How to Outsource:Part 3

So here we are. Part III. And if you read the first two parts of our series, I think you’ll see I love the outsourcing game. We’ve worked on some fantastic projects and grown over the years and it’s why I want to share what we’ve learned. It’s not only our work, it’s our clients work, and the more everybody understands how things are done right, the more the work stands a chance of being the best it can be, and isn’t that the goal?The first two parts of our series focused on preparing your studio for outsourcing. Now your team is ready to work with an external partner.Let’s turn our attention to selecting the right partner, getting a contract into place and kicking off the outsourcing experience. With this guide you’ll be equipped to create a win-win relationship that goes beyond vendor/client relations and builds true lasting partnerships.Ready?

PROJECT SCOPE

Preparing to outsource is more art than a science. It’s important to look at development in a holistic manner.Does your team know exactly what it needs, with corresponding specifications? Or is your production dynamic, fluid, ad hoc in nature? You need to know.These two distinctive styles set the stage for the partners you’re looking for.Let’s be clear:

CLEARLY DEFINED PROJECT

• You have an art bible.

• You know the specifications.

• Technology is locked in.

• Asset lists are broken down.

• There isn’t much change, if any, possible.

AD HOC PROJECT

• There’s no art bible.

• Specifications are not finalized.

• Technology is changing.

• There are no asset lists.

• Change is as constant as the ocean.

WHY? You need to be clear upfront on the type of development you’re attempting. Any potential partner needs to be 100% aware of the essential nature of your project. It’s the only way to guarantee a successful result.

FINDING A PARTNER

You’ve completed your company and process analysis and have learned what makes your organization tick.Here’s some helpful resources to put you into contact with outsourcers:

• Gamasutra: Outsourcers listed in its contractor section. A good starting point to view company profiles.

• Events:XDS,GDC,GDCE,Casual Connect. Frequented by outsourcing companies. A great place to meet one-on-one and get a feeling for teams.

• Referrals: Games is a small industry. Finding referrals isn’t too difficult. Get onto LinkedIn and throw out an inquiry to your network. I’m sure you’ll get a few names.

VETTING A PARTNER

There was a time when outsourcing vendors were limited in supply and then out of nowhere 300+ companies appeared. It’s important you cut right to the chase by having a handy list of questions for pre-screening potential companies.And it so happens I have one right here.Q&A FOR OUTSOURCING COMPANIES – FIRST ROUND VIA EMAIL

• Ask to see their portfolio.

• Ask specifically what they did on the projects.

• Ask to see company profiles.

• Ask about management, team size, years in business.

• Ask what they feel is their strongest attribute.

• Ask for referrals or recommendations.

• Ask about their general liability insurance

• Ask about anything you think is important, right now, at the start.

WHY? Portfolios are great to look at, but you want to know the details behind certain pieces they’ve worked on. You need to know everything and as much as you can upfront. Later in the project is too late to uncover hidden secrets of their business.Company profiles show you how partners represent themselves and give you insight into their business skills. Knowing what they feel is their strong suit helps compare the work you need done to the partner’s capabilities. Referrals help you check on what others say, their experiences and results. General liability insurance helps you understand the maturity of their organization. How do they want to work? It’s important!You may have noticed money wasn’t the first thing on our lists. No accident. Ask the above questions first. If you don’t like the answers, price won’t matter. It won’t work out.

THE SHORT LIST

Okay, you’ve screened potential companies and now you have a shortlist of studios. Before rushing ahead into production or even testing, call a meeting, phone, Skype, face to face, whatever works.You need to see and talk things over with these people!

THE ALL IMPORTANT ALL-PARTIES MEETING Q&A

Let’s say this is the first time you’ve actually spoken. Look for signs of professionalism, cultural fit and, most importantly, customer service.During the call focus on:

• Their experiences – get the good and bad stories.

• Details of your project– the specifications.

• A walk through of their processes – be sure to listen carefully for any potential clashes with your way of working.

• Their man-month rate, what it is and how it’s calculated. Get an understanding of their business model.

• How they handle testing/pilots. What their experience is with the different techniques involved.

That’s it. You’re ready to make your decision. But wait . . .

LET’S TALK RATES

Currently, rates are between $4-8K a man-month.They vary depending on:

• Type of work to be performed.

• Skill-level of partner.

Go back toHow-To-Outsource: Part 1.

