“Translation: Are You Costing Your Company Money?” looks at what happens when companies over emphasize translation and localization costs.

Dealing directly with clients everyday, I often get to witness the adage “penny wise pound foolish.” Let’s jump right in with a real world example to illustrate how relentless pursuit of cost can sink your project.

Real world example
I was positively thrilled when the project manager of the financing arm of a luxury motorcar brand confirmed a quote for a challenging translation and localization project. My company, a Japanese translation services agency based in Tokyo (Japan), had worked for months on winning this client.

You’re waiting for the other shoe to drop, right? The client called a couple of days later to cancel our services, apologizing profusely. What happened? Another vendor submitted a belated quote at 2.87% below our offer -- less than 3%, several hundred US dollars. What can I say, competition is tough!

If that was the end of the story, there wouldn’t be much of an example here. This project manager contacted me 10 days later in despair as the vendor of first choice could not produce the quality of service required. His team of 4 financial and IT professionals flown in from Germany would be back in Tokyo in 2 weeks, and could we provide our services then? Ok, no problem. However, having been left out hanging to dry once before, I informed the client we would require a binding contract with full payment upfront no later than one week before the team flew back into Tokyo. Naturally he agreed. (What else could he do?)

Now, one would think lesson learnt; however, this project manager insisted on haggling over the quote, right down to the wire. Finally, 4 days before the project was due to start, realizing that it was not possible to assemble a custom team for this particularly tough project by the deadline, I had little choice but to cancel.

Let’s do a quick ‘n dirty costing of this self defeating behavior:

  • Weeks of haggling - certainly costing more than a couple of hundred bucks.
  • One unnecessary round trip for a team of 4 professionals - USD12,355.20 (Berlin Tokyo Economy Class on Lufthansa), considerably more than our services for the project!
  • Team’s lost productivity - USD8,624 (average finance and IT professional hourly rate on payscale.com calculated based on 7, eight hour days for a team of 4 professionals.)
  • Impact on sales of repeatedly delayed project - ? (This project was for the Japanese translation and localization of a web based motorcar financing and leasing system.)

Sure, this is one of those extreme examples that could possible fall into the category of “Did you hear the one about…” However, this kind of self defeating behavior manifests itself often in companies where there is an over emphasis on cost reduction.

Why chasing the deal can be costly
The result of excessive emphasis on reducing costs will, if not doom your project outright as in the example above, ensure a translation project riddle with errors negatively impacting your bottom line. The reason is quite simple; there comes a point in the cost reduction process where more is less -- the law of diminishing returns.

A famous anecdote to illustrate this point is provided in graduate school economic classes. That infamous “We will bury you” speech by the Soviet leader Khrushchev was widely interpreted as a nuclear threat by the West; in fact, Khrushchev was referring to economics. The Soviet Union made great economic progress in the ‘50s, and the thinking was that by doubling the means of production, such as the number of fishing trawlers, returns would double. In reality, though, after a certain point, the number of fish being caught actually started diminishing.

Translation is, as indeed most endeavors are, no different. There is a point where incremental cost reductions (absence technological improvements) start producing diminishing returns in terms of quality (i.e. increase in the number of errors). This happens in the translation industry when vendors are forced to:

  • Cut corners during the translator evaluation process resulting in unqualified translators on the project.
  • Bring low cost non-native translators onto the team producing unnatural, or stilted, translation.
  • Pressure translators to increase their daily capacity resulting in countless translation errors.
  • Employ automated machine translation (MT) that more often than not produces gibberish.
  • Cut back, or skip altogether, the proof-checking process allowing errors to go to print undetected.

My company is very conscious of the cut-throat competition we face in the global translation and localization industry. So, when a vendor located in a well known Southeast Asia cost center offered irresistible rates, the possibility of outsourcing piqued our interest. I commissioned a trial translation -- if it sounds too good to be true, it probably is…

The math behind the diminishing returns of offshore costs centers
The vendor was offering rates 50% below what we pay our native speaking translators. So, it was not surprising when the trial translation came back several notches below our quality standard. Being unnatural and stilted it was immediately evident that this vendor was using non-native translators on client projects.

When a service provider offers clients a complete satisfaction or 100% money back guarantee as my company does, there is absolutely no compromising on quality. Let’s just say the idea of outsourcing to offshore cost centers has been shelved, indefinitely.

However, this experience did get me thinking about the business model of cost centers. Professional native Japanese translators with the right skills and experience can command upwards of 10 yen per word in Japan. So, you have to wonder what kind of translator would take a 5 yen hair cut (50% reduced rate offered by this vendor). There can only be two possibilities:

  1. Unqualified wannabe native Japanese translators that can’t find work in Japan, or
  2. Non-native translators

Neither could complete a translation (localization) project according to your quality expectations. Both would produce errors that seriously impact your bottom line.

If your drive to reduce costs has tempted you to look at offshore cost centers, take a page from the book of professional service providers.

Applying the lessons of Fukushima
If you have made it this far into the article, you’ve probably realized that I tend to draw on past experiences to formulate and present my thoughts to you. I do so again in conclusion to drive home the point that over emphasizing cost may be the root cause of errors costing your company in lost revenue.

Originally billed as a natural disaster, the Fukushima nuclear incident (note: not ACCIDENT) is increasingly being painted as the result of ignored warnings based on solid scientific research, incompetence, arrogance, and possibly even (criminal?) negligence. For example, TEPCO (the operator of the nuclear facility) ignored a 2007 study by its own senior safety engineer concluding there was a 10% possibility of the March 11 scenario unfolding within a 50 year period. Ultimately, the Fukushima incident spiraled out of control because the emergency diesel generators were flooded when the historic tsunami overwhelmed the plant’s seawall defenses.

Apparently, the issue of big tsunami was taboo at TEPCO. According to Toshio Kimura, a retired 12 year veteran of the Fukushima No.1 plant, “If they’d moved the emergency diesel generators to a position above the expected tsunami level it would have cost the company a lot. So nobody proposed it.”

You can’t help but think that it would have cost far less to secure the diesel generators than the hundreds of billions of dollars in compensation, cleanup and other related costs TEPCO is now saddled with…

And, that is the lesson I hope you take way from this article. Over emphasis on cost reduction can lead to counter productive results that will end up costing your company considerably more than the savings of foregoing a quality solution for your projects.