Ubisoft’s recent move to buy and rapidly expand a Gameloft studio in India to 200+ heads by 2009 is the latest example of international expansion into lower cost markets by bold companies unafraid to exploit globalisation. UK companies like Eutechnyx, SCi/Eidos and Babel have also adopted this strategy to maintain competitiveness. Ubisoft differs in that it intends to move some of these studios beyond in-sourcing lower value development towards entire game development. That critical step up the value chain is starting to create vibrant games development markets around the world.
Ubisoft is the pioneer of internationalisation, beginning its expansion in the mid-90s and now boasting studios in 18 territories worldwide, including Canada, Eastern Europe, Morocco and two sites in China. 80% of its new hires derive from Canada, Romania and China, the largest site being in Montreal, where it plans a 3,000-strong studio within 5 years.
One of Ubisoft’s oldest but most challenging ventures is its 500-strong Shanghai studio. Launched in 1996, it was planned as an internal art and animation resource. The company chose its location because of local government support, such as subsidised office space, and low salaries. Shanghai was China’s newest broadcast and interactive hub, benefitting from a healthy flow of graduates from good quality local universities.
Ubisoft adopted a dual approach to staffing, bringing in western specialists while recruiting graduates. A group of veterans acted the new team’s core and mentored raw recruits. Critically, it also needed local managers to oversee day-to-day operations. It headed the studio with senior Ubisoft staffers willing to spend several years in-country increasing capacity, capability and quality to service its internal clients. Early in its international expansion, Ubisoft was cautious about quality levels but aggressive on timing, investing in fairly high numbers of western experts as a proportion of total Shanghai headcount with the goal of getting the studio up to speed rapidly.
Shanghai’s graduates were recruited in volume by Ubisoft, whose studio quickly came to be seen as the best place for aspiring Chinese developers to gain hands-on experience, better than relocating to Japan or Korea to work on quality titles. Over time the studio came to be known locally as “Ubisoft U”.
The problem with being the graduate school for China’s games industry was that the students wanted to graduate all too quickly. This combined with the rapid growth of the indigenous Chinese development sector and booming demand for experienced games developers led to a high rate of turnover of staff who left for better paid, more senior roles in new companies. The problem was essentially cultural, a deep-rooted lack of company loyalty primarily driven by the mentality of former state-owned enterprise employees who prioritised fast salary growth over commitment to the company training them. The result was a continuous flow of ex-Ubisoft producers, programmers, designers, marketing and sales people into local companies, whose rates as outsourced studios can today exceed San Francisco’s. It is now hard to find Chinese games companies which are not run by ex-Ubisoft staff.
Despite the high costs and staff turnover, there have been undoubted benefits for Ubisoft’s Shanghai studio. It offers cheaper development from a large, experienced team producing high quality art and animation in volume. It has developed successful ports of western-made games, including PS3 / 360 versions from the flagship Ghost Recon and Splinter Cell series. Crucially, the studio is now judged to have enough experience to be entrusted with developing its own games. That’s a significant step for a global company with brands worth hundreds of millions of dollars. Ubisoft Shanghai is creating Tom Clancy’s EndWar, a well-previewed real-time strategy game and potentially a major new series.
Arguably, the biggest benefit for Ubisoft has been that Shanghai has acted as a training ground for how to expand internationally. Ubisoft put this experience to work in multiple countries, especially Montreal, where it has invested in its own campus, which ties graduates into the company by subsidising training fees if hired students outlast their probationary periods. The ratio of foreign experts to local staff has also been reduced. In Montreal, 85% of the staff are local. Its expertise and cultural proximity to major western games markets has seen Montreal produce some of the best selling games globally.
Ubisoft’s new Chengdu studio was launched earlier this year with the aim of growing more slowly by working on ‘in-sourced’ projects in the short term but working towards full MMOG production in the long run. Ubisoft’s belief in its overseas studios is testament to its growing confidence in emerging development markets’ ability to handle original IP development for the global market.
How pivotal is this decision and are these new studios really a viable and far cheaper alternative to western studios? As we’ve written in the past, outsourced art or porting companies can get up and running fairly quickly but it takes much longer to incubate a viable creative talent pool originating global hit games. Ubisoft took over ten years to build enough confidence that Shanghai could create original designs, but other non-western territories may not mature as slowly. Globalisation is slow but inexorable, and emerging territories’ technical abilities are improving. The real test for China, India and others is whether they can overcome cultural barriers to create global hits, and there’s no sign that this east/west cultural divide will be conquered soon.