Development, video games

Outsourcing’s time has come: outsourcing is now standard operating procedure

December 2005

Until recently outsourcing was discussed in hushed tones, a “secretive affair … nobody wants to admit.” (Develop magazine, print edition May 04). While outsourcing localisation and music was frequent, outsourcing most kinds of asset creation was heresy to many developers.

The orthodoxy has shifted. Our most recent survey of over 30 studios’ outsourcing practices found that this year UK studios will spend at least £50m on outsourcing. Over 16% of the average development budget is already spent on outsourcing, growing to over 25% within 3 years. Unsurprisingly, as outsourcing budgets grow, investment follows: Take Babel’s recent funding round, imminent announcements from other major outsourcers or the TV post-production companies circling this sector.

So, what’s changed?

Firstly, the paradigm for developers has updated. Only recently, the winning studio offered end-to-end solutions – everything from music, MoCap, games engines, script and QA under one roof. Today, some of these full-service developers are no more – unstable edifices that collapsed under their own weight. The full-service paradigm is being replaced with one of execution on-time and on-budget, to the relief of publishers looking for value for money as well as creativity. One way to deliver this is the lean model, encapsulated in Codemasters’ maxim: “Do what you do best, and outsource the rest”.

Secondly, the taboo around outsourcing has been undermined by a growing number of developer and publisher studios with years of hard-won experience in getting the most from outsourcing. They have fallen into the common tank-traps of first-time outsourcing (like poor due diligence or choosing price over quality), shot themselves in the feet (poor speccing or weak project management), but now enforce strong, formalised processes for handling outsourcing.

In turn the suppliers have matured, their quality rising dramatically. GamesOutsourcer.com now profiles 170+ companies outside North America, many with 50+ headcounts and impressive client lists. The larger outsourcers negotiate high six-figure contracts, and undertake substantial proportions of asset creation (particularly in art and animation) for studios working on AAA titles. They forge long-term partnerships with their clients, not the quick, cheap and dirty deals that some developers fear. Some, the likes of Babel, Dhruva, Glass Egg, and Nikitova, unshackled by location and slowly building their capability, are now generating very respectable revenues. Outsourcers have entered the UK industry’s mainstream – of TIGA’s 100+ members, nearly 15 are outsourcers.

Undoubtedly, things that can go badly wrong with outsourcing, but its benefits can be substantial. It’s not simply about cost, although Bangalore does compare favourably with Brighton. It’s about the flexibility to rapidly scale resources up and down to address temporary needs. It’s about focusing staff on higher-value tasks like originating IP, designing game-play or creating characters. Most importantly, effective outsourcing acts as a tune-up for games studios, because it forces them to tighten up processes and improve project management, which benefits the entire development process.

Looking forward, the next generation will drive outsourcing from the sidelines of games development into centre stage. Whatever your scepticism about the difficultly or real expense of developing for 360 or PS3, the platform holders’ belief in High Definition and gamers’ expectations unquestionably demand more detailed and extensive content. As budgets rise, as upwards pressure on team sizes grows, outsourcing becomes one of the few sensible ways to keep costs from getting out of control.

This is why the largest games companies globally have embraced outsourcing as an investment that protects profit margins and ultimately delivers shareholder value. Their processes are comprehensive and sophisticated: they conduct due diligence in person irrespective of location; they run multiple tests; they cultivate long-term partnerships; they share resource planning as soon as available; they train staff in outsourcer management; they easily spend seven figures on major titles. Emphatically, the large publishers believe they cannot do the next generation without outsourcing.

While some still doubt, most have already jumped on the bandwagon. It’s painful at first, but your publisher as well as your accountant will heartily approve.

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