Summary: Leveraging Outsourcing

The 4pm Production session featured Aaron Pulkka, Sr. Director Outsourcing, Vivendi Games, discussing the pros and cons of using outsourcing in games production. The focus was predominantly on art production outsourcing, though the general discussion elements certainly apply to most kinds of outsourcing games producers and studios can leverage.

Aaron brought a view from both sides as both a vendor and client (which coincidentally works for me too because I’ve been both a consultant and a client in my previous life). He also positioned his pitch as “advanced common sense” (taken from David Allen’s “Getting Things Done”)

Outsourcing is a result of the continued evolution of game development towards increased complexity requiring multiple teams of specialists. Aaron’s first experience was with Sony 9 years ago, which he characterized as “a failure”, with underspecified requirements and insufficient due diligence on the outsourcing vendor were the key reasons.

He used his subsequent experience with a physical pod game simulator developed for the Sony Metreon in San Francisco as an example of “success”, crediting a more rigorous process:

• Prototype
• RFP
• Due diligence – can the vendor do it?
• Contract
• Updated prototype
• Production plan
• Production in batches
• Delivery and assistance with installation
• Integration

(On a side note, the Sony

Metreon experiment overall was a bit of a dud, as described in wikipedia here, with Sony selling the property to Westfield, owners of the nearby Westfield Mall.)

Aaron then went on to describe general outsourcing types:

• Platform adaptations – e.g. outsourcing from one platform to another (console), middleware (physics engines, etc.)
• Localization (translation, etc.)
• Art outsourcing (cinematics) – most of the industry’s focus and where his talk focused on

Expected benefits considered: control costs, increased production capacity and efficiency, leverage highly-skilled talent pools without hiring them or having them sit idle during pre/post-production.

Risks: unreliable vendors, insufficient resources, low quality, bait-and-switch (such as switching staff or sudden increase in cost), lack of IP protection, high overhead (could negate any cost savings), time and language differences

He then used Thomas M. Koulopoulos: “Smartsourcing” as the basis for a major chunk of the remaining presentation, which went by rather densly and rather quickly I’m afraid. He described what “smartsourcing” is vs. “outsourcing”, the implication being the latter is tainted with simplistic visions of ruthless globalization and cost-cutting.

• Not about economies of scale, but of scope (not exactly sure what he meant here, especially when he said “looking at projects more holistically”. If he meant that smart outsourcing looks at leveraging all comparative advantages rather than absolute cost advantages a-la Ricardian economics, then I agree).
• Not about ownership, it’s about partnership (again, needs more definition otherwise it veers dangerously close to consultant-speak…I should know, I used to be one!)
• It’s not just about cost-cutting, it’s about innovation (which jives very well with IBM’s own experiences showing innovation is moving to “collaborative innovation” and away from “the entrepreneurial tinkerer” to partnerships because it’s getting too expensive and complex to do it on your own anymore. The Cell chip developed by Toshiba, Sony and IBM is just such an example.)
• It’s not about cheap labor, it’s about smart, educated workers. Aaron disagrees with a recent Gamasutra article claiming it’s “about a race to the bottom”. I agree with him that the media, China-bashers and isolationist elements tend to overemphasize that element. While it certainly has happened, smart people eventually figure out pure price or cost is never a sustainable advantage; even India is now outsourcing back to the US and China’s wages have risen enough that Vietnam is competing.
• It’s not episodic, it’s here to stay – not a passing fad. Complex games are going to continue requiring external partnerships to be successful.

The next section was on “getting started”.

• Forecasting and preparation
  • looking for what work to farm out vs. what to keep in house.
  • Close collaboration with art department is critical (they may surprise you on what they want to keep!)
• Vendor selection – used process described in “The Black Book of Outsourcing”, Douglas Brown
  • gather info
  • define objectives and evaluation criteria
  • prepare RFP
  • evaluate bids
    • reliability is the most important criteria when clients were surveyed on what they look for in an outsourcing vendor; without that all other criteria are irrelevant: ability to deliver, stable infrastructure, consistent communication, minimization of sub-contracting
    • 2^nd was technical capabilities
    • 3^rd was trust – used the Prisoner’s Dilemma to illustrate how entering cooperative relationships rather than self-interested ones are better in the long-haul. Trust and cooperative negotiation has been covered really well in a class I recently took on cooperative negotiations based on the book “Getting to Yes”. I highly recommend it as a great adjunct to this session…I should mention it to Aaron as well. The most interesting experience in the class was how quickly relationships can devolve into mutually assured destruction, even when cooperation would yield better results individually and in toto
• • • 4^th was cost & value
• Outsourcing production
  • Issue RFP – the more detailed, the better
  • Look at a staged approach – start small and ramp up
  • Clear feedback is important, particularly for rework that might pop up in future iterations

Aaron then covered common mistakes:

• Know when NOT to outsource – team not ready, requirements not clear, insufficient infrastructure to support a vendor, never your core competencies
• Uncover hidden costs – time to integrate outsourced assets, level of completeness, changes in scope/specs
• Verify data security/protection measures – don’t forget the human element, not just technology
• Track key personnel – watch for staff rollovers
• Care about cultural differences
  • Used the example of McDonalds making their offerings more culturally specific (green bean pies in
    China, vegetarian in
    India)
• Start locally or in a similar cultural/language background if you have limited experience with outsourcing. When ready to consider
  China or
  India, he suggested we read the book “The Elephant and the Dragon” by Robyn Meredith – describes the differences between the two countries, each with their own strengths and weaknesses.

Overall, Aaron’s presentation brought back a lot of memories of when I was a consultant. Being on the “agency side” (as they say in the Advertising world) was a real challenge. The Games industry can certainly benefit from the years of experience other industries have gathered from outsourcing; there’s no need for games developers and publishers to reinvent the wheel here.

Questions from the audience:

• On SW development side we run into challenges in non-compliance – ask for a document that certifies the vendor is site-compliant; been cases where the BSA raided vendors and seized the partially developed assets on non-compliant SW
• Large audio production outsourcing company – how do we control producers asking for very high quality with very low turnaround times or expected price? Answer: From previous presentation, instead of saying “no”, say “why not?” then walk through what would be realistic and what isn’t – be clear, honest, open about what you think is feasible.
• Follow-up: small outsourcing narrative firm – how do we change paradigm for convincing studios can outsource narrative and story? Answer: Will be very hard because most studios see this as their core competency. Need to look for studios that don’t see it as core or are currently too hard-pressed to do it right.
• Handheld developer with main site in
  Hungary – dealing with poor perception of our location and
  Eastern Europe, how can we overcome? Answer: there is no “one” eastern Europe, and one approach is to highlight how each area in the region differ and where we fit in – get focus away from your physical location and more to your competencies.
• Do you see a tendency for larger publishers and developers to have in-house or captive outsourced operations? Answer: yes – many are building offshore studios, mainly to deal with areas where they’re nervous about IP or security. Doesn’t see it fully replacing true outsourcing.