Gilbert Segura
VP of Technology at PGLS
Language service providers (LSPs) are adapting to the rapid changes in the market driven by the advent of large language models (LLMs) and the increasing commoditization of language tools beyond Google Translate. Natural language processing and Machine Translation (MT) have both seen explosive growth in the last five years, with ChatGPT-like products becoming increasingly mainstream and integrated into mainstream authoring tools, search engines, and even consumers’ phones. Technology that was standardized by a few cloud providers just a few years ago is now able to be built by smaller teams and specialized to solve specific customer needs. While the increased sophistication of LLMs had initially raised doubts, LSP industry growth now hinges on the capacity for these tools to transform the value chain.
As a result, our industry is at a turning point. Due to significant fragmentation, the top 100 LSPs account for just 20.5 percent of the industry, per Nimdzi. There is ample opportunity for consolidation. Nimdzi maintains its prediction that the LSP market will sustain a CAGR of seven percent, achieving a $95.3 billion valuation by 2028. Growth is expected to remain concentrated among the business models enjoying the highest demand: interpreting-focused firms, media localization, and those embracing tech-first solutions. Merger and acquisition (M&A) activity reflects these trends.
Given the fragmentation of the market, especially in key regions such as Africa, there is a slower than expected growth rate for providing services to a growing population and economic powerhouse. It’s not just one location, but it’s indicative of how the scattered allocation of resources in the 19th century language services model persists to this very day. With the advent of new technologies, many locales can leap-frog over the gradual and procedural advance and go straight to large language models and newer methods without the decades of investment and millions of dollars of cost.
Here are our top observations about the continued transformation of the LSP value chain, driven by AI and M&A activity.
Mergers, Acquisitions, and Funding
In 2025 and onward, the language services industry will continue to trend towards consolidation. According to Slator, the leading categories of acquisition transactions in recent years involve media localization, interpreting, and sign language accessibility services. What’s driving these purchases is the strategic expansion of in-house capabilities in the areas of increasing demand.
In-house capabilities are increasingly favored over a contracted services model. To compete, LSPs must be able to pitch more comprehensive services and maintain control over end-product consistency and costs.
With increasing merger and acquisition activity, especially among tech-first business models, the LSPs that embrace advanced solutions are positioned to thrive in the next decade. Buyers face intense cost competition. They demand agile operations and choose partners offering wider work scopes and stronger contracts. Through this strategy, technology cannot supplant the value provided by third-party LSPs, particularly when the tools can be bespoke to industries or even individual, large-volume clients.
Tech-Driven Advancements to the LSP Business Model
Generative AI has accelerated the possibilities for language services by increasing volume, capacity, and speed. The challenge is how to leverage these advancements in such a way that does not cannibalize our industry’s value proposition.
For example, large buyers have experimented with developing or purchasing MT tools that bypass LSP involvement. Between 2017 and 2018, Netflix launched Hermes, a content localization platform that onboarded freelance linguists to address the growing demand for global streaming. Netflix ultimately returned to working with its language service partners and closed the platform after just one year, but disintermediation remains a core challenge to language services.
Evolving the Value Chain through M&A
From procurement to consolidation: acquisitions are transforming the value chain to bring greater consistency and value to the end customer. By expanding in-house capabilities in media, interpretation, accessibility, and other high-growth areas, LSPs can leverage vertical integration strategy to present a richer offering to existing and new clients.
This industry has been historically slow to adapt. However, large buyers with the capacity to invest in large-scale tools continue asking themselves whether they can fulfill their language service needs internally. High-tech LSPs are the players poised to overcome this tangible threat by offering better and faster AI-driven solutions and more agility in an evolving space. Be it by buying technology or building it in house—see Amazon Web Services and Meta —there are significant investments at play that are not always external products. At many locations, making your own technical stack is an option; albeit one with technical and language difficulties.
There are some risks to this strategy. LSPs and buyers must avoid the pitfalls of buying companies and their technology without understanding capabilities, culture, and core competencies. There is the possibility of acquiring technical debt, unsupportable requirements, or proprietary talent and techniques that do not gel with the acquiring company’s approach.
Evolving the LSP Supply Chain
Evolutions in language services are much more nuanced than a race to the bottom on price. On the contrary, the conversation is largely centered on a reevaluation of supply chain management through the lens of M&A strategy. A, as well as the cost of doing business. Does it make more sense to outsource or buy and build in-house?
The LSPs that will thrive in this new era are streamlining their supply chains, reducing costs & overhead, and allocating resources to proprietary AI and advanced technology that elevate the value proposition for the end customer. The key differentiator for these tech-forward LSPs is adaptability, with the tacit understanding that the value chain must be transformed in order to sustain growth.
At PGLS, we are leveraging our expertise and working with researchers to develop new and better ways to serve our customers, so they can reach their audiences, communicate across boundaries, and thrive.
Follow PGLS on LinkedIn for more insights and to join the conversation.