1. Check your initial cost calculations.

2. Weigh cost-benefit ratio of your potential partners.

Yes, there’s always someone willing to work for less. Don’t be foolish. You get what you pay for, right? There’s no point going through hellish cycles of rework, rework, rework if it can be avoided.Here’s a great question: What do you get with the upper-end of the rate spectrum?I’m glad you asked.Outsourcing is not about cheap labor, keeping prices artificially low and going to places where imaginary talent is in abundant supply. Successful outsourcing managers know great teams are rare. Not everybody can provide end-to-end integrated digital productions (IDP.)IDP effectively works like an augmentation of your internal development team and allows for maximum throughput by having a 3rd party team capable of hitting the ground running with little or no training.IDP is the evolution of outsourcing in two ways:

1. It’s a smart use of funds/resource allocations.

2. The choke-point of QA/review is removed when it’s mirrored at a partner’s location.

Lastly, you’ll encounter hundreds of studios vying for your work. Not everybody gets the job done. Peace of mind, skilled execution, quality result and finishing on time always trumps price. Always. Look, I can’t tell you how many times I’ve gotten this call:“I got an amazing offer for $3K a man-month. Six weeks later nothing’s done. I’m running out of time! Can you please help me? My job’s on the line! We can’t be late!”I always want to help, I really do, but sometimes . . . well, time’s the most expensive element to recover. Be wise. Now for the next steps.

TESTING AND PILOTS

The entire point of a test is:

• Check if your partner produces to the level you need.

• Check processes align and make comparisons.

It’s NOT a way to get free work. Get real. Please.Look, if you want to save money put some effort into this step by making it as real as possible and I’d say forgo a test and initiate a pilot.Why not?Tests are vague, poor indicators of production, and barely scratch the surface of what a project needs. This is the time to gather as much critical information as possible. Pilots are designed to do just that.Let’s look at what a pilot is.

PILOTS

• Pilots are longer than tests and generally last about 1-2 months.

• Pilots have all the characteristics of live production

• Pilots utilize specifications from the production to showcase working relationships between studios.

• Pilots tests communication, processes, tools and feedback.

• Pilots cost money. Yes, they cost money.

If the needle scratched the record when you read that, it’s time you consider a few factors.

• You’re going to spend money on outsourcing.

• You built your team.

• You got them trained.

It’s go time.And go time is exactly the time to make sure it’s all working. Get a budget together and spend some money. It’ll save you a ton of cash AND time down the road. Trust me. I’ve seen it again and again. Okay, onward.

REAL DUE DILIGENCE

Once pilot tests are completed, whittle down your list to a few partners, get on the road and visit the studios. No amount of email, phone calls, reassurances or terms of endearment can ever replace old-school face-to-face meetings. There’s no better way to really get a sense of things, vibes, auras, whatever, than being in the same room. Make this an absolute requirement before engaging in negotiations.WHY? Spending time with the team will answer any remaining questions. You’re going to be spending a lot of time with each other- understand how they speak, how they think. If things go wrong it’ll be easier to make them right. You want to reaffirm the spirit in which development will be done. There’s just no better way than being in the same room to understand the subtleties of a job.

BID/PROPOSAL/OFFER

The best part is coming to a meeting of the minds. This means having a bid, quote, or offer for the work to be done. Yeah! You’re ready to rock!Based off the materials and information you’ve provided the potential partner can now send over their proposal. This is what you need to see:

• Number of direct and indirect resources working on project.

• Charge for producers and art directors.

• Additional line item costs for travel and equipment.

• Rate and timeframe bid is based on.

WHY? Because there’s no way people managing the work are going to do the work. At least, it really shouldn’t be that way if you want your project done right. If you don’t see these items ask where they are and how your partner expects the project to be managed. All costs need to be included on the bid, especially if travel will be required. It’s best to get that out early. Walking back through the bid mathematically should be easy to do. If it’s complicated, find out why.

CONTRACT TYPES

Remember when we discussed if your development was Clearly Defined or Ad Hoc? Here’s where it matters:

• Clearly Defined contracts work on defined deliverables with clear asset lists. These are easy to do and very straight forward.

• People love these contracts because they’re based on a list of work to be done.

• The problem is if there’s no list, the production stalls and vendors wait, bleeding cash.

• Ad hoc contracts require more resources, more committed agreements with staff. Application of manpower is critical and production is more fluid and complex.

