How IKEA does it

A look at IKEA Group’s global localization program

 Research: How IKEA Does it

HOW IKEA DOES IT

Introduction
For the purposes of this report, we will be discussing IKEA Group, otherwise known as
Ingka Holding, which technically operates as a franchise for Inter IKEA Holding. IKEA
Group, headquartered in Malmö, Sweden, is responsible for running the global retail
operations for IKEA and this is where we focus our attention.

The information contained within this report has been gathered from various sources
inside and outside the Language Services Industry. The insights are valuable whether
you are a localization manager interested in learning from how IKEA does it, or an
eager LSP who would like to understand the needs of this unique customer.

Information contained in this report:

1. TL;DR – Executive Summary
2. Organization structure and culture
3. Centralization of localization processes
4. Localization budget allocation
5. Project management structure and processes
6. Quality control processes
7. Vendor management structure and processes
8. Technology strategy and processes
9. Nimdzi’s insights and summary of information

We know you are busy! That’s why each of our reports are formatted so that information
can be quickly and easily digested. For those in a hurry, we provide the TL;DR (Too
long; didn’t read!) section in the beginning of each report. At the end of each report we
also summarize key points with our own Insights.

For those that think the devil is in the details, we have you covered, too! In the body of
the report we go into as much detail as possible about each topic discussed. Still not
satisfied? Never hesitate to reach out to us directly to request additional information.
We’re here to help!

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 Research: How IKEA Does it

TL;DR – Executive Summary

Employees Founded

>10,000 1943

IKEA Group employs over 10,000
employees, which accounts for only part of
the 160,000+ total people worldwide in the
larger IKEA family of companies and
franchises.
IKEA was originally founded in 1943. In the
last 75 years, the company has gone through
many organizational changes and is now
represented by multiple separate business
entities.

Headquarters Locations

Malmö, Sweden 330 IKEA Group stores in 28 countries

IKEA Group is headquartered in Sweden and There are currently 330 IKEA Group stores
this is also the localization of the central in 28 countries, which represents the
Localization Team. majority of franchise operation of IKEA’s
total 400 Stores in 49 Countries.

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 Research: How IKEA Does it

Vendor model Budget

Two preferred MLSPs and multiple smaller
vendors
IKEA Group has on-boarded two MLSPs with
“preferred vendor” status, though individual
groups within IKEA are still at liberty to work
with other suppliers who are not on the
“proffered vendor” list.
Estimated EUR € 7.5 - 11.5M
An estimated € 1M – 1.5M is spent annual
with the two preferred vendors, and an
additional estimated € 6.5 – 10M is spent
with other LSPs.

Languages TMS

51 Languages No centralized TMS

IKEA Group operates in 30 markets and has The central Localization Team has not
a wide range of language needs, including deployed a TMS, providing flexibility to
multiple dialects/variants for some individual LSPs to use their preferred
languages. technologies.

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 Research: How IKEA Does it

Machine Translation Challenges

Relatively agnostic Measuring quality, change management,

IKEA Group does not mandate, forbid,
encourage, or discourage use of Machine
Translation.
and pricing
The top three challenges faced by the IKEA
Group central Localization Team are 1)
defining a way to measure and track
language quality, 2) managing internal
change necessary to continue centralization
of localization, and 3) competitive pricing for
language services in low cost markets.

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 Research: How IKEA Does it

Organization and culture

Culture and enthusiasm for localization

It is rare to find an organization that is as global as IKEA. Global expansion is not just a
strategy for IKEA, it is in their DNA. IKEA operates 400 stores in 49 countries and has
suppliers located around the world.

Global IKEA retail locations (Note: map includes all locations, not just franchises
operated by IKEA Group

Centralization

IKEA Group’s localization function is both centralized and decentralized. Individual

groups and country managers have control over their localization process, but there has
been a push in recent years to provide centralized support for the localization function
through semi-centralized vendor management and company-wide best practices.

As part of the corporate overhaul, there was a localization “team” formed and tasked
with driving the centralization and standardization of localization practices within the

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 Research: How IKEA Does it
company. This newly formed function in the company currently consists of a single
localization manager (hence “team” in quotations). The localization function for IKEA
Group falls under the Corporate Communications Team (Translation, after all, is a form
of communication!).

