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Ivan Smolnikov: The Slow Pace of Fast Change

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This time, TAUS interviewed Ivan Smolnikov, CEO, and founder of Smartcat. We found out the biggest thing he has learned in the translation industry. According to him, LSPs travel the innovation world at a very slow pace!

Captains of the Translation Industry Talk About the Single Biggest Thing They've Learnt

TAUS spoke with Ivan Smolnikov, CEO and founder of Smartcat. At the core of the conversation lies this question: ''What is the single biggest lesson that you have learnt about the translation industry?''

TAUS: What is the biggest lesson you have learnt about the translation industry?

Ivan Smolnikov: After 15 years working in the industry I have learnt a lot about both the pipeline and quality assurance issues. But the biggest lesson for me – and it took some time to validate it properly– is that most LSPs are actually very slow in adopting innovations. They do not feel a strong push from any direction to improve their process, so they can keep serving their core customer base with the same basic approach for many years!

Technology innovators are faced with two very different potential “markets” – a small one that is rapid and responsive, and the long tail of thousands of companies which is very slow-moving and thus hard to penetrate. The top several hundred big LSPs are happy to talk about innovation and have a long list of very sophisticated requirements for tech vendors. However, small translation suppliers tend to build their businesses around personal trust as the core value. So, often there is no big incentive to change until they see a real threat coming from their local competition who decided to adopt innovation and started to increase their market share. This has been an eye-opener to me.

TAUS: How did you finally arrive at the Smartcat solution?

Ivan Smolnikov: Fifteen years ago I founded a translation company. Then, after several years we sold part of the business to ABBYY and created a new brand together which was named ABBYY LS at the time. I ran the company from 2007 to 2015 as the CEO, growing it into a global top 50 company with various major locations – first in Russia, later in California and in New Jersey where we acquired a small translation company in 2012. It was quite a typical industry success story – rapid growth from zero to close to $15M of revenue per year.

Process automation was in our focus from day one. We started with the development of an online platform that automated the buying process back in 2005 and then also designed and developed our own TMS that was used as the back-end solution for more than 10 years after. We also worked on many more innovative projects, for instance, a service combining optical character recognition for scans (OCR) with Machine Translation and a human translation workflow, that was later integrated with Xerox multifunctional printers. Also, some automated services for over-the-phone interpreting, etc.

In 2013 we started building a cloud workflow automation solution. Essentially it was a CAT tool in the cloud, which was relatively rare at the time. One of our key motivations was that the translation industry was being held back by traditional licensing policies. Counting licenses for all freelance linguists was a bottleneck for us when we were building most of our innovations. We were struggling with desktop client-server applications and even more with the licensing limitations each time we built new web-services for our customers. So, the dream was to develop a scalable cloud solution with no limitations on the number of users, that also enabled parallel work for multiple users down to the individual document level and, at the same time was easily accessible via both modern UI and API.

This led to what we know today as Smartcat, which was spun out in early 2016 and became completely independent from the previous business the same year when we raised our first money from VCs. Since then we have raised $4.5M in funding from several investors from Europe and Israel. The company is now Headquartered in Silicon Valley, with two offices in Europe for operations and R&D.

Our “no-license” approach and other values developed through the last couple of years gained rapid traction. We grew massively in 2017 with a 520% leap in revenue, and similar growth rate in number of words translated on the platform. This has validated and greatly improved the perception of our model and has generated more trust from potential users.

TAUS: How do you evaluate the take-up of technology in the translation business?

Ivan Smolnikov: Our industry is quite conservative, people can easily ignore a new technology for say 10 years. For example, almost 10 years after the appearance on the market of customizable statistical MT,–most translation service providers still do not use it. An opportunity for change will mostly come from a new type of buyers, as new hires come into the industry on the buying side and begin to stimulate change and engage with new technology. Recently, major changes have been inspired by Internet companies, such as Amazon or Airbnb, who are buying services in a different way. Many such companies will be major translation buyers in five years’ time.

We believe that LSPs which are not adopting innovations today will be pushed to adapt to this innovation shift in the buyer market later, when this change in buying paradigm comes closer and they start losing market share to their more innovative peers. But this shift towards more technology-driven translation practices across the board will take some five to ten years. This is because major buyers of translation in such areas as energy and pharma are not like those internet companies I mentioned, and do not want to change simply because there are innovative technology solutions. For now, they are quite happy with a reliable service provided in the traditional way. Their priority is to know how to defend their business, so they naturally adopt innovation in our field slower.

The reason for this view is that CEOs and founders do not usually have time to understand how to transform their translation business model until they are pulling revenues of more than $10M. Most small translation companies generate less than $1 million of revenue per year and their customers don't expect or require much innovation.

TAUS: What impact do you hope Smartcat will have over time?

Ivan Smolnikov: We currently have more than 4,000 LSPs and 3,000 end-customers on the platform, interacting with 150,000 freelancers. The major impact will come from the fact that Smartcat is designed primarily to make collaboration between all market participants simple and efficient.

We believe that currently, collaboration is broken and inefficient: all parties have difficulties with tools, they are often expensive and growth-limiting due to the outdated licensing policy, which doesn’t facilitate transparency, real time communication and information exchange. At the same time the world is rapidly changing and requires faster delivery and real-time collaboration between all parties in the process: buyers, LSPs and freelancers.

Also, we see that even though freelancers are spending a lot of time searching for new rewarding projects, and buyers and LSPs are suffering from the lack of the proper suppliers, the matching issue has not been resolved. And our industry is naturally global, so you can’t work with only those freelancers that are easily accessible and can accept payment using your standard bank transfer or PayPal, etc.

We see our major value in the unique combination of easy to use software designed for collaboration, with no limitation on the number of users for any account, a tightly integrated marketplace of suppliers helping to cover any ad-hoc need, and complete automation of payments and paperwork.

Usually, buyers, LSPs and freelancers start using Smartcat with the free to use translation automation components (CAT, collaboration and project management), but after some time they also leverage from the team management center, the payment automation solution and the marketplace.

We work very carefully with data confidentiality, guaranteeing that users’ data is never shared with any other user or third-parties, and kept private in the users’ accounts. This is very important in our industry and many users were initially worried about the unsolicited usage of their data by some cloud applications. We understood that from the very beginning and made data confidentiality our priority.

Also, we believe in an open architecture approach that can help everyone add important integrations via our open APIs. This enables customers to build what they want, and they can even offer their custom solutions to all users of the ecosystem.

With that in mind, our ambition is to become the default collaboration platform between buyers, LSPs and freelancer in the industry and make everyone’s life much better and less stressful this way. We are very positive about this collaborative and stress-free future!

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Andrew Joscelyne

Long-time European language technology journalist, consultant, analyst and adviser.
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