THE 2024 NIMDZI 100

State of the Language Industry

Still a growth market

2023 will go down in the books as the year of AI uncertainties in the language industry. AI's impact on the job market has sparked endless debates and speculation; however, the broader economic landscape tells a more nuanced story. Despite the unsettling wave of layoffs within the tech sector, attributed largely to strategic adjustments rather than AI's direct influence, the U.S. economy – the biggest market for language services – has shown remarkable resilience. This robustness, underscored by low unemployment rates and sustained consumer spending, contrasted sharply with the economic challenges faced by Europe and China, illustrates the complex tapestry of global economic health.

Throughout the year, many of our discussions with LSPs of all sizes indicated that 2023 is a tougher year than the previous, and revenues are in danger. The two key recurring factors mentioned were drops in order volumes from clients and the uncertainties about the return on investment of generative AI (GenAI) adoption to enterprise content workflows, resulting in a wait-and-see attitude of buyers.

Moreover, the layoffs in the tech sector – while concerning – have not been directly tied to AI implementation in localization efforts. In fact, there's little evidence to suggest a widespread adoption of AI at a scale that significantly impacts employment within our industry. Instead, what we are witnessing is a recalibration of workforce strategies aiming to optimize operational efficiencies in a shifting landscape of technological advancements.

Despite some instances that might indicate otherwise, the prognostications of doom have scarcely made their mark in Nimdzi's annual flagship industry analysis. The more traditional super-agencies – such as Transperfect, RWS, Lionbridge, and Welocalize – show results similar to last year, with low single percentage point changes up or down, and few have shown such sharp drops as Appen's multilingual AI data offerings. Equally resonant is the ripple effect of the Hollywood strikes – temporarily – shadowing the fortunes of LSPs deeply intertwined with the entertainment sector, such as IYUNO, VSI, Dubbing Bros, Plint, and Zoo Digital. In addition, a select few mid-tier LSPs have seen a slip in their standings, either descending the ranks or finding themselves on Nimdzi's watchlist.

Constrained growth and recalibration

Against this backdrop of constrained growth and recalibration, 2023 witnessed remarkable success stories. Noteworthy among these were LanguageLine, which is approaching the billion-dollar mark in the U.S. interpreting sector, and Keywords, which is making strides in gaming services. The year also saw strategic movements through mergers and acquisitions, especially as language technology has become a major investment interest. The successes of LSPs such as Propio, Global Talk, ElaN, and DA Languages demonstrate robust performances in specific niches like interpreting, healthcare, and public sector engagements. Toppan and PGLS saw their performance largely fueled by regulatory demands for comprehensive language access.

While reflecting a period of adjustment, this landscape does not necessarily spell an industry-wide retrenchment. Instead, it indicates the language services sector's enduring adaptability and resilience. Some providers told us stories where clients ditched their services for automated solutions powered by large language models (LLM), only to return a few months later for expert language and workflow support. The complexity of adopting new technology paradigms prevents plug-and-play enterprise implementations, and this gives time and opportunity for the industry to adapt, building on the experience of the successful embrace of machine translation over the past several years.

As we delve into the narrative surrounding AI, particularly its role within the language services industry, it's crucial to separate fact from fiction. The fear that generative AI will usurp jobs and diminish the need for human expertise in language services has not materialized as many have anticipated. This is not to say AI hasn't introduced efficiencies or reshaped certain aspects of our work.

Integrating the new AI into localization processes has been gradual, as a feature rather than a disruptive new way of working. On a large scale, AI seems to complement rather than replace existing workflows, technologies, and human skills.

Resilient future

According to Nimdzi’s research, it would be an overstatement to declare the demise of the language industry. Responses to our survey’s question, “Overall, how optimistic are your business and the industry in 2024?” also indicate a positive outlook for 2024.

Service providers’ optimism for 2024:

“Overall, how optimistic are your business and the industry in 2024?”

In our previous report, we forecasted a 7.0% compound annual growth rate (CAGR) for the language industry. Reflecting on our research findings, we see 2023 in the rearview mirror as a transition year from 4G to 5G, from NMT to GenAI, and from CPU to GPU. Based on the complete data analysis, our targeted discussions with providers, and the general industry backdrop, we have corrected our previous forecast for the industry growth in 2023 downwards to 5.0%. 

Nevertheless, both data and sentiments indicate that 2024 will be a new record year for many industry actors, which justifies the 7.0% CAGR as our forecast for the next five years. We have already factored into our projection the effects of the shifting economic landscape, characterized by inflation, geopolitical conflicts, and the integration of AI into strategic planning. This projection reflects our confidence in the industry's capacity to navigate and thrive amid these considerations. At this rate, the industry should reach USD 95.3 billion by 2028.

The language industry: Market growth 2018-2023 and forecast 2024-2028

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