How It Works

Historically, the stereotype is that translation software is associated with machine translation. Many people would immediately imagine something like Google Translate and its translation edited by a translator. This misunderstanding gives rise to a series of problems in relations of translation agencies, translators and customers and is the reason for many reservations and manipulations by all the parties.
In fact, professional translators avoid machine translation but they do use automated translation heavily, i.e. professional systems aiding to make translation without repeating the same work many times. The principal function of such systems is to memorize all already completed translations: every sentence is stored in a database (called "translation memory" or "translation database") where it can be found at any moment.
If, working on a document, the application finds that current sentence (or, more specifically, a segment) has been already translated, it simply offers to use the ready translation: a translator will have just to check if it can be applied in this particular case. Sometimes it happens that part of a current sentence matches the already translated sentence: for example, only two or three words have been changed. In this case the application proposes to edit the translation of the old sentence and not translate "from scratch".

Example

A translator translates a sentence "I have a black cat" and its translation is automatically stored in the translation memory. A short while later, a translator comes across a sentence "I have a black dog". The application immediately prompts the translator that a very similar translation "I have a black cat" is stored in the translation memory; it is just enough to replace the "cat" with the "dog". Therefore, you don't have to translate the sentence in full: it is possible to save time.
A translation memory can be refilled and used in every new project. This allows saving a lot of time and money when translating texts of the same type, for example, all kinds of contracts, manuals, etc. A translation memory can be shared with another translator who will continue his colleague's work using his materials. In addition, CAT tools allow keeping terminology consistency: a translator can look up the previous translation of one or the other word at any time.
Eventually, it may turn out that instead of translating a 100-page manual for a device, only 70 pages have to be translated. The remaining 30 pages are already stored in the translation memory. In other words, work (thus translation price) is reduced by 30%.
Who actually saves and makes money on it? This depends on competence of the parties.

Background

The first commercial products for working with the translation memory started to emerge in 1990s. Chronologically, Trados was the first of them and even today it still leads the fashion in its category. In the beginning of 2000s, some translation agencies saw a real economic benefit in using such applications. So they tried to keep existence of this technology in secret from their competitors to maintain their competitive edge. However, the technology was winning more and more supporters promoted by the application producers themselves.
Gradually, the number of the offered solutions was increasing and technologies were developing. Competitors of Trados emerged such as Wordfast, Transit, MemoQ, Deja Vu and many others. In the course of time solutions emerged that enabled many translators to work with the same translation memory simultaneously. Many of such products became even free. It is quite obvious that under such circumstances the translation memory technology was not known only to the most ignorant translation agencies that don't follow where the world is moving to.
That's why today any a little bit modern and professional translation agency uses the translation memory technology regardless of whether its customers ask for it. Below we examine the matter of how and to whose benefit it is done.

Customers' Concerns And Translation Agencies' Manipulations

Unlike translation agencies, many customers are not even aware of CAT tools existence. If a translation agency does not inform a customer about them, it can make good money on an order with many repetitions.
However, translation agency does not always keep it in secret because it is greedy. If a customer is not sufficiently tech-savvy and somebody starts explaining that the text would be translated in some special software, the customer may think that it will be translated using machine translation and dismiss the order at all. You may not just have time to explain to customer that it was misunderstanding and that you did not want to palm off a surrogate translation. You'd better not overload the customer with unnecessary information.
Therefore, if a translation agency sees that its customer is not translation technology savvy, it will act according to one of the following ways:
1) It will just make additional money on its competence, or more exactly on its customer's incompetence.
2) It will offer the customer a discount "for no particular reason", just to attract it. The customer is sure that the translation agency reduced the price per page, but actually the volume of work is reduced thanks to repetitions.
3) If a project is a complicated one and requires additional expenses (for example, on layout design, terminology base creation, additional proofreading, checking using QA software and other activities the customer does not understand), the translation agency uses the saved money to compensate for such expenses. Therefore, the translation agency does not bother the customer with technical details and both parties win.
There are customers who know on which side bread is buttered, so they demand a discount from a translation agency for the repetitions in the text. As a rule, such companies negotiate with translation agencies the acceptable and mutually beneficial discounts for the repetitions in the text.
That's why, if you want to order the translation of the text with many repetitions, don't be shy to ask for a discount for the repetitions in the translation memory. A competent translation agency either will offer a discount and provide the text analysis for repetitions or will explain with reasons which additional costs it will compensate due to savings on the repetitions. If it becomes clear that a translation agency has not any idea at all what you are talking about, have no dealings with them, most probably they are amateurs.

Translators' Misconceptions

Curiously enough, not only customers but also many translators do not know about existence of the translation memory technology or have a very vague image of it. There are two types of such translators:
— Beginning translators. Unfortunately, they do not teach modern CAT tools in many educational institutions that train translators. As the result, graduates receive a diploma but do not receive understanding of modern industry processes, so they have to study all over again.
— Experienced translators with 15+ translation background who accumulated experience of translation itself but have no idea about the tools invented for them over the last 20 years.
As many customers, most often such translators do not see any difference between the automated and machine translation. That's why they have hostile attitude towards machines interfering with their work or just confine themselves to using MS Word. Many of them are just not ready to learn new things and continue working using antique methods. Reasons can be conventionally divided into two categories:
— Why do I need your Trados? I translate using my head! But these things are not mutually exclusive but mutually complementary. CAT application just "spares" your brain and protects it from a dull work that can be delegated to a computer.
— It's all so complicated! I will translate faster in MS Word. At first, new software can really seem difficult. However, progress forges ahead and you should keep up with the times. Otherwise, you will be trampled down by the others. Just as agriculture moved from hoe to harvesters, translators moved from typewriters to computers and translation memory technologies.
With every new day, a growing number of customers learn about advanced translation technologies and request translation agencies to use them in order to reduce costs and optimize workflow. That's why a translation agency will inevitably demand that translators use such applications. It's up to you to decide whether you want to meet the same fate as dinosaurs...
Surely, CAT tools can't be used in every case. For example, they are almost useless for translation of fiction as there are almost no repetitions and every sentence is unique. However, when the same character is called Michael, Mikael, or Michel in various parts of the book, you find yourself thinking that translators did not share the translation memory...

Summing Up...

CAT tools have turned from once secret weapon of the select few into a mass phenomenon. Soon only people that are far from translation business will not be aware of them. That's why:
— Customers of translation services are recommended at least to superficially learn basics of CAT technologies. This will allow building pricing in a more reasonable way and in some cases negotiating better financial conditions.
— Translators who do not intend to change their job will inevitably have to learn the translation memory technologies. Sooner or later there will be a time when all translation agencies and even many customers will request using them.