New Pricing for Language Service Providers Explained

Georg Ell, Phrase, CEO
Georg Ell, CEO, Phrase

We recently introduced an innovative new pricing and packaging model for the Phrase Localization Platform. We understand these types of changes can be sensitive and may raise concerns. To address this, we would like to clarify the reasons behind the recent changes and outline the specific actions we are taking to support our LSP customers through this transition. 

Why We Introduced Platform Pricing and Packaging

Language technology is moving fast, and modern hyperautomation combines AI, MT, and Quality Technologies with customizable workflows, analytics, integrations and controls. 

Over the past years, Phrase has expanded its offering to be a composable platform offering, with a broad range of capabilities extending far beyond CAT tooling or TMS or Strings capabilities alone. 

As we innovated, customers told us they wanted the ability to access all of our capabilities, to solve their needs, without commercial constraints related to purchasing add-ons or separate products. And so, with the introduction of the Platform packaging, we no longer sell any individual ‘products’ and instead always combine all of our capabilities into the platform fee. Customers can now prove the value in any and all components of our platform, with a meaningful level of included volumes, and then add on additional volumes only for those parts where they have proven the additional value. 

This new platform pricing streamlines our pricing structure and provides a more consistent and scalable solution for our customers. In particular, the new pricing model addresses three key concerns:

  1. Alignment of Value With Usage: Customers expect fair pricing, best achieved by linking costs to the value derived from using a product. Thus, we implemented usage-based pricing in our new pricing and packaging strategy, aligning with customer feedback and needs. This approach promotes scalability and ensures that customers only pay for what they use, fostering trust and satisfaction.
  2. Complexity in Pricing Structure: Previously, different methods were used to calculate various end-user metrics. Seat-based metrics, throughput-based metrics, capability limits, flat fees, percentage-based pricing, and other consumption-based metrics created confusion and inconsistency as usage scaled. This approach was unsustainable, leading to ad-hoc adjustments and increasingly complex pricing structures for new capabilities and products. We are shifting towards a more streamlined and predictable pricing model that simplifies budgeting and forecasting for customers.
  3. Transparency: Determining usage levels was challenging for customers, especially regarding the legacy Fair Use Policy for the Phrase TMS product. With our new pricing structure, we provide customers with full visibility into their usage per each individual pricing metric. We will work further to provide even more robust analytics across the Phrase Platform to allow customers the ability to drill down and get as much transparency and data as feasible.

We Value Your Feedback

We have listened to our LSP customers and understand that the shift to usage-based pricing requires flexibility, adaptability, and education. Our goal is to make this transition as smooth as possible for you.

Overall, the feedback on the new plans has been positive. However, some of our LSP customers have expressed specific concerns:

  • Words Related to Quoting/Analysis: LSPs often work with clients on a project basis and need to provide a quote based on analyzing files before the client accepts the project. If a quote is rejected, these words are not directly monetizable by LSPs. As Phrase counts TMS Processed Words upon import, LSPs need a higher word count allowance to compensate for this challenge.
  • Forecasting Costs: Some of our LSP customers are struggling to predict costs under our new model and determine how much capacity and/or volumes they need to consider for the level of their usage and activity.

What We Are Doing to Address These Challenges

To address these concerns, we have implemented the following measures to mitigate the impact of these challenges:

  1. Dedicated LSP Plans and Unit Pricing: Our dedicated LSP plans now offer significantly higher capacities for TMS Processed Words at much lower unit prices for additional capacity. When compared to Direct (non-LSP) customers, LSPs pay roughly 40% of the unit price for an additional 1,000 TMS Processed Words.
  2. Increased Volumes for Quoting: Based on the analysis of all LSPs in our customer base, 70%+ of LSPs have a Completed vs Processed Words ratio at 40% or higher (Fig. 1). Phrase’s dedicated LSP Plans started with a higher TMS word count allowance from the beginning; however, we have recently added even more volumes as a complimentary capacity for quoting to provide sufficient buffers reflective of the outcomes of our analysis. As a result, our LSP subscription plans assume the total TMS Processed Words consist of roughly 40-45% paid capacity and 55-60% complimentary quoting capacity (Fig.2).  

    LSP Completed Processed Words
    Fig.1 An illustration of the distribution of Completed vs Processed Words ratios among LSPs in our customer base.
    Fig.2 Table depicting our LSP subscription Plans; 40-45% of the capacity is paid, 55-60% is allocated to complimentary quoting capacity. TMS Processed words allocation per year.

  3. Flexible Pricing and Top-Ups: We offer flexible pricing options and top-ups directly in our Platform to accommodate varying needs. In line with our shift to usage-based pricing, we also provide unlimited users for all Phrase TMS plans except for the Freelancer plan (which is a single-user account for obvious reasons).
  4. Forecasting Support: We provide forecasting assistance based on the pace of wordcount usage and we will soon provide more robust analytics (incl. forecasting) directly in the Phrase Platform. Please reach out to your dedicated Customer Success Manager or send an email to sales@phrase.com to get support in the interim.
  5. Best Practices For Managing Word Count: We encourage you to read our best practices and tips on cost-effective word management available in our Help Center (TMS and Strings). For a general overview, please refer to our Localization Platform Pricing.

We are committed to ensuring these changes help you manage your usage and costs better and provide a more transparent and flexible experience. Your feedback is crucial, and we will continue to listen and make necessary adjustments to meet your needs.

Supporting your future growth 

We hope this information clarifies the reasons behind the recent changes and illustrates how these changes are designed to better support you. As the Phrase Localization Platform evolves, your input remains invaluable in helping us improve our services and support your growth. Please continue to share any concerns or suggestions; our team is always here to assist you.

We’re dedicated to working together. LSPs are a crucial part of the Phrase ecosystem, and we want to ensure that Phrase remains a trusted partner in our joint success!