The task of centralizing and standardizing the localization function within IKEA Group is
not a small task, especially as IKEA as a whole seems to be moving in a direction
towards less centralization at the corporate level, which consists of a breathtakingly
complex system of multinational corporations, foundations and franchising operations.

Internal teams needing localization have been operating in a certain way for years. They
already have vendors that they like working with and don’t want to give those up.

The Localization Team has limited authority over other groups within the company that
are requesting localization services. The localization team can assist and guide internal
teams, but has no ability to mandate any change to processes or even supply chain at
this time.

Because IKEA does not have a full localization team that manages localization, they
can only serve as trusted internal advisers to other groups performing localization.
Actual localization projects are managed by individual stakeholders in these other
groups that are requesting localization. The centralized localization function consists of
a one-person team that is there to provide guidance to these teams on best practices
and vendor selection.

A considerable accomplishment of the Localization Team has been to bring on two

large MLSPs (Multiple Language Service Providers) as approved vendors to help
service the various internal teams. These MLSPs enjoy “preferred vendor” status and
are available to service any groups within IKEA. However, individual groups within IKEA
are not under any mandate to work exclusively with these teams and are still free to
work with their own preferred vendors if they so choose.

From a process and supply chain centralization standpoint, there is still much more
work to be done. Currently, only an estimated 15% of localization work is being
performed by these centralized vendors, with the rest being performed by various
smaller vendors and freelancers that are still preferred by the various internal groups.

However, we must give credit to IKEA Group for having a localization team, however
small, as it shows a commitment to streamlining their localization function. The process

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 Research: How IKEA Does it
of centralizing localization in any company is no small task, and this holds true even
more so for a company with such as long history of decentralized localization
processes, like IKEA.

Localization Budget

There have been rumored estimates of IKEA spending EUR € 17M per year on
localization, but upon further investigation, this appears to be a bit on the optimistic side.
This estimate was made based on certain assumptions about the level of centralization
and volume of content to be localized that never turned out.

Currently, IKEA spends between EUR € 1M to € 1.5M with the two preferred MLSP
vendors they have on-boarded. This is only part of the story, though, as it is estimated
that only 15% of the total localization spend is spent with these preferred vendors. While
there are efforts to promote further consolidation moving forward, currently 85% of
localization spend goes to smaller LSPs, agencies, and freelancers, and this spend is
not centrally tracked or reported. This means that total localization budget could be
anywhere between EUR € 7.5M and € 11.5M globally.

It is important to note that currently there is no centralized localization budget.

Localization services are bought and paid for by individual budget owners throughout
the company. The Localization team provides guidance and best practices, but does not
pay for any of the localization and has no budget allocated for any purchasing.

Estimating budget is further complicated by the fact that historically there has been no
consistent cost center internally for different IKEA managers to use when purchasing
localization. Often, these costs have been absorbed and “hidden” in other project
budgets, making it impossible to track. This is something that will be expected to
improve moving forward, though, because starting in 2017, IKEA has rolled out a new
cost center to track localization costs regardless of where they are incurred.

Lack of evangelism and education about localization to different groups means that
localization is often an afterthought and not included when people put together their
initial project budgets. Ongoing education efforts from the Localization Team are
seeking to improve budgeting by training project managers to more consistently and
accurately include localization in their project budgets. These education efforts have
already shown a level of success.

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 Research: How IKEA Does it

Project Management
The localization team serves as an internal source of guidance on localization process
and best practices for corporate groups such as HR, Legal, etc, as well as country-
managers who are responsible for individual corporate areas. The localization team
does not provide services such as localization project management, engineering,
translation, or LQA, but rather guides the various teams on how these services should
be carried out and helps them to select a vendor to work with.

Two main types of localization requestors

The individual project teams are located all over the globe, though there are also
requests for global content that comes from a centralized location. This means that
there are two different types of sources for content needing localization.

Country managers Global content

Responsible for content specific to their
specific countries. These managers work
with a web of freelancers and small
companies, but are moving more towards
working with one of the two approved
MLSPs to perform localization.
Global content teams generate content
that needs translation that is not always
necessarily tied to a single country.
Global Content teams have localization
needs for internal support services such
as HR, Legal, and Training. 80% of the
global content is generated in Sweden
and Netherlands, but there are many
regional training and distribution offices
around the globe that also have global
content for localization.

