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As we at PIXELearning approach our 7th year of trading, and with a pretty good picture of the overall sector, I find it strange that there remains, still, a predominance of the ‘work for hire’ business model.
Work for hire might work for professional services where you can charge out, for example, your auditors for $200 an hour because, although some projects will be more challenging than others, a firm will pretty much know what a typical audit engagement will entail. Looking closer to home, a traditional eLearning company will most likely work from a total cost/learner hour or n (development hours)/hour of learning basis and, barring major errors of judgement, be pretty much accurate.
From my experience to date over six years working in this space and spanning 40+ projects ranging from between $5,000 and $500,000, the work for hire model is undesirable for serious games developers and for a multitude of reasons:
 Clients are not capable of creating a specification
I have yet to see a specification, RFI or RFP document that clearly articulates the full extent of the client’s requirements in a way that covers organisational goals, instructional objectives, content/curricula definitions, learning evaluation strategies, business impact/ROI approach, creative brief, technical guidelines and ,, somewhat fundamentally, the game/simulation vision. Some of these will be adequately covered – usually where that aspect is related in some way to what the issuing organisation actually does as its business – but I have never seen a comprehensive document upon which one could base an accurate price.
This is a problem as invariably the developer is required to provide a fixed price based only on the initial RFP information. It takes a brave developer to stand their ground on this issue and even if they do they will very probably lose the contract.
Now I don’t expect that your average insurance, automotive, banking or retail multinational should be able to create a proper serious games specification. Why should they? It isn’t their area of expertise. What I am surprised about is that even now, in 2008, why only a tiny few organisations employ a consultant at the scoping and procurement stage to help them define their true requirements. I would stand up in a court of law and testify that if they did do this they would save money, time and stress and significantly de-risk the project.
So what we end up with is a client that has taken a leap of faith, internal sponsors who have put their reputations (or careers) at risk, the involvement of a wider group of reluctant stakeholders and a developer who now faces delivering upon a project with no defined start point, specification or defined set of deliverables. What they do have is a defined (fixed) project deadline and contract price.
This situation is akin to a builder agreeing to design and build an ‘office’ without knowing where it will be built, using what materials and whether it is to house 10 or 1,000 office workers. Now I probably paint an exaggerated picture here, but I’ll bet that it is an analogy that resonates well with many a developer.
 Clients are usually very large. Developers are always minnows
This may not be a situation which is unique to the serious games space but the chances are that, when measured by revenue, balance sheet or head count, most clients will be at least several dozen times bigger than the developer. Often it will be a developer with an annual turnover of less than $2million working for a global multinational firm with revenues in excess of $1 billion. Big does not mean bad but it does mean that on the one hand you have a young, innovative firm with strong technological and creative leanings with a flat management structure and a dynamic ‘can do’ attitude. On the other hand you have a large, slow-moving goliath packed with 9 to 5 ‘staffers’, a risk-averse culture, big company politics, rigid administrative procedures and little or no understanding of what it takes to deliver a successful serious games project.
This clash of cultures can often make for personality clashes and client-vendor communication breakdown if not acutely-well managed. It is also worth noting that if things turn really ugly that the client’s lawyers are bigger than the developers! Managing expectations at both a macro and micro level is crucial. It is also a frustrating diversion when efforts are needed elsewhere.
 Design (scoping) comes after agreeing a fixed-price
The developer has agreed a price. The initial scoping, needs assessment and design have been undertaken. Now, however, the client’s project team have had a chance to get up to speed and they want to get creative. They have been shown some prior examples and possibly some prototypes. They have dusted down the SNES and PS1 from the attic and got all excited about the idea of contributing ideas to the game project. They have a much better idea of what is possible and want to get their hands dirty. Everybody gets a buzz out of getting creative and picturing what could be…. but the developer is working on a fixed price and time is tick tick ticking.
The biggest danger here is project creep. The client won’t recognise this as chargeable changes as you are still in the design phase….so no comparison point exists from which to measure change and besides, they engaged with the developer in order to benefit from a creative company to help them flesh out the ideas. “What’s the rush?” they are thinking. Meanwhile, the developer is asking, “where has my margin gone?” and, “how are we going to deliver on time now?”
I have rarely seen a project where the design phase is completed on time. For small discreet mini or casual games-based projects this is less of a problem. For large serious games or immersive learning simulations it is rather more of a challenge.
