Report: Industry turning to outsourcing

  • By Staff, GameSpot
  • Posted Mar 9, 2006 10:00 am PT

Next-generation development costs increasingly pushing publishers to shift their workload to Eastern Europe and South Asia, according to Screen Digest.

Outsourcing has been something of a hot topic in business and politics for the last few years, but if a new report from UK-based research firm Screen Digest is right, it's likely to become one in gaming as well.

In fact, Screen Digest already refers to outsourcing as "a quiet revolution," estimating that the market for games outsourcing, practically nonexistent five years ago, will hit $1.1 billion this year and $2.5 billion by 2010. The report says that 60 percent of studios already use outsourcing to some degree, with that figure rising to 90 percent by 2008.

The report's author, Rick Gibson, blames the rising cost of next-generation game development for the bump in outsourcing. He says it's not only cheaper to outsource, but it also provides developers with flexible and temporary workers for more menial tasks, allowing in-house staff to spend time on more important work.

According to Gibson, "Outsourcing is in wide use today, but it is not a magic wand. You get what you pay for in the trade-off between price and quality, but the real costs of outsourcing are often below the line. This is forcing the industry to undergo a fundamental shift towards stronger project management skills, which have been lacking in many organizations."

However, Gibson also cautions that the demand for outsourced development will exceed the supply, resulting in "rising prices, continued suppression of the number of new titles in development, an increase of financing into the games services sector, and a number of new market entrants, particularly traditional media companies, whose entrance will be slow, difficult, but ultimately beneficial for the games industry as a whole."

34 Comments

  • SavoyPrime

    Posted Mar 10, 2006 1:52 pm PT

    Well, the next-gen is certainly causing a change in the development environment. But outsourcing could lead to some major issues.

  • rbarahona

    Posted Mar 10, 2006 9:09 am PT

    I hope that they can set good standards for the code and part of the games they outsource...

  • Achilles438

    Posted Mar 10, 2006 8:02 am PT

    this is not good at all, what if Europe suddenly doesnt like us anymore? who will make these games then? And that goes for the rest of the companies outsourcing their products.

  • ufopuller

    Posted Mar 10, 2006 7:55 am PT

    Take to asia, be even cheaper

  • Game13a13y

    Posted Mar 10, 2006 7:17 am PT

    this is how the economy goes. would you rather pay $1.00 for a piece of bread, or $10.00 for the same piece of bread?

  • chrisdojo

    Posted Mar 10, 2006 5:23 am PT

    how dumb is this. can america do anything for itself anymore????????????????????????????????????

  • ewjim

    Posted Mar 9, 2006 11:50 pm PT

    They (developers) just want MORE $!!!

  • famuboy

    Posted Mar 9, 2006 11:09 pm PT

    Outsourcing is not a silver bullet. Just like any other piece of development, outsourcing must be managed and carefully planned. Otherwise you're just wasting time. Trust me, there are enough problems dealing with external "specialists" in the US that do sfx, graphics, music, middleware, marketing, cg movies, translations, or whatever. Entrusting game development tasks to someone far removed from the process is like sending a test tube of man juice to some surrogate mother somewhere in the hopes that she'll raise your kid for about 4 years just the way you wanted. Yeah right.

    Not saying it can't work, but it's difficult...really.

  • GyRo567

    Posted Mar 9, 2006 7:43 pm PT

    And God saw the PC and its lower development costs while maintaining higher gameplay standards, and he saw that it was good. Amen!

  • Chainblast

    Posted Mar 9, 2006 7:02 pm PT

    You know what's funny about this? Games like Super Mario World and Metroid are still better than "most" games released today. Graphics are nice but they have little to not bearing on truly great games. I think Nintendo knows this and they're going that way with the Revolution. This next-gen console war should be rather interesting.

  • Ravenlore_basic

    Posted Mar 9, 2006 6:37 pm PT

    I have said this for a while now and it works like this. -- -- First You have a team that comes up with the game and work out how it is going to work and look and then you have the grunts do all the coding and small work and then look at what they have done and have them change it if needed. -- - -- - They work more and for less than 1/4 the cost of programers in the US or Western Europe. -- - - SO games can be done faster and at less cost. It is a must and is happening regardless of what people think. THIS will only aid in keeping prices as they are and avoid prices from going up as Adding more physis, bigger game levels, better game elements, more VOICING, and increased labor cost form developers here will still push game development up. This is only an atempt to keep prices under control; as much as possible.

  • paranoiasurviva

    Posted Mar 9, 2006 6:20 pm PT

    I love outsourcing.

  • paladinvn

    Posted Mar 9, 2006 4:33 pm PT

    We will have some "made in China" games next year... *sigh*

  • superbrett2000

    Posted Mar 9, 2006 4:03 pm PT

    I would rather pay higher prices than save $5 or $10 on a game because of oursourcing.

  • Odin897

    Posted Mar 9, 2006 3:24 pm PT

    I'm happy that atleast SilV3R and I have an understanding of of basic economics and what the government's responsibility in economic growth really is. I suspect another reason for outsourcing is to avoid that unbelievably complex taxation systems in Western nations. The American tax code alone now is longer than 10 thousand pages....10 FREAKING THOUSAND!! Not only that, but almost all of our tax laws encourage us to spend and consume instead of save and invest. Did you know that investments in companies are taxed five seperate times. This is one of the top 3 reasons for outsourcing and frankly I cannot blame the corporations for doing it. If the government really wanted to keep jobs here we would move to either a flat income tax or a retail sales tax/poverty rebate combination. Silver is also right in saying that it is not the gov's responsibility to see that everyone is employed; it is their responsiblity to keep the conditions for growth (captial accumulation, monetary stability, etc.) as healthy as possible.

