Outsourcing: The Next Evolution in Game Development

During my 2006 keynote presentation (Outsourcing: The Next Stage of Evolution in Game Development) at the Game Developers Conference - "Game Outsourcing Summit" I explored the evolution of game development and discussed how the industry has shifted to converge on a distributed approach to development. I also covered the benefits of outsourcing and shared insights on how globalization is helping to raise the bar leading to better games - the transcipt follows:

Thank you Jamil.

It’s truly a privilege for me to be here this morning.

When I was given the opportunity to speak with you all, I have admit that I spent a lot of time deciding how to spend the next half hour with an audience that is already at the forefront of this field.

In many respects, we are all -- pioneers working together -- to establish a production process that will scale to match our industry’s unprecedented growth.

To me, this summit truly symbolizes what outsourcing is ultimately about –establishing relationships and dependencies between groups of people, you and me, the person sitting next to you – linking all of us together, which has the potential to transform our industry and streamline the game creation process.

As Jamil shared earlier

Today, we’ll hear from all sorts of experienced folks in this space– covering outsourcing do’s and don'ts, case studies, logistics of setting up an offshore business, the demographics of outsourcing and so forth --

My goal is to touch upon these 3 areas…

By the end of the day, I’m hoping that we all come away with a stronger perspective and more defined context to integrate outsourcing into our development culture.

Also, I’ll be sure to share with you how outsourcing relates to ----Starbucks ---- Skeletons ---and Wasabi!

All of us by now have probably heard the news.

The ESA announced that it “is no longer necessary or efficient to have a single industry ‘‘mega-show’’ – E3 is “evolving” into smaller meetings spaces, distributed across multiple locations.

This is really an example of globalization and its impact on our industry.

E3 started 12 years ago – and represented the epicenter of our game industry. The industry has evolved and matured since then.

We now see that the evolution of the game industry has led to an expanding global market – spawning major events in different regions, such as the German Games Convention, the Tokyo Game Show, China Joy, Korea’s GStar, and company-specific events , and others around the world.

The fact that it’s no longer necessary or efficient to have a single industry mega show symbolizes in some ways why it’s no longer necessary or efficient to develop games entirely in one location…

Let’s look at the evolution of Game Development – to understand why this might be the case..



In the beginning, there was Pong. Just as Pong was played with two players, many games were created the same way – by two people.. Sometimes even one person was enough!

I remember publishing my first game for the Apple IIGS – with 2 other people contributing to the music and graphics…– we were fuled by pizza and coke –– all out of a one room office until it was released.

Then came the 8-bit console storm, and development teams found themselves having to ramp up in the dozens in order to meet the demand of the technologies.

But the biggest impact to development was -- 3D graphics! And that changed the way we made games forever.

Art teams ushered in specialists, such as animators and modelers and texture artists. Programmers found the need for specialists like AI and graphics experts.

After the Playstation and N64 hit the markets, and PC users were faced with a multitude 3D graphics cards to choose from, Game Developers found themselves chasing their tails trying to keep up with the phenomenal demand for bigger and better. And after 10 years since the PS1 was first introduced, that growth hasn’t stopped, especially now with next gen consoles.

The technologies being employed in current games have advanced to the point where computer game companies are now leaders in graphics research. Along with that, we’ve seen the advent of the mega teams in some cases – hundreds of people working on large scale productions.

With every advancement in gaming hardware – we find more memory, higher resolution graphics, greater storage capacity, internet connectivity– all of this -- allowing developers to create richer, more immersive gaming experiences..

As the sophistication of next-generation videogames accelerates and the number of assets requiring management increases --

we see that Outsourcing is already common – it is estimated that 60% of games studios outsource today --- with this figure projected to rise to 90% by 2008 .

Companies are already accustomed to outsourcing localization, movie cinematics, sound and music --- and game compatibility testing. In some cases, companies have been outsourcing these areas all the way back to the early 90’s.

This afternoon, Ben Wibberly from Babel Media will share with us outsourcing best practices related to some of these areas.

As far as engineering - we have seen just the tip of the iceberg so to speak– currently outsourcing is confined to porting and tools development, but I suppose that engineering outsourcing has been rampant, disguised as middleware --- (for example, you can now license physics engines and rendering engines and plug them into your games – when in the past, these were things you’d create yourself).

Today, you’ll find that the majority of games in development use middleware in one way or another.

Beyond those areas we are seeing significant growth in art and animation outsourcing, primarily due to the transition to the next generation systems.



Video Games are leading global Entertainment growth – estimated to reach $42 billion in worldwide sales -- by the end of the decade – that’s almost doubling in the next few years!

Why the growth?

For one, we’re seeing significant growth opportunities in Europe and Asia Pacific. The Asian Pacific Market – some say will be the biggest market by 2009.

Expansion of Gamer Demographics – people playing games as they get older (it’s hard to tell, but he’s really holding a nintendo DS, ok – well not really)– but new products like Nintendo’s brain age are attracting more mature gamers (and frankly I’m hooked on it as well).

And we see that people are starting to play at younger ages – like these children in Korea.

We also see that -- New gaming platforms continue to bring more consumers into the fold. Each console cycle has seen a broadening demographic of video game consumers.