 There are always changes to a signed off design…but rarely extra payment
I spent nearly seven years working in the construction industry for a mechanical and electrical building services engineering firm. We worked rigidly from very detailed specifications, technical designs and Bills of Quantities. If the client’s team (e.g. the architect or design engineer) made a change of any kind then there was a well-understood process of quantifying the time, cost and other implications. The client’s team then, assuming they accepted the costs, issued a formal change request and the contractor (my employer) billed them for the work.
For the serious games developer it is not so easy. Firstly the client nearly always struggles to envisage what the finished application will look like and how it will function until they see it and try it. When they get the early prototypes, alpha and beta releases it gives them the opportunity to ‘suggest’ numerous improvements on the basis that only at this point are they able to appreciate the implications of the written design document. It is highly unlikely that the developer’s tender bid included an explicit cost for ‘client mind changes’. An iterative approach to software development can be an excellent way of getting a perfect end result from a technical standpoint but it does not make for an easily quantifiable development schedule or controlled costs. Seeing as time deadlines and budgets are the two factors about which they client will most likely fixate upon, it is easy to see how this approach can easily lead to project failure for the developer, the client or both.
Harping back to the ‘clients are large, developers are small’ point, it is very hard for the under-pressure developer to fight to be paid for each and every change irrespective of how legitimate the basis. Refusing to carry out the change will most likely be viewed by the client as deliberate intransigence or even belligerence on the part of the developer and probably a withheld milestone payment.
Most developers, engage don a work for hire model, will seek a gross margin of between 40% and 60% in order to achieve genuine net margins. A project that involves numerous and frequent changes can quite easily go from sound profitability to a loss-making situation for the developer.
It is also fair to say that the client’s project team will nearly always fail to realise the level of impact for what, to them, appear to be very minor changes. A recent client of ours, for example, repeatedly asked us to make changes to some of the in-game characters. These characters featured in many pre-rendered animations. To the client these seemed to be a quick job for an artist of, I guess, an hour or so. The reality was several weeks of artist time and a cost to the company of a few thousand dollars.
 The source code issue
For a serious games developer however, this demand is nearly always untenable. It is rare that a project will not involve some level of prior IP in the form of application code or source assets. These assets are the lifeblood of a serious games developer. They reflect significant R&D, prior capital investment, commercial risk and specialist know-how. Handing that over to a client is akin to commercial suicide yet developers will very often face a major battle on this issue.
The ironic fact is that the source code is practically worthless to the client as they are very unlikely to possess the technical ability to do anything with it. Even a competent 3rd party developer will face a massive challenge in making sense of the code and the originating developer is hardly likely to help them in that endeavour.
In reality, the client probably only demands the source code because it wants to protect it’s development in the eventuality of the developer going bust. That eventuality can easily be handled by a source code escrow agreement. Philosophically however, the ‘work for hire’ model puts the client in a frame of mind where they feel that obtaining the source code is a normal request.
 The ongoing ‘input’ of the well-meaning amateur
This is (usually) a minor threat – and not unique to the WFH model – but when that ‘well-meaning amateur’ is a key member of the client’s team then their desire to input into the technical, creative and instructional design process can easily create problems for the developer.
At best it is a distraction for the developer’s project manager. At worst it ends up causing project delays (which will be seen by outsiders as the developer’s fault) and eating into that profit margin.
 The 20:80 rule
This is a reverse of the commonly referenced Pareto’s Rule. Whereas traditional web content or eLearning development is fundamentally linear – meaning clients get to see progress early and consistently – serious games development is all back-ended. A significant proportion of the project timeline is eaten up by design and preparation. Underlying software engineering invariably takes time before it yields demonstrable releases. All of this makes clients nervous as they are being asked to approve milestone payments yet cannot yet play anything.
Serious games projects will almost (always?) be based on milestone payments. Not being able to show anything tangible (in the client’s eyes) makes getting paid in accordance to actual costs incurred, very challenging.
 Its hard to create and leverage IP
For a developer to make the transition from a WFH services provider to being an IP holder in it’s own right, significant capital will be required. It is challenging to raise that capital on commercially acceptable terms in good times. The collapse of the private equity markets and the extreme cautiousness of commercial banks (especially towards small companies and start ups) in recent times makes it practically impossible.
It is not in a client’s interest to help the developer achieve this by way of a WFH contract as it complicates the contracting process (the legals get far more complex) and besides if the developers starts to own it’s core IP it can potentially lock the client in (never appealing to the client) and possibly even take the same IP to competitors of the client.
