below is a list of the ten fastest-growing mid-market providers on our ranking (growth between 2021 and 2022 revenues in USD). The 10 most productive mid-market LSPs Looking at the productivity of the premier mid-market providers on our ranking, the average revenue per employee in 2022 was about $189,600. For comparison, the average revenue per employee for the top 100 largest LSPs in the world was about $229,300 in 2022. If we consider the average productivity by revenue bracket, then LSPs with revenues below USD 5 million in our mid-market ranking come out on top ($281,964). This is followed by companies with revenues of more than USD 10 million ($207,415). Businesses with revenues between USD 5 and 10 million recorded the lowest average productivity in 2022 ($147,124). Considering company size, six of the 10 most productive companies on our ranking employ fewer than 25 professionals. The remaining four companies have 25 to 49 full-time employees. Location, location, location Growth by geographical distribution To get a better sense of where the biggest growth for the mid-market is coming from by geographical distribution, we have developed a map of the average growth rates of the LSPs on our list by region, based on the country of headquarters. We calculate growth based on revenues expressed in USD, using the average annual exchange rate to US dollar, published by the Internal Revenue Service of the United States for each day of trading in 2022. As already mentioned earlier in the report, this means that, for some regions, currency fluctuations skew the growth picture. If we calculate the average growth of the mid-market LSPs by region in the companies’ local currencies the percentages increase for all regions that do not typically report in USD:14.8% for Asia (vs 3.9.0% in USD), 9.7% for Europe (vs 0.3% in USD), and 1.4% for Oceania (vs -6.4% in USD). LSP distribution by georegion Out of the 59 premier mid-market providers we’ve identified for this ranking, 55.9% are headquartered in Europe and 22.0% in North America. Companies in Asia represent 8.5% of the geographical distribution. Oceania and South America each host 6.8% of the premier mid-market providers on our list. There is no representation from companies based in Africa. Trends and business challenges Although our Nimdzi 100 ranking only lists the 100 largest LSPs in the world, our survey for the Nimdzi 100 is answered by providers of all sizes from around the world. Considering only the responses from LSPs who are listed in this ranking, the following section provides a snapshot of a few key trends and challenges for this segment of the market Key business challenges in 2023 It won’t come as a shock that of the companies who are listed on our premier mid-market provider ranking (and took the survey), more than 90% want to grow their company’s revenue in 2023. After that, the top five business challenges selected are: implementing new processes and technologies (58.1%), developing additional service offerings (55.8%), cutting costs and optimizing processes (53.5%), expanding into new industry verticals (46.5%), and managing price pressure (37.2%). This is quite in line with the results of the full Nimdzi 100 survey that looks at providers of all sizes, with two major distinctions. When we consider the results for providers of all sizes, 47.3% want to improve their brand reception and awareness, whereas in the mid-market segment only 32.6% share this concern. In addition, out of the full survey sample, 42.6% worry about talent retention and acquisition, compared to only 34.9% in the mid-market segment. Impact of global events Although the language services industry is (as we like to say) impervious to crises because there is always a need for communication, there is no denying the fact that individual businesses will nonetheless have ups and downs. Recent shocks to the global economy have triggered a mass reshuffling of the labor market, and we are currently experiencing inflation, currency fluctuations, an energy crisis, and mass layoffs in the tech industry. So, for this year’s Nimdzi 100 survey, we wanted to know how many LSPs are already feeling the impact of these global events and for how it may be impacting their 2023 strategy. Breaking it down to just the replies from LSPs who are part of our premier mid-market provider ranking, here are the results: Are you feeling the impact of the current economic crisis? The results show that more than a third are already feeling the impact of inflation and economic pressure, and another 40% are considering the potential impact as part of their 2023 strategy. Only about 24% have not been impacted at all. Compared with the data collected for LSPs of all sizes, the results differ slightly. Considering the full Nimdzi 100 data set, two out of five companies are already feeling the impact of the current economic crisis, and another 30% are preparing for it in their 2023 strategy, despite not feeling the impact yet. Another 30% report not feeling any impact at all. What are your customers doing? Of course it isn’t just LSPs who are impacted — everyone is, and buyers are no exception. So we asked respondents to our survey what the reactions from their clients have been so far. Considering only the responses from the premier mid-market providers in our ranking, the results show that a majority of companies note that clients have reduced their order volumes (70.0%), and another 23.3% report that clients have reduced the number of languages they are localizing into. In addition, 40.0% state that clients are choosing cheaper, machine-generated solutions instead of human-led services. These results are similar to those of the full dataset of LSPs of all sizes — with one notable distinction: 33.3% of respondents from our premier mid-market provider ranking report that clients have not made any changes to their business with them yet, whereas this is only true for 16% of providers of all sizes. What strategies are you planning to roll out in 2023 to offset rising inflation and economic pressure? Lastly, we wanted to know what strategies companies in our industry are implementing to combat rising inflation and economic pressure in 2023. The results show that the most-reported course of action for LSPs in the premier mid-market provider bracket is increasing the use of machine translation: 50% of companies will be using this cost-saving method. Other popular solutions include increasing prices with clients (35.7%) and reducing office space to save costs (32.1%). In addition to these strategies for increasing revenues and cutting costs, 50.0% of companies report that they will increase salaries for their employees to help compensate for the higher costs of living in the current economic climate. 21.4% are planning to reduce staff and 28.6% want to ask vendors to reduce their rates. These results are again trending in a very similar direction for providers of all sizes in the full Nimdzi 100 dataset. Conclusion What strategies are you planning to roll out in 2023 to offset rising inflation and economic pressure? Two main things. When it comes to trends and business challenges, the results for the medium-sized providers on our ranking are predominantly in line with the results of our full Nimdzi 100 survey that considers providers of all sizes. However, when it comes to growth, there is a more notable gap between the premier mid-market providers and the top 100 largest LSPs. Close to half of the mid-market providers on our ranking reported positive growth in 2022, compared to almost two-thirds of the top 100. And although the average growth for providers in the mid-market segment was still healthy, it was also 12.3 percentage points lower than for the top 100. It is not unreasonable to assume that medium-sized providers were more heavily affected by the economic challenges of 2022, whereas large providers managed to weather the storm better due to a more diversified client portfolio and geographical reach. Overall, it must be acknowledged that this is only a snapshot of the large mid-market segment that makes up the majority of the language services industry. We can expect this ranking to grow in the years to come, which will allow us to paint a more accurate picture over time. Not part of the ranking yet? Make sure to sign up here.