Another exciting development is the chance to expand revenues through a variety of downloadable content and in-game advertising.

These are all good signs for all of us here today. --- Which means, opportunities for Outsourcing will only increase!!! The global market for games outsourcing is estimated to reach $1.1bn by the end of 2006 and is set to grow to $2.5bn by 2010

Let’s take a closer look at globalization

It’s pretty fascinating to look at how the internet --- technology and personal computing --- have been a catalyst for an incredible amount of change in the last two decades.

Just looking at the last 10 years - we’ve seen ---- a technology revolution take place – all across the world (this map above is generated from gamedevmap.com – a site that plots the location of game related companies – check it out).

Technology, the internet and growing worldwide capitalism are transforming and reshaping the world in front of our eyes,

Technology has ---- and will continue to create millions of new jobs and industries --- while reinventing old ones – all over the world – companies are now competing in a global market place..

An entire new class of entrepreneurs have emerged, like Rajesh Rao, head of Dhruva Interactive who we’ll meet later today.

These entrepreneurs are embracing new technologies, leveraging the internet and moving forward with new processes and improved ways of working and collaborating to drive this WORLDWIDE transformation – this media age, web 2.0 or whatever you want to call it.

It’s been practically impossible --- to AVOID – hearing about how outsourcing and globalization has transformed industries –such as Medical imaging, tax preparation, application development, tech support, R&D, animation, and film– all have been transformed and optimized by outsourcing.

"What is really fueling global growth?"

Well, I discovered the answer – after traveling around the world to Beijing China– the answer was right across the street from Tiananmen Square...

That’s right – Star Bucks. It costs $4 for a grande sugar free non-fat vanilla latte –just like here in Los Angeles!

Seriously, it's important to pay attention to China and India – and Asia Pacific. I call it “The Law of More People” – and it’s kicking in. What I mean is that –every business simply cannot ignore the fact that practically overnight – 40% of the worlds population are waking up and embracing capitalism, entering the global workforce.

All of this combined - will drive the most significant changes yet to come! "

Just like Starbucks

We’re seeing game development studios and related businesses sprouting up all over the world – not just in North America or Europe – but now seeing an emerging game industry in Asia and Eastern Europe.

Today, you can go almost anywhere in the world, any place – and you’ll find teams of people programming, animating, designing and creating video games – all --- drinking --- Starbucks!

Governments and educational institutions are also helping to fuel this growth by
setting up schools and universities to teach students about game development and
production.

In India, there are animation schools popping up
everywhere -- producing several thousand graduates a year – that are entering
the growing animation industry.

The last thing I expected to see -- as I walked down the street -- in a neighborhood in Mumbai– was an advertisement for an animation/art school.

Here are some photos of classrooms you’ll find in Beijing, Mumbai, Seoul– in this classroom in Korea – you’ll notice that there are PS2 development kits for each student! Now, that’s hard core.

And of course, here in Los Angeles – USC’s computer science program offers advanced degrees in gaming!

Gaming has come along way since the days of pong –
-- just look at the complexity involved in game programming and design these days
-- USC’s curriculum is hard core
-- but it’s really a reflection of how much science there is in game development.
-- and why specializing is becoming more of a trend – there’s just soo much to learn

With so much growth projected for the game industry

IT’s not surprising that government trade organizations are recognizing that the game industry is good for their economies – and they are working hard to build partnerships with game development and publishing companies.

Never in a million years did I think that I’d be sitting with members of the Korean parliament – discussing ways to foster relationships between American and Korean game companies --- and feeling very underdressed


If we look at all the things discussed, we see:
1. We have a growing global market
2. Rising game development costs
3. Technology and the internet allowing people to work and collaborate from remote locations
4. The Law of More People fueling an already growing development work force
5. And economic incentives and support from government agencies

BOOM - all of these trends converging together at relatively the same time – have created an environment ripe for outsourcing.

Now, of course THE game industry is pretty badass

–after all, IT’S invented lot’s of great things --- pushed technology and hardware – and is full of extremely creative and technical people

– plus – it’s brought entertainment to millions of people.

Seriously, the Game industry IS USED TO – no actually –thrives on change – and has BENEFITED and LEARNED from previous transitions (such as learning to use middleware)

--- just like we are getting better learning how to use outsourcing.

And when I say “outsourcing” I’m referring to all the different flavors– from offshoring, onshoring, insourcing, build operate transfer, distributed development and coventures – and all the other hybrid business models we hear about.

If other industries are any indication of what’s to come-- outsourcing is gonna lead to one of THE MOST DRAMATIC changes in how we develop our games
– possibly as significant as a role that mass manufacturing had in remaking the industrial revolution
– well, ok – maybe that is a bit of an exaggeration – BUT

HERE we are… an entire industry –revisiting the fundamental assumptions of our production model.

One might benefit from examining how other industries have successfully integrated outsourcing into their workflows.

In some cases, it may be prudent to seek insight from experts that have extensive experience helping companies evaluate their options when it comes to outsourcing
– consultants like Amritt Ventures --- sponsor of this event --- comes to mind as a potentially valuable resource.