The flip side is that a healthy and sustainable serious games industry would give clients major benefits e.g. stability, innovation and cost reduction through reusability but those are benefits that come from long term thinking and clients, understandably, are driven by the requirements of current projects not possible future ones.
 N.D.A. hell
“Seeing is believing,” or so the saying goes. Serious games are a medium that is hard to convey the value of…until you see them and try them. Sales people need to be able to show stuff off in order to generate new leads and close new deals.
Clients do not like that for the understandable reasons that their project is most probably linked to a desired increase in competitive advantage in one way or another. Naturally they do not want their competitors to hear about this.
When it is the client that is funding the project through a WFH model then the developer is always locked into a frustrating Catch 22 situation where their future growth and sustainability depends on sales but it is hard to generate new sales when you cannot demonstrate (or even talk about) your prior experience and project successes.
 A fixed gross margin…that shrinks
‘Work for hire’ is very probably going to be on a fixed price basis. The developer will target a gross profit margin that they seek to achieve. Depending on a number of factors (use of prior IP, eagerness of the developer to win the project, direct and overhead cost basis etc) this is likely to be in the 40-60% range.
Whether this works operationally depends a lot on the capital base of the developer (do they have private equity investment and an aggressive growth strategy for example?) their approach to operational resourcing (a fixed-cost internal team or a burstable model based on variable cost contractors and freelancers?) and their underlying overhead cost base. It also depends upon scale. The overhead cost base should be fairly static. The developer will need to achieve a critical volume of profitable projects in order for the gross margin to flow through to cover (and hopefully exceed) the overhead costs.
Delays to projects starting, design creep, post-design feature creep and other factors will occur and will therefore eat into this gross margin. The danger is that this makes it very hard to cover the overhead base at times and the finance director and company owners will find this very uncomfortable.
 Projects fall into fiscal quarters
Big companies think in quarters. Invariably the required project timeline will be either three months or, if the developer is lucky, six months. We often think in terms of the 40:40:20 rule. That is 40% of the project time for design, 40% for core development and 20% for final QA and integration. Given the peculiar hybrid of skills, experience and content that goes into a serious game project and thus, the wide number of people involved in it on the client side (who all have day jobs) it is very hard to create and agree a robust design in anything less than two months.
Starting development for a three month project in month three is project suicide. Starting development on a large project without a robust, signed-off design is also project suicide. Inevitably this leads to a project delay of anything up to 50%. Whilst internal client stakeholders will feel the heat from their superiors, it is hard for the developer to overcome the perception that they are the cause of a ‘slippage’.
Invariably what this pressure leads to is an iteratively created design and for a substantial proportion of the design and development activities being run in parallel. The likelihood of achieving this without frequent design and/or development changes, delays to the process (whilst the developer awaits client sign off, content or clarification on a design aspect) are going to occur no matter how much effort the developer puts micro managing the project.
So, clearly I am not a strong advocate of a work for hire business model for the serious games space. The question is what are the alternatives and is it even possible for the development community to adopt these?
Answers on a stamped, addressed postcard please!
My favourite eLearning group, US-based The ELearning Guild, yesterday released their latest 360 degree report. This time the focus is upon eLearning 2.0, a subject that is close to my heart being in the serious game and immersive simulation space myself.
I have copied some descriptive text below – find out more at http://www.elearningguild.com/research/archives/index.cfm?action=viewonly2&id=134&referer=
Published Date: 09/23/2008
Learning in a Web 2.0 World
by Steve Wexler, Jane Hart, Tony Karrer, Michele Martin, Mark Oehlert, Sanjay Parker, Brent Schlenker, and Will Thalheimer
People that read the Guild’s 360° Reports on emerging technologies often express the following fears:
- The emerging technology will obsolesce what they do now;
- The emerging technology will be difficult to learn;
- It will be difficult to convince colleagues and management that they should embrace the emerging technology; and,
- Not embracing the technology will lead to certain doom.
Our comprehensive research and analysis from industry experts should allay concerns over the first three items. Indeed, the use of traditional classroom instruction is actually *up* from a year ago, so e-Learning 2.0 approaches are not going to replace instructor-lead training or e-Learning 1.0 approaches anytime soon. As for the fourth item, while the language may be somewhat extreme our research shows that organizations that ignore incorporating Web 2.0 approaches for their learning initiatives may be doing so at their own peril (at least according to Guild members’ survey results).
