Last week I attended a Grenoble Ecole de Management conference on the future of manufacturing. The high-level panel — top executives from major French corporations and a journalist from a leading economic daily — brought in quite a crowd, and the auditorium was jam packed.

One nugget that grabbed the attention of a number of entrepreneurs in the audience came from former Schneider Electric CEO Henri Lachmann who posited that the onus is on major manufacturers to foster equitable partnerships with suppliers to help local SMBs grow, develop new expertise, diversify, and — ultimately — reduce their dependency on a single corporate customer.

When you look at corporate purchasing policies, however, you start to see just how wide the gap between corporate-executive-speak and actual practice really is.

Take the example of translation services as a case in point. I’ll focus on a market I know fairly well, Grenoble (Schneider Electric happens to be a cornerstone of the local economy here).

Grenoble is home to several small to medium-sized translation agencies, virtually none of which employ in-house translators. One local agency even boasts generating 80% of its revenue from other translation agencies. Three of the local agencies I know of through current — or, more frequently, former — employees pay the few in-house translators/project managers they do employ at the minimum wage. So employee turnover tends to be high. Work is outsourced to translators that could conceivably be located anywhere in the world. And, when you add a chain of outsourcers and outsourcers-of-outsourcers, you can imagine what the person actually doing the translation is probably getting paid (very little).

So, at the end of the day, what you get is a business model that has a hard time delivering the level of quality corporate customers are looking for (at least in my field, marketing communications), is not terribly effective at building long-term customer-supplier relationships, and is financially profitable to a handful of intermediaries or « brokers » while doing little to develop the skills or even adequately compensate the professionals doing the work, whether they are local or further afield.

What would a more sustainable business model look like?

Probably not something very attractive to corporate purchasers. I imagine a network of local or regional translation service providers with in-house expertise and minimal outsourcing. Purchasers, internal customers, and service providers would work together to develop quality procedures and ensure continuous improvement. In the meantime, long-term relationships would enable the translation service providers to develop expertise around the corporate customer’s business while building skills (like project management) that could be used to diversify into other industries. Brokers with little added value (agencies that simply dispatch work and serve as a document forwarding service) would be eliminated and each member of the team (translator, reviser, proofreader, project manager) would receive just compensation for their contributions.

Naïve, huh?