Quality Control

IKEA provides subject matter experts that are responsible for reviewing and signing off
on translations. This is a service that IKEA has no intention on outsourcing, as it is
important that this expertise remain in-house. There are SME’s that have been working
on this content for 10-15 years, and so it is best left in house.

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 Research: How IKEA Does it

Vendor Management
Current vendors

Currently IKEA Group is working with two MLSPs as approved preferred vendors,
though they are seriously considering bringing on a third vendor in the near future.

Vendor selection

The selection process for these approved vendors consists of a standard RFP process,
which is managed by the Localization Team with assistance from the Procurement
Team. While the Procurement Team places an important role in the vendor selection
process, ultimately, the decision over how many and which vendors to on-board is in the
hands of the Localization Manager.

Vendor selection through RFP is only the first step in the process, though. Due to the
decentralized nature of localization at IKEA, these vendors then work with multiple
stakeholders inside IKEA to onboard different streams of work. For example, as of the
time of this report, one of the preferred MLSPs has already worked with individual
country teams to on-board about 8 different countries, while the second preferred MLSP
has yet to on-board any countries. It is apparent that, from the LSP’s perspective,
“winning” an RFP for IKEA does not mean that there is a guarantee of immediate work.
Rather, it is winning a spot on the preferred vendor list and the right to work with
individual teams within IKEA.

The central localization manager has the authority to approve vendors onto the
approved vendor list, but then can only recommend these vendors to the various teams
needing localization. These individual teams are free to work with whomever they
choose, and so each LSP on the preferred vendor list needs to work to develop a global
relationship with each of these decentralized teams.

SLA’s and KPI’s

The SLA’s and KPI’s tracked varies by team within IKEA. Generally, though, they are
tracking KPI’s for cost, quality, on time delivery, and number of words translated by
region. IKEA looks to the suppliers to provide reporting data for these KPI’s, which is
generally provided quarterly.

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 Research: How IKEA Does it
A big challenge for IKEA has been on how to properly measure and report quality and
put this into meaningful KPI’s. Currently, many of the groups have not yet defined a
quality reporting methodology that they are satisfied with.

Technology
IKEA is a furniture company, not a technology company. This is important to keep in
mind when considering the level of technology implemented into their internal process.
IKEA performed a technology pre-study in 2016 to take stock of their current use of
technology and identify areas of improvement that they are still working towards today.
The central localization team would like to see central technology rolled out in the
future, but at this point it is not a priority. The language technology that does exist is
typically deployed and managed by the vendor LSPs.

TMS implementation

Because of IKEA’s multiple vendor strategy, they have chosen not to implement a
global TMS as of now. This is a conscious decision made by the Localization Team. Not
having a centralized technology mandate means that the LSPs are free to use
whichever TMS they like. This provides greater flexibility for each individual group within
IKEA and their vendors to work out a process that works best for them. Since work is
typically split by language, there is no major concern to manage TM sharing between
suppliers.

One of the downsides to not having a centralized TMS is that there is no centralized all-
up reporting available. IKEA Group needs to rely on reporting provided by the LSPs to
track volumes, SLA’s and KPI’s. The reporting that is taking place is usually not
happening at the global level, but rather between the LSPs and the individual project
managers coordinating the projects. This could mean that if an LSP is working with
multiple groups within IKEA, there may be different reporting expectations and
agreements with each group.

The exception is that the two preferred vendor MLSPs that are on-boarded are required
to provide centralized reporting to the central Localization Team in the form of quarterly
reports. Such reports may overlap with reports that are also being provided to individual
groups, but they are not meant to replace any reporting agreements between the
suppliers and these groups.

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 Research: How IKEA Does it

Workflow management

Workflow is different depending on the team requesting localization. Generally, files are
transferred to and from the LSP through emails and/or file-share systems. This presents
an opportunity for mature LSPs (ie: the two preferred vendor MLSPs) to work with
individual project managers to deploy automated workflows to streamline and optimize
multiple areas of the localization process, from file preparation to hand-back and
everything in between.

Machine Translation

IKEA Group does not have a central MT strategy, but individual groups are free to use
MT as they see fit. The only known instance where MT is consistently used is for
translation of user-generated content (ie: product reviews and customer feedback).