My company, PIXELearning, is running further half day hands-on workshops on experiential learning. Each one with a different focus, all are free to attend but with a small and limited capacity. It’s a chance to see how immersive learning can be effective as an alternative to classroom training whilst saving on training budgets.
“Chalk Talk 101” is aimed at anybody interested in learning more about Immersive Learning Simulations (ILS) aka “serious games”. What is, and how do I implement a successful game?
http://chalktalk.eventbrite.com October 23rd
“Chalking up your skills” covers personal skills development such as Leadership, and Diversity and Inclusion
http://chalkingup.eventbrite.com October 30th
“Calling a Serious Solution” will focus on the areas where role play works particularly well such as Customer Service, Call Centre and Sales Training.
http://callingaserioussolution.eventbrite.com November 6th
Venue: The Serious Games Institute in the centre of Coventry, West Midlands.
Well…not just talking, honestly.
I am speaking at three upcoming, high profile events in th enext couple of months all of which have a quite different feel to them. Details below…if you are in the vicinity do pop along and say hi.
Monday 6th October, London
VIRTUAL WORLDS FORUM
How do we get serious? – The Practicalities of using Serious Games in an enterprise environment
1. What do we mean when we say ‘serious games’?
2. What organizations are doing in 2008 and why they are doing it.
3. Keeping it real for learning & development.
4. The investment outlay – the real internal and external costs of a project.
5. Sensible timescales & stages – implementing a project to guarantee success.
6. Processes & approaches that work (and that don’t work)
7. Deployment issues – hosting, bandwidth, costs, internal promotion and support.
7th October, BAFTA, London
Learning & Development in Broadcast
This event is aimed at senior L&D people within the broadcast sector and I have been asked to help illustrate what is going on in other industries with particular reference to innovative approaches to L&D.
I shall be attempting to:
- explain what serious games and immersive learning simulations are, how they are used, why etc with quick examples (PXL & other companies).
- Illustrate the challenges we/clients face e.g. Lack of awareness of the medium (embryonic still), resistance to medium (and the term ‘game’) in traditional corporate and L&D, need to help clients understand design, development and deployment issues (different to eLearning), cost/business models, IP issues (background vs foreground IP) and measurement (learning and organizational impact for decision-making and ROI). Blending learning games/sims with traditional instructor-lead training, eLearning, OTJ training and coaching.
- Describe the required team skills (internal & external); Illustrate breadth of skills required e.g. creative, software engineering, instructional design, game design, simulation modeling, subject matter expertise, testing/QA. Explain nature of each and how teams function.
- Walk through an examples (talk thru); Illustrate how different industry sectors, behavioral and functional training needs have been tackled with games and/or simulation approaches with PXL and other vendor examples. Briefly illustrate range of technical approaches and where they are/are not appropriate. Focus on examples aimed at adult vocational learning, especially where end user audience are graduates/professionals rather than military or school examples as these are not relevant to conference audience.
Thursday November 13, San Jose, CA
514: Best Practice Guide for Implementing Immersive Simulations
Organizations that require training, but with tight budgets are no longer able to fund classroom training, are starting to discover the benefits of a more efficient training method. Immersive Learning Simulations are cost effective and efficient, and they provide high quality learning results, benefiting not just the user but the organization.
In this session, participants will gain an understanding of the key functions to look for when implementing an immersive learning simulation. You’ll learn how to simplify the processes of deployment, the do’s and don’ts for implementing, and how to provide motivational experiences. You’ll follow a step-by-step best practice guide to implementing an immersive learning simulation that will take you through the inception of your idea, the justification of your concept with supporting documentation and theories, to the design and implementation stages. You’ll go through key areas, such as calculating the return on investment using real-life case studies based on your customers, integrating a LMS system, and why to use 3-D environments instead of 2-D environments.
In this session, you will learn:
- How to implement an Immersive Learning Simulation
- How to identify an approach to training that suits your organization
- The costing and time scales for simulations
- Different technological approaches to learning simulations, either virtual worlds or bespoke solutions
- What game genres engage different target audiences
Intermediate Designers, Project managers, Managers, Directors, VPs, CLOs, and Executives.
Adobe has teamed up with Brickfish to launch the “eLearning Challenge” campaign located at the following URL:
The campaign is looking for learning professionals, subject matter experts and designers that can or have created online learning content using Adobe tools products.
Adobe will give away prizes for the best image, best video, best blog and most viral. All winners will receive Adobe Creative Suite 3 Web Premium and get free attendance to the Adobe Learning Summit.