• Your team is locked and able to take on whatever you throw at them. So these contracts can work better.

• But . . . if you take too much time figuring things out, you’re paying people to sit around. Not good.

The type of contract you use augments the nature of production and potentially relieves inflexibility introduced by the production rubbing against contractual framework. Each agreement has their benefits and drawbacks, but the most important step is getting the correct contract structure worked out. Be clear on this. It’s critical.

THE CONTRACT

“Trust, but verify.” Business 101. It’s especially relevant when it comes to contracts. We could write an entire series on this alone, but let’s focus on the most important aspects of any agreement. Remember, the contract is the default position in any dispute. Get it right. And get a lawyer. I’ve got a lot to say about these things, but I’m not a lawyer and I’m not offering legal advice.

Never sign anything without having an attorney approve every word in a contract.

SERVICES TO BE PERFORMED

Ensure this statement is clear on the exact nature of work to be done. It needs to be clear and concise. There must be no discrepancies.

INTELLECTUAL PROPERTY

All work produced is assigned to client. Make sure all assignment rights of the artist are also in the document. It will also include non-infringement.

FEEDBACK/UPDATES

Parties need to agree to a standard feedback and update process that doesn’t hinder production, while also being preemptive of any issues in work produced. The general timeframe is 2-3 days. Ensure feedback process is mutually agreed upon and up to each party to implement.

APPROVALS/REJECTIONS

Timeframe for approvals should be structured in a way that doesn’t hold back production or unduly affect the partner’s ability to be paid. The standard here is 3-5 days. No more than 5 days. It also needs to include a change-order process that allows for changes to be done without holding up submissions.

CHANGE-ORDERS

This is a process in which changes are made to work without fundamentally altering the agreement/scope of work. Ensure that it’s done in good faith regarding additional costs and changes to the timelines.

COMPENSATION/PAYMENT

This needs to be spelled out and clear that it’s based on the work being agreed to (generally referenced and found in the appendix.) Make sure bank fees are addressed, currency charges are addressed and that they’re not subject to any exceptions outside of force majeure.

LATE PAYMENT

Everyone tells you they pay on time and then they don’t. Each country has their own standards for what late payment can be, but standard terms are 2% after 15 days and it escalates from there. Be clear upfront what the terms are.

SELF-PROMOTION

This clause allows for the partner to promote their work. You want to be sure any language here makes it clear nothing will be done without approval of client, which will not be unreasonably withheld.

TERMINATION OF AGREEMENT

There are two things to keep an eye out for here: termination with cause and termination without cause. With cause – make sure there’s time to remedy a breach. Specify everything within a separate clause, generally around 30 days. Without cause (for convenience) – a notice period of about 30 days is standard, along with a payment for the ability to get out. (Don’t forget this part!) We’ve seen this range between 10-15% of contractual amount remaining on the agreement.

OWNERSHIP

Transferred only when all outstanding financial obligations of the parties have been met. In other words, you don’t own it, until you pay for it.

LIMITATIONS ON DIRECT DAMAGE

Damages should only amount to what has been paid.WHY? Remember all that matters is what’s on paper. In the event of a dispute, you’ll try to reasonably resolve issues in a professional manner. However, if agreement breaks, the only recourse will be the contract.So now we have the final step, and it is . . .

KICK-OFF!

You’ve made it this far. Contracts are signed, the deal is done. Now it’s time to get started with a kick-off meeting to define all the lovely things that couldn’t be done ahead of time, namely, the in-production process and tools training.I suggest this is done in person and onsite. All principals who will work together should meet and finalize production variables:

• Weekly call schedules.

• Update processes.

• QA procedures.

• Tool deliveries.

• Training.

And yes, have some fun here. Play games, have drinks, hang out. You’re going to war together. This is the new team. Enjoy each other’s company!

So that’s it. There’s so much more to say. It’s my sincere hope you found the material useful and that it helps you on your journey to outsourcing success. Should you have any questions, please feel free to contact me. I’m always up for a conversation and I love this business.

How to Outsource: Part 2

Outsourcing is here to stay. Setting your company up for outsourcing success is about preparation and a deeper understanding of how your studio works. Part I of our series focused on the meta of outsourcing: How to prepare your organization for the process. In this installment, we’ll look at the qualities of a good outsourcing manager, internal processes and tools of the trade.It’s a great start to outsourcing excellence.