As an industry, we already manage large teams, develop games on multiple platforms and release them in a bazillion different languages – all at the same time..

Outsourcing will only improve those very same project and resource management skills.


I love this quote –- it really defines some of the key benefits of outsourcing –

“Outsourcing rattles the skeletons in the closet”.

What does it mean??



Well, it means that when you look at distributing development between multiple locations

Bad processes will rear their ugly heads, things will stop working that worked in the same location --- forcing you to address process issues that were generally “hiding in your closet” - things that you weren't even aware of.

This is one of the many reasons why we're seeing a growing number of companies embrace outsourcing -- so that they can gain efficiencies and competitive advantages in the marketplace.

Later today, Paul Steed will get into all sorts of detail about “knowing when to outsource” – we’re definitely looking forward to hearing about his thoughts and experiences.

Now, I’m not gonna stand up here and plug a new game -

BUT - THQ is releasing “Saints Row” for the XBOX 360 August 29th!. Developed by one of THQ’s premier studios, Volition

– this game features a truly open world environment

– where players can do anything they want, whenever they want.

Let’s check it out:

[PLAYS VIDEO]

The team at volition married old school - traditional game development with outsourcing, to produce a game world that is incredibly large and deep - for the XBOX 360.

The decision to outsource allowed Volition to raise the bar
– by allowing them to add a tremendous amount of content in parallel to the development of the game.

Looking at these images from the game
--- the player would never realize that many of the exterior landmarks were outsourced
--- and the final assets were seamlessly integrated back into the game.

In some ways - the developer acted as a “city planner” or architect – designing the layout, the game areas, etc
– while having the outsourcing company “construct” aspects of the environments.

Outsourcing can create all sorts of competitive advantages -- BUT The challenges of realizing those competitive advantages are significant.
Chief among them is the need to communicate accurately and unambiguously across the barriers imposed by firewalls, distance, time zones, national borders, languages, and cultures -- or all of these factors.

-- Speaking of the importance of communication--
I’d like to share an example, a colleague of mine, was having an animation created, where in one scene, a bunch of goofy characters in the kitchen squirting mustard at each other, and off course they provided story boards, and concept drawings, technical specifications. --- So, they were completely surprised when the final renderings came back. Everything looked right, except one thing, the mustard that was getting squirted all over the place was green and not yellow, like what we Americans are familiar with. Turns out in some cultures mustard is associated with wasabi, which is quite green.

Obviously, this was not a major problem, but really underscores the importance of what can happen.

Now, these issues are further compounded by the need to manage all dimensions of the software development lifecycle -- requirements, change and assets, testing, coding, etc. -- in a distributed environment via a repeatable process, while maintaining effective security. -- Ok, that was a mouthful --- Outsourcing is difficult, challenging and deceptively straightforward.

Having realistic expectations is critical in engaging in outsourcing – since adopting it cannot happen overnight – but requires a long term commitment and fundamentally requires organizations to evaluate ones own strengths and weaknesses..

Companies should view outsourcing as a long term initiative

Why? The decision to distribute development -- is also a decision that affects your company culture, work flow and forces a reevaluation of its focus – all of which should not be taken lightly.

What am I trying to say, it’s as important as choosing your spouse –– ok, well – not THAT important.

Really, embracing outsourcing means that you’re willing to invest the time and effort in seeing it work -- company’s top executives need to embrace and support the production model.

Investing in outsourcing must include the involvement of all employees and partners – fueled by a commitment from the top to setup a process that will ensure the long term success of seeing it through.

THQ established the External Development Group – XDG to spearhead the company’s outsourcing initiative.

Earlier this year we Announced the Formation of XDG
– a team focused on making a deep strategic impact for our company
– by streamlining development outsourcing needs for the entire corporation.

With more than 15 studios and divisions - XDG’s ultimate goal is to increase our production capabilities and efficiencies across the entire studio system – by knitting together people, processes and platforms to ultimately allow our core teams to focus on delivering the innovative game play consumers expect.



I wasn’t sure where to put this slide – but It’s worth mentioning some interesting variations on outsourcing that folks are experimenting with – generally outside of the games industry.

In some ways, User Created Content could be considered “outsourced work” – which may begin to play greater roles in augmenting content needs for various types of entertainment. This Is already happening on the internet - YouTube is now one of the most visited portals – which caters to user created content.

And then - there’s a relative new concept of crowd sourcing -- Amazon.com’s Mechanical Trunk is a platform that enables thousands of micro freelancers to do a tiny bit of work (such as identifying items in a photograph or writing short product descriptions).

... and peer to peer production networks allow people with certain areas of expertise
– linked together through a social network (similar to LinkedIn or MySpace) -- to work together to create something big – like we see in the open source development communities.

All of this is certainly worth keeping an eye on.

So what have learned today – really?

No matter where you are - The Law of More People hasn’t had an effect on the price of a cup of coffee at Starbucks.

Skeletons?? -- well, prepare get rattled – outsourcing is coming to get you

And most importantly – if you want YELLOW mustard make sure you don’t get wasabi!

...and once again thank the conference organizers for bringing us all together.

I’m happy to answer any questions.