Introduction
China, India, and Eastern Europe have experienced significant economic growth in recent years, establishing themselves as leading countries in the outsourcing industry. The video games sector is particularly prominent. But why does America choose to outsource? Is it because we lack skilled workers for these high-level jobs? Despite the weakening American economy, we continue to send high-tech jobs overseas. Michael Devine, CEO of Lan Haiwen, made the decision to enter the development and outsourcing business.
Due to the increased demand for outsourcing, individuals in China are embracing entrepreneurship and starting their own businesses in the outsourcing industry. This trend is occurring regularly. However, the video game industry has not fully shifted to an outsourcing model due to the fragmented landscape of service providers. This fragmentation prevents clients from strategically outsourcing their services.
...There may be a potential consolidation in the industry.
According to Andrew Day, CEO of Video Game Outsourcing, the complexity of creating and developing highly creative content poses a challenge for complete outsourcing. This undertaking necessitates advanced technology. Presently, game creators collaborate with various outsourcing companies for particular services. Nonetheless, merging these companies is expected to result in growth for game outsourcing. The video game industry originally originated in university labs during the 1950s and 1960s but has subsequently flourished into a profitable multibillion dollar industry.
Two types of video games exist: PC games, which can be played on a regular computer at home or at the office, and console games, which require specialized hardware like Xbox (Microsoft), PlayStation (Sony), Wii (Nintendo), and a TV or display screen. The global sales from the video game industry reached $21 billion in 2003
and the global revenue in 2018 reached $138 billion.
Analysis
Information technology (IT) is impacting new product development and changing the relationship between firms and their customers. Technology enables new forms in the product development process, revolutionizing business-customer interactions.
This phenomenon has been observed in certain environments, where trendsetters have revolutionized surgical instruments and sports equipment. Game toolkits are specific applications initially created for developers to utilize. Once made accessible to the public, certain companies permitted customers to generate and evaluate product designs. After comparing the toolkits with the innovation and design process, it was determined that digital consumer networks equipped with toolkits can decrease the expenses associated with transferring information between producers and consumers.
Video game users understand what successful design structures are and why. It is difficult for firms to receive information about customer preferences, which limits exchange networks and creates challenges for firms in processing information. As developers try to perfect new games through trial and error, costs increase. Networks of consumers have taken on the responsibility of improving existing games and designing new ones.
There are two types of game variation based on changes in game elements. Partial conversion mods involve adding new content to the game by modifying and adding to its media files. This includes changes in game scenery, music, as well as improved or additional characters and objects. Partial changes can also involve modifying a game's map files, which control character and object positions and movement, allowing for the alteration or addition of playing levels.
On the other hand, total conversion mods create entirely new games by making coordinated changes to media, map files, and other game functionalities that depart from the original game
theme.
These mods are freely distributed on the internet, where online feedback can generate word of mouth effects and contribute to the success of the highest quality mods.A decade ago, people lived in a culture that had predictable consumption patterns, which facilitated the mass production of cultural artifacts. However, there has been a shift today as networks are being redefined to adapt to the changing culture characterized by unpredictable consumption patterns.
It is increasingly difficult and costly for firms to understand their customers and develop products that meet their diverse demands. Some companies are outsourcing product innovation and development to external sources, including their own customers, as a new business model. For example, video game firms are successfully outsourcing parts of their game design and development process to digital networks. While there are benefits and risks associated with outsourcing, economic analysis suggests that profit-maximizing game producers have incentives to partially open game content to users and compensate advanced ones, as long as it complements rather than substitutes for the original product. By separating game content from the platform on which it runs, firms can reduce the risk of outsourcing novelty and development to digital networks. However, allowing a network of consumers to develop the game also increases the risk of poaching and competition from other firms disguised as users, potentially resulting in wealth transfer away from the original game creator.
Working together with trusted partner firms can be more advantageous in situations like this as they can help in designing the core product while ensuring strict confidentiality. Some game developers have achieved success by limiting extensive modding. As per a prominent gaming industry market research analyst, mobile gaming
on smartphones and tablets constituted 42 percent of global market sales in 2017. This percentage rose to 45 percent in 2018, indicating the growth of the worldwide gaming market and its impact on traditional game development practices. To fulfill the increasing demand and cope with price pressure due to heightened competition, alternative production models and labor sources have become essential. In 2006, outsourcing companies were employed by 40 percent of game studios.
According to a study, 86% of major studios use external developers to save costs. The mobile gaming industry is not restricted by console-specific coding needs and does not rely on expensive gaming equipment. With a modern smartphone, individuals can effortlessly access top-notch gaming without substantial expenses. Unfortunately, this trend of outsourcing has adverse effects on employment opportunities for creative talent in the United States.
The statistics from Indeed show that job listings have decreased by 65 percent between 2014 and 2017. However, there has been a significant increase of 50 percent in job searches for game development positions during this time. To cut costs and management responsibilities, employers in the Game Industry are increasingly relying on outsourced labor. These outsourcing teams are located in different geographic regions and time zones, allowing them to improve efficiency by coordinating schedules and maintaining round-the-clock production.
References
- Digital Consumer Networks and Producer-Consumer Collaboration: Innovation and Product Development in the Video Game Industry; Arkji, Reina; Lang, Karl (2007)
- https://www.gamesindustry.biz/articles/2018-03-12-could-games-development-transition-to-a-complete-outsource-model
- https://www.gamesindustry.biz/articles/the-realities-of-outsourcing
