TL;DR

Market size and growth

Mergers and acquisitions

• The 2023 M&A landscape was slightly more restrained as macroeconomic factors such as high interest rates, geopolitical challenges, and rising uncertainty put the brakes on and saw deal volume slightly contract.
• Nonetheless, investment interest from private equity remains high due to the inviting prospect of AI in the industry and the growth potential of consolidations. We expect big changes in the top 10 due to private equity M&A activities in 2024. 
• In-trade transactions may experience another slow year in 2024. In this year's survey, 39.8% of LSPs stated that they are looking for companies to acquire (significantly down from 52.4% in 2022) and 28.6% are looking to sell (down from 34.3% in 2022).

Geographical distribution

• Of the top 100 LSPs in this year’s Nimdzi rankings, 41% are headquartered in Europe and 34% in North America. Companies from Asia represent 18% of the geographical distribution. Oceania hosts 7% of the top players. This year no LSP from South America or Africa made it into the top tier. 
• According to the survey results, in 2023, 49.9% of revenues in 2023 came from clients based in North America (up 41.0% in 2022), Europe accounted for 38.5% of the client base (down from 48.2% in 2022), and 12.2% of revenues were derived from customers in Asia (up from 9.8% in 2022). Same as in 2022, South America (1.4%), Oceania (1.5%), and Africa (0.5%) are the smallest regions in terms of client base in 2023. 

Buyers

• The trifecta of optimization, automation, and integration are the top-of-mind challenges of buyers regarding technology. GenAI is the key target for pilots and experiments, although many buyers are still at the beginning of the MT journey.
• Leaders on the buyer side cite quality, on-time delivery, and – no, not price – a lack of knowledgeable engagement with their vendors.
• According to two separate Nimdzi studies — one asking buyers and the other providers of language services — this is what buyers care most about when partnering with an LSP:
  • On-time delivery
  • Communication
  • A true partnership
  • Quality management

Key Trends

• Generative AI and large language models - 2023 was the first full year of GenAI. Many LSPs find themselves on the defensive end, having to explain to clients that the AI revolution in the industry already happened with the adoption of NMT, and human cultural and language expertise in their supply chain is not less but more valuable than ever. More than half of LSPs in our survey expect a positive impact of GenAI in 2024. 
• AI whitewashing - Blessing for many, curse for a few: any LSP that uses MT can claim to be AI-driven, increasing valuation and piquing the interest of buyers and investors. Buyers of services recalibrate as to which providers are actual AI-enabled experts, albeit slowly, which is less good news for the de facto language technology-focused LSPs. 
• Companies like IQVIA, Uber, Shopify, and Canva have started offering language services - Democratization of technology means that competition may be shifting for small and mid-size providers. At the same time, technology alone doesn’t solve the language problem on the enterprise level - LSPs’ supply chains of language talent are still in demand. 
• Volumes of “weighted words” are reducing, but demand is increasing - a paradox - Technology increases what we lovingly refer to as leverage (e.g., recycling from translation memories), which means lower revenue per request. This is counteracted by the increase in the amount of content for localization because of lower per-word costs. 
• Multilingual content creation is finding its way (?) - LLMs enable a new disruption for the traditional create-translate-publish content cycle. Demand for AI-generated content post-editing for certain content types is slowly picking up, as many tech-enabled traditional LSPs are seeing an increase in these requests from their clients and are starting to offer related services. 
• Interpreting will continue to be a growth driver - Demand for interpreting relies less on economic factors and more on geopolitics, and AI impacts it less (except for a few niche use cases). In times of crises – such as war and immigration or personal health issues – the need for accurate communication increases, and language access and equity is heralded in Europe and the United States.
• M&A - Continued consolidation is expected, including in the top tier. Many small businesses, including tech providers, will struggle in the new AI era and sell or close business.

LSP challenges and actions

• With demand rebounding, more than two-thirds of respondents expect an increase in revenues (68.3% versus 48.2% in Q4 2023), and optimism is returning across surveyed LSPs regardless of last year’s results.
• Growth, innovation through technology, and price pressure are the main business challenges of providers in 2024. 
• Cost-saving actions in the next year will be less prominent than in 2023 with the improving macroeconomic background.
• More than a quarter of LSPs expect their prices to increase, and only 11.3% anticipate lower prices in 2024.