LOS ANGELES--Outsourcing and offshoring have come to gaming. Greater China, Eastern Europe, and India in particular offer deep pools of low-cost development talent. But how can US companies work with offshore partners effectively? What do they need to do, and what are the risks? An afternoon panel presented as part of this year's E3 workshops answered some of these sessions.

Jason Robar of the Aisa Group, a consultancy focused on global game development, led a discussion that presented views from both sides: US companies that use offshoring and offshore development firms that do game-related work.

On the demand side, Dan Bernstein of Sandlot Games, Tobi Saulnier of 1st Playable productions, and Rich Vogel of Sony Online Entertainment discussed their experiences working with offshore partners.

The supply side was represented by Xin Chung of Vykarian and Rajesh Rao of Dhruva Interactive. Both speakers were the CEOs of their respective companies, and both brought some impressive achievements to the table. Vykarian worked on the EA game Lord of the Rings: the Third Age, while Dhruva Interactive did offshore work for Forza Motorsports from Microsoft Game Studios.

Robar opened the session by attacking what he described as a common misperception. He showed the attendees a slide that said: "People in _______ just don't get games," and challenged them to name the country that filled the blank. No one was able to guess, so he revealed the answer--the UK--and the speaker: an Atari executive in the late 70s who had offshored development to a British company with poor results.

Today, the UK game industry has developed to the point that Robar's mystery quote seems ridiculous, and he pointed out that dismissing China, India, and Eastern Europe as viable destinations for offshoring would soon seem just as ridiculous.

Robar's second point undermined another common idea about offshoring: that it will yield dramatically lower costs. Though Robar conceded that "decent programmers" in India, China, and Russia only make around $1,000 per month, he pointed out there are other expenses to consider.

Establishing a relationship with an offshore partner, local taxes ("or bribes" as he dryly noted), and the increased management burden for the source company all add up. Bottom line? Companies might save from 20 percent to 33 percent through offshoring: an attractive proposition, but by no means the death knell for onshore development.

All the panelists agreed with this assessment. Rather than cost-cutting, smoother workflows is the key benefit for companies that use offshore development. Vogel described the process at Sony Online: They use a "core team" that doesn't change size much and call on offshore partners as needed to balance the work load for the members of that core team.

There were two other key points on which the representatives of onshore companies agreed. First, working with an offshore partner requires better processes and improved internal discipline. A company that can't tell its offshore developers what to do won't get far. For example, Vogel commented that "art assets need to be well defined up front," and panelists agreed that clear timelines and milestones--preferably tied to deliverables--are also invaluable.

The second key point the panelists raised was the value of communication. As Saulnier put it, "You need to make your partners part of the team; they want to know what they're doing and feel like they're part of it." Tools the panelists recommended for this include e-mail, chat, phone calls, and even secure WANs and wikis.

With that, the offshoring firms took the spotlight. Rao took the chance to articulate a point that other panelists hadn't yet stated explicitly: "Outsourcing is not a Band-Aid. It's most effective as a long-term commitment with a single partner." The time and energy required to start a partnership mean that it's not a quick fix, but companies that invest in these relationships will find they deliver results consistently over the long term, even across multiple projects.

Meanwhile, Chung had heartening words for the members of the audience who were leery of seeing their own jobs disappear overseas. "You're not being replaced; you're being empowered." In his view, offshoring lets the original developer focus on what's really important while farming out noncritical tasks to a partner that can do them cheaply and well. "That means you can do that many more levels and that many more dragons, and you don't have to do the crates and exploding barrels anymore."

All in all, the panelists made a strong case for offshore game development. It's easy to imagine that despite the strong emotions attached to the idea of offshoring, financial considerations will drive more and more developers to explore these relationships.