A new report from media research company Screen Digest has highlighted a marked increase in developers outsourcing game development costs to alternative services providers, many located in Eastern Europe and South Asia.
The report, named Outsourcing in Next Generation Games Development, estimates that the market for game outsourcing, largely insignificant just five years ago, will reach $1.1 billion by the end of 2006 and is set to grow to $2.5 billion by 2010, representing around 40 percent of total game development spend.
The sudden increase is attributed to the arrival of the next generation of games consoles. Screen Digest predicts that publishers, console manufacturers and developers will be able to cap rising costs to 20 percent by keeping team sizes stable and outsourcing large projects to specialist outsourced studios. It further estimates that 60 percent of games studios outsource to some extent today, with this figure rising to 90 percent by 2008.
The report’s author, Rick Gibson comments: "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."
Outsourcing's common pitfalls are listed as low quality delivery, lack of due diligence and poor briefing by clients. Benefits include the reduction in development costs, accessing a flexible and temporary resource base and focusing staffs work on higher value work.
Demand for quality art and animation is expected to soon outstrip supply, with the result of 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 the report predicts as “slow, difficult but ultimately beneficial for the games industry as a whole”.