MT is not mandated, forbidden, encouraged, or discouraged by the central Localization

Team, so this decision is left up to the individual project managers. So long as the
output quality does not suffer, MT is a perfectly acceptable solution. This presents an
opportunity for LSPs to provide an MT post editing solution in order to either increase
their margins, reduce costs for IKEA, or a combination of the two.

Top Challenges
Internal change management

The first of the top three challenges faced by IKEA today is getting internal groups and
country managers to change suppliers and adopt the new way of working. Some groups
are ready and willing to change, but most of them aren’t.

Since the localization team does not have any authority over other groups, they can
only help guide these groups towards further centralization. Evangelism and education
efforts will continue to show other groups the value of relying upon a central localization
team.

Measuring quality

IKEA faces a challenge around measuring quality. This is not an uncommon challenge
in the industry, as there are many very mature companies out there that are not working
with an objective and consistent way to measure quality.

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 Research: How IKEA Does it
Relying heavily on internal SME’s to review translations for each region, it is difficult to
implement a process in which quality meta data will be captured as part of this review
process. Internal SME’s will not want to be confined to a restrictive QA process, or fill
out scorecards. They will want to continue reviewing translations the same way they
have been doing this for years.

An external, third party LQA program could benefit IKEA, but may be equally
challenging to deploy. Internal SME’s have been working on the same content for years,
sometimes decades, and it would be difficult to transfer their knowledge to new
reviewers.

So long as the localization process remains mostly decentralized, IKEA would do well to
work with their individual vendors to report quality. MLSP’s will have no problem adding
a data driven quality review and reporting step to their existing workflows. If this data
can be captured and is shown to be useful, this could also be used to build a good case
for centralization of localization, showing benefit to the 85% of project managers in the
company that are not currently using the preferred vendors.

Pricing

One of the main concerns that various internal groups have about switching to a
centralized localization model is that of pricing. They feel that they can get the job done
quicker and cheaper themselves if they engage directly with freelancers or smaller
LSP’s.

This is particularly true of lower-cost geographies, such as Asia and Southeast Europe.
Country managers for countries like China, Croatia, Romania, for example, are able to
buy translation from local suppliers at a fraction of the cost that they would incur if they
were to engage with one of the two preferred vendor MLSPs.

This presents the central Localization Team with the challenge of convincing internal
groups to switch to using more expensive vendors than what they are used to. In order
to make a convincing argument, the central Localization Team will have to build a
strong case to each individual group and effectively demonstrate the real value that they
are bringing through centralization, such TM’s and machine translation reducing cost,
quality programs leading to reduced reliance on internal team members, scalability,
and/or reduced turnaround times from standardized processes.

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 Research: How IKEA Does it

Nimdzi’s summary and insights

Information is meaningless without insights. What does all of this mean? Based on Nimdzi’s
analysis of the information collected while preparing this report, we can offer the following
insights.

IKEA is not a tech company

IKEA is not a tech company, and so it will be difficult them to manage the change
required to implement technology driven localization practices. The central Localization
Team is presented with the challenging task of influencing individual groups within IKEA
to adopt technology, when those teams are perfectly happy without these processes in
place.

To centralize, or not to centralize... That is the question!

While the localization team at IKEA struggles to bring more centralization to the
process, they are competing against their own corporate leadership, which has lead the
company as a whole in the direction of decentralization and franchising. On top of this,
they are dealing with internal stakeholders that have been doing things a certain way for
decades and so may be resistant to change.

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 Research: How IKEA Does it

Measuring quality

You can’t improve what you can’t measure. IKEA will continue to struggle to bring
efficiency so long as they are not tracking data and KPI’s in a consistent manner. We
can expect to see continued improvement in this area, as they continue to roll out
standardization.

Opportunities for LSP's

There is opportunity for growth for the current two preferred vendors and any other large
MLSP that gets on-boarded onto the preferred supplier list. These mature MLSP’s can
open up new opportunities at IKEA by helping to guide them towards more efficient
localization processes. Areas of focus would be workflow management, TMS
centralization, machine translation, and end-to-end localization management
outsourcing.

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 Research: How IKEA Does it

Attracting new LSP's

IKEA will continue to be decentralized into the foreseeable future. LSP’s wanting to
work with this global behemoth will have to weigh the allure of working with such a well-
known and respected brand against the potential overhead that will be incurred to
service multiple stakeholders in this decentralized company.

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