1. WHO’S IN CHARGE?

The outsourcing manager should be senior in position and experienced in production.Why?

• Outsourcing will tax your team’s time.

• This can result in budget busting delays.

• This can wreck havoc on your pipeline.

You need a steady, experienced hand to manage the process.

• A production veteran - hard to put too much value on experience.

• Grace under pressure - things always get crazy in every production.

• Numbers savvy - including P&L, exchange rates, budgeting, and basic finance.

• Organized - no procrastinators!

• Communicative - critical given the multi-time zone, multi lingual aspects of outsourcing.

• Well-traveled - don’t underestimate the value of somebody who knows how to get around an unfamiliar place and culture.

CONSIDER THIS: I’ve experienced many types of outsourcing managers. The ones who are serious are the ones who get the jobs done on time, on budget and create a powerful, successful project. The ones who are not have a good time traveling and having fun, but leave behind a trail of broken promises and wrecked reputations. It’s your company. Find serious managers.

2. INTERNAL PROCESS

Operating a successful outsourcing pipeline means having an efficient way to plan, manage and receive volumes of work from an external source. Excellent outsourcing partners will be efficient producers.

• Review your internal production process.

• Locate where outsourcing connects to your internal production.

• Get ready to process a high-volume of work.

Here’s some essential steps to take to prepare for outsourcing your production.

• Diagram your production process - cross-functional/swim-lanes diagrams are easiest to create and understand. This is an excellent exercise to gain important insight into how your studio functions.

• Determine appropriate ratio for QA/review of received files (we have found 1:13 works).

• Define escalation procedures for issues internally and how they’ll be communicated back to your outsourcing partner.

CONSIDER THIS: Outsourcing lives and dies on your internal processes. If you want to know where the structural flaws are in your organization, bring in a 3rd party. During process reviews you’ll find ways to improve. A healthy debate may break out in your company, but don’t stop! Your studio will be better for having done it. 

3. TOOLS OF THE TRADE

Where are your outsourcers? Most likely you’ll be working with teams located in a different part of the world. Time zone lags, language issues, cultural differences, if not efficiently managed, can cause chaos. You need the right tools!

• Accessibility - your tools need to be available to external parties from anywhere in the world.

• Collaborative - the system you chose must track communication in an orderly, logical way. (Not emails chains!)

• Management - ensure your tools give you a global, boot-on-the-ground view of every step of the in-progress work.

• Analytics - capturing performance metrics is worth its weight in gold. Find an active, automatic way of doing this.

• Finance - your tools must compare forecasts, actuals, issue daily reports and perform project on-going health checks.

In closing, find the right outsourcing manager. It’s critical. You need a seasoned production member to run the team. Once you’ve selected a manager, have them focus on internal process reviews and linking your organization directly to the outsourcing department. As they do this, they’ll implement tools to accelerate production between your studio and external partners. It’s a lot of work, but it’s worth it.Part III of How-to Outsource will focus in on how to find the right partner, understanding the various contracts available and commencing the process.

How to Outsource: Part 1

There are how-to guides for everything, but art outsourcing defies definition. Over the years, I received questions about ways to outsource, so I went ahead and put together a basic guide. Outsourcing probably still defies definition, but maybe it’ll be a little less confusing.I hope these steps helps you build a great outsourcing process.

1. ASK WHY

Great endeavors begin with a basic premise. Your organization needs a clear reason why it wants to outsource on its digital production.

• Are you looking to save money?
• Is your team drowning in work?
• Do you need access to immediate talent?

Knowing why you want to outsource sets the stage for all your decisions.Some other questions:

• Why is the studio outsourcing?
• How does your team feel about the decision?
• What changes are required to make it work?
• Are you communicating to your team clearly why outsourcing makes sense?

I worked with teams who had no idea why they were outsourcing. It creates internal resistance in production. Not good. Everyone needs to buy into the process.

2. WHO ARE YOU?

• Is your organization fast and loose?
• Or does your team like a highly structured process?
• Are you price sensitive or striving for value-add?
• Understanding how your organization behaves allows you to seek out the right partners to fit your studios unique culture.

CONSIDER THIS: If all you’re looking for is cheap-as-possible save your money, save your time and sanity. Keep your needs in house. Cheap doesn’t mean good. People don’t cost less than software. Trying to detour a fair price is no reason to go halfway around the world.

