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.
Check your initial cost calculations.
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:
It’s a smart use of funds/resource allocations.
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.