  • Plays_4_Pants

    Posted Mar 9, 2006 3:11 pm PT

    i agree with 2nd post here...go the way of the rev or watch this industry concave from its own technology and "innovations."

  • KingJ2002

    Posted Mar 9, 2006 2:54 pm PT

    so... they outsource the work to put a buugy title on store shelves... then release patch after patch and "extras" on places such as xbox live marketplace so the hardcore can pay for something that should have been in the final product... microtransactions... gotta love em.

  • yanks26wsw

    Posted Mar 9, 2006 2:23 pm PT

    ok then?

  • FrankSoul

    Posted Mar 9, 2006 1:17 pm PT

    i am not even worried about such thing for once almost every game that where made in country where it was cheaper to produce , have almost all failed in europe and north america, the reason is they are for the most part unable to produce a style and quality of game that appeal to european and north american. some great games have come out of those places but they are RARE. in the long run its not even worth it for the company to send things there, part of the production are made there like the copy and labeling and boxing ( duh) but usualy not more. Gaming industry is just like the movie and music you cant really have it made elsewhere.

  • NeoJedi

    Posted Mar 9, 2006 1:16 pm PT

    Now we'll be able to buy games "Made in Europe"... nice.

  • SilV3RSix

    Posted Mar 9, 2006 11:50 am PT

    People who talk about losing jobs to oversees workforces are misinformed. As noted, competition forces businesses (in this case developers) to become as cost efficient as possible. This in turn means lower prices for you and me. If we closed our borders and kept the jobs here, costs would go up and we would ultimately have to pay for it. Duh.

    The article makes a good point: "He says it's not only cheaper to outsource, but it also provides developers with flexible and temporary workers for more menial tasks, allowing in-house staff to spend time on more important work. "

    This is an important concept for lazy Americans who think its the governments job to employ its citizens.... If foreigners can do something cheaper then we can, then we simply need to get creative and do something they can't.

  • spidey008

    Posted Mar 9, 2006 11:25 am PT

    This is a problem in all job markets, but it is the consumer that drives this. The consumer wants cheaper prices yet employees want higher paying jobs. This forces companies to look elsewhere to drive costs down for consumers. It's too bad that this is what it has come too, but just as long as games are good, I really don't care.

  • Yoshi

    Posted Mar 9, 2006 11:23 am PT

    The real problem here is that the gaming industry has yet to find it's operating model. It went from a niche market to an industry that could rival Hollywood in money making potential in a relatively short time. Unfortunately Hollywood has had almost 100 years to figure out the best way to run their business (one could say they still have a long way to go as well.) But gaming swelled fast when it took off and the real truth is most game companies are run by amateurs and people who have no real idea how to successfully manage a project, keep costs and deadlines in line and turn a profit at the end of the day. This is just another lame attempt to shave off $$ as opposed to running a successful business. It may be band-aid for immediate problems, but if the industry doesn't apply a tourniquet soon it will bleed out.

  • DarkJedi8_basic

    Posted Mar 9, 2006 11:23 am PT

    Don't blame me...I voted Democrat!

  • FourSwordsx4

    Posted Mar 9, 2006 11:16 am PT

    Outsourcing sucks, when I call tech support, I don't want to be directed to some guy in China who can barely speak English.

    I'm not trying to be racist, but that's how it is.

  • DryvBy

    Posted Mar 9, 2006 11:13 am PT

    wow, will we get more "ALL YOUR BASE ARE BELONG TO US" games with this?

  • frankeyser

    Posted Mar 9, 2006 10:32 am PT

    we as consumers are going to get the shaft twice. mediocre products adn a high price tag to boot. life is peachy.

  • Donkeljohn Site moderator

    Posted Mar 9, 2006 10:30 am PT

    If we want reasonably priced games, then outsourcing must be done.

  • FrankSoul

    Posted Mar 9, 2006 10:23 am PT

    actually it wont work games are a form of art like television and movies everytime they tried to produce for cheap in those country it rarely worked and end up with 'mediocre' product. it may be more expensive to produce the game here but it usually balance in the end since you get a product of higher quality that appeals more to the european and north american market. best exemple is the number of studio that are oppening in montreal

  • EBWCLIF

    Posted Mar 9, 2006 10:18 am PT

    just because companies save money on development doesn't always mean they pass the savings on to us. They'll probably still charge $60 for games even if they cost less to produce.

  • Walter_Sobchak

    Posted Mar 9, 2006 10:17 am PT

    I, for one, welcome our new insect overlords.

  • Rej72380

    Posted Mar 9, 2006 10:13 am PT

    On one hand, it will cause the jobless rate to skyrocket. On the other hand, it will save businesses, especially small businesses, a lot of money on manufactoring and allow them to sell video games below the $35 range.

  • Sil3n7Knight

    Posted Mar 9, 2006 10:12 am PT

    Keep the dev costs down.... yet another reason we need the Rev0lution

  • DLUX85

    Posted Mar 9, 2006 10:03 am PT

    Great...less jobs here.

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