Here’s some additional pointers:

• Review your cost structure (labor+overhead+management) to determine your actual internal costs
• Benchmark your average time to complete like tasks (use comparison between team members, factor differential between skill, quality and result.)
• Utilizing your internal man-month, model out an outsourcing scenario that compares internal and external costs to get an accurate figure. (BE SURE TO INCLUDE MANAGEMENT CYCLES.)

3. GREAT EXPECTATIONS

• Do you expect your outsourcer to be available 24/7?
• Do you want someone who just ‘follows orders’?
• Do you want a collaborative experience?

Just like dating, knowing whom you want to be with is how you find the right person.In outsourcing, you need to find a team that matches your expectations. Your ideas of quality, delivery, communication and business style are all important. There’s nothing worse than having unfulfilled expectations. The last thing you want is to be let down. Save the heartbreak.

• Write out 5 traits you want in a partner. Select the top-3.
• Using top-3 write out your goals for how outsourcing.
• Compare your top-3 to your financial model and see if they align.

Outsourcing can easily fall off the rails. Plan well from the start. A careful plan, the right team and good communication will get you a great result, and isn’t that the goal?In Part II I’ll focus on the traits of a good outsource manager, internal process reviews the work and the tools of the trade.

5 Reasons Outsourcing Fails

Outsourcing is a way of life for most game developer and publishers. This process allows for teams to remain agile while also keep costs in control. There are plenty of horror stories of art outsourcing gone bad, but seldom do we hear why. After careful review, we have summed the top-5 reasons outsourcing fails in order to not suffer the same fate.

5. Spec creep. 

You can't hit a moving target and when it comes to outsourcing it pays to be bedrock in what you are trying to accomplish. Like all things in life, knowing what the details are make a world of difference. With outsourcing you want to be 100% clear on specifications and scope of work. A good rule of thumb here is to be thorough in your documentation and reaffirm what you have asked. TIP: Have a coworker not related to the outsourcing process read your documents and explain to you what they believe they are stating. This way you catch anything that is unclear.

4. Penny wise pound foolish. 

Nowhere is the expression "you get what you pay for" more applicable than with outsourcing. If you're getting offers that are too good be true, they probably are. On the other hand if you're putting the squeeze on your vendor in hopes to save a nickel don't be surprised when you find yourself in rework hell. Remember, the true benefit of outsourcing is the ability to access skilled talent on demand for a reasonable price. If you find yourself demanding prices lower than the cost of a software license you best look around realize this isn't Victorian London. TIP: Understand the total cost of production by calculating the time of direct overhead, man month and cycles when budgeting. Doing so will help you understand how much you are spending. You may find a team that costs more, but delivers on time and end up saving time, money and stress.

3. They can't do more. 

One of the saddest things is watching great talent go to waste and the worst is knowing that it wasn't given a chance to shine. Most outsourcing vendors have been in a constant state of production since their founding. This never ending grind has endowed them with unique insights and experience that only veteran production staff have. Unfortunately, this talent and know-how isn't tapped into as studio biases can cloud reality. No one doubts your company is unique or special, but when you are deep in production having access to seasoned hands is worth everything. So next time you're in the shit, ask your outsourcer if they can help. It may just save you some sleepless nights. TIP: When assessing outsource partners ask them for the best and worst experience to gain insight into their experience. The more you approach the process from a level of professional respect the more buy-in you will get.

2. Poor infrastructure. 

Outsourcing is a powerful process for game development and it's only as good as the infrastructure to support it. You want to be sure your outsourcing team is appropriately equipped the same way your internal development team is. Experienced outsources generally come with their own flexible pipeline that can accommodate your development needs. Find out early how your systems can integrate together in order to reduce manual processes that are convoluted. TIP: Investigate cloud based Production Management Solutions. They can significantly improve the outsourcing experience and are built from the ground-up for game development.

1. The wrong staff. 

Outsourcing done right can save millions of dollars. It can also cost millions of dollars when managed by the wrong people. The makeup of an outsourcing team requires deep knowledge of production, business and management. Shorting any of these positions will result in an ineffective experience. Seek to build departments that have the authority and mandate to implement the right processes studio wide. After all, outsourcing is a vital business process. TIP: Resist the urge to staff these position with inexperienced production staff members or paper MBA's. As productions scale-up your team will find itself in battlefield decision making situations and you want the best people making the calls.