Outsourcing Summit: What Are The Business Gotchas?

As part of the Day Long Game Outsourcing Summit at GDC, a panel discussion about avoiding the potential pitfalls of outsourcing from both sides of the relationship took place. The speakers were Aaron Pulkka, Vivendi Games, director of global outsourcing, Zhan Ye, of Game Creation, James Jen, who handles digital entertainment outsourcing for Augmentum, and Chris Kauza, of ACS. The panel was moderated by Jay Minn of AristoDigital. The panel began with an audience question -- what's the biggest challenge for outsourcing? In a statement that would be echoed many times, Kauza suggested, "I think it's communication... managing and setting expectations for the project is key... day to day communication, language issues aside, you have [so many people involved]." Outsourcing Contracts: The Issues Minn then took over, asking the panel to identify critical issues in contract negotiations. Pulkka offered, "For publishers and for clients in general it's important to remember why we need a contract. For the client, one of the most important things is to remember is we get ownership of the assets when the project is done and delivered. What the rules of engagement are, and milestones, and how to deal with change, and how that's worked out in the contract. When the contract is done, it's about day to day relations." Ye clarified the issue a bit. "[There are] two kinds of contracts -- an umbrella contract that affects relationships and contracts for specific projects." He said, "Change and revision mechanisms [must exist] because there will be change down the road. How many revisions are we going to allow, and what kind of feedback and how quickly will we offer it? [Also], IP issues -- obviously the buyer will own the IP, but what kind of other rights as a vendor can we have? Can we use some of the artwork in our portfolio?" Kauza maintained that a governance structure is "critical. How are you going to manage change? Who's accountable from the development shop, publisher and each of the content providers? How are they going to communicate? Good project management is also a part of this." Minn then asked what the contractual requirements look like. The discussion quickly turned to suggest that it's not just about the contract, but the relationship between the parties. Jen said, "You're not just contractually committed but philosophically and culturally working with the partner... you have to have in the contract an understanding of deliverables... but you need to be an extended team." Ye concurred. "We always like that [to be part of the team] than just 'deliver 10 models' because you have an extended cash flow and that part of the team is going to be very stable." Pulkka also agreed. "It becomes about the partnership for this to actually work. There needs to be a really good rapport between the developer and outsourcing service provider... everything from how much work they're going to need to what the requirements are... everybody's on the same page once the ramp-up happens. It's not so much about the contract, the contract defines the parameters... but really, for things to go right, you need to think more about the information that outsourcing service provider will need." IP Ownership and Legal Issues IP ownership is a sticky issue, apparently. Legal issues are problematic when working with an international outsourcer. Kauza said, "Before you go into contract negotiations, you need to have a clear idea of your ideas on IP ownership and you need to know where the contract is going to be enforced -- San Francisco, Hong Kong, Cork, Ireland? The laws of the country will affect IP ownership." Building from that, Ye said, "IP protection is going to take time in China... Talking about law enforcement, it's going to be very hard to enforce the law if it's broken in China. Have the signing entity based in Hong Kong or the U.S. if you're signing a contract in China." How do you offset IP issues another way? Relationship building, suggested Kauza. "Go for a revenue share, to extend the relationship... if you want to create more longevity to your own property, you'll want to consider being more flexible." Changing Scope, Fostering Communication Projects are always going to change their scope over time. How do you handle that when working with an outsourcing team? Jen said, "Figure out how the provider is going to be working with you -- will they adopt your processes, or do they have their own processes?" Kauza agreed. "It's really a good idea to be clear on whose change control system you are going to use. Be very clear up front. It's better to over-communicate in the beginning, especially about change control." As the project gathers steam and things become more complex, and as deadlines loom, communication can break down. How do you avoid that? Pulkka said, "Communication is obviously a challenge between languages... but it's all about being open and making it work. It's about being committed to seeing the process through. One cultural issue is that in a lot of other countries people are very reticent to announce a problem or open up an issue. People need to be aware of that and elicit that constant feedback. Encourage your outsourcing provider to raise issues, and don't penalize them for raising them." When it comes to communication, Jen thinks that "The perfect communication is no communication at all. In a perfect world no communication means that you have achieved total harmony, but to achieve that it means that you have to communicate a lot at the front of the project... the long term relationship is really important, because only through that can you reduce the communication." But Pulkka disagreed. "Even when things work well you need to communicate... silence cannot mean approval." Kauza said, "Working in an open and collaborative manner is the only way to go for both parties. I strongly encourage it as a standard." Everyone agreed that travel is the best way to foment that working relationship, whenever possible. Kauza noted, "It's in-person that makes a difference. Depending on budgets, a quarterly trip would be great. Leveraging video conferences it the way to go." In line with that, Pulkka said, "People have to go out and have face-to-face meetings and get to know each other, to really establish those relationships and find how the corporate cultures might be different. The biggest challenge is that everything is always changing -- development models, technical requirements, aesthetic requirements -- and the only way to withstand that is constant communication." Ye agreed and pointed out a great way to do it -- "As a vendor, what we like best is when the senior artist is sent and can sit down with our artists -- our artists can learn a lot." Outsourcing and Agile Someone from the audience brought up agile development. With changes even more likely and more rapid, how do you do contracts? Jen said, "We have a lot of projects that are agile or waterfall... the stand up meetings are very different... It's just about good communication, clear understanding of when the sprints are going to be, and great contact that you can talk to and change things on the fly. We typically start with a fixed price contract to make sure the companies are aligned but then we move forward with new contracts." Feedback in Outsourcing The biggest pitfall beyond actual language issues is potentially the reluctance for the developer to be negative about its outsourced resources in communication. How do you encourage honest feedback? Kauza offered, "The easy answer is you put it in a tool and that's the way it goes... but it all comes down to people. You have to like the people you're going to work with. Generally we incorporate a lessons-learned process -- we do a short meeting, what worked, what didn't work. Do that five or six times or so and you build the idea that feedback is appropriate and expected. When you have really big issues later on, it becomes easier to bring up."