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Babel's Richard Leinfeller and Algy Williams

Wed 02 Jul 2008 11:00am GMT / 7:00am EDT / 4:00am PDT
Outsourcing

New CEO Richard Leinfeller and co-founder Algy Williams talk about the company's new partnership with Quatrro

Babel Media

Babel is the leading global provider of outsourced specialist services to the games and interactive entertainment...

babelmedia.com

Although outsourcing seems to be a topic that has come to the forefront in the games industry only recently, one company has been at it since 1999. Babel employs 500 staff at its offices in Brighton (UK), Los Angeles, Montreal and New Delhi providing a wide range of services.

Over the years, the company has worked all the big publishers including EA, SCEA, SEGA, Nintendo, Microsoft, THQ, Ubisoft, Eidos, Capcom, Activision-Blizzard, Namco Bandai, Midway, Konami, Take-Two, Warner Brothers and LucasArts.

Yesterday, Babel announced that it had received new investments from Quatrro and the DE Shaw group which will allow the company to significantly expand its capabilities.

Richard Leinfellner, Babel's new CEO, and Algy Williams, Babel's co-founder, spoke with GamesIndustry.biz about what it means to become part of the Quatrro group of companies.

Q: What was your most recent role at Electronic Arts, and how have you come to be associated with Babel?

Richard Leinfellner: I've been with EA about 11 years now, and my main post at EA was vice president and executive producer - so I've been basically producing games.

However, a few years back, I actually landed a special project which was to look after outsourcing. At that point, I became very interested in that field.

If you want to go deep into my background...My real background sort of started with programming videogames in the early 1980s and then moved to games production and team management. So, I suppose if you go back right from the beginning, I'm a programmer.

Q: Right. I think some of our readers may be familiar with your Commodore 64 and Amiga titles.

Richard Leinfellner: I basically cut my teeth on the C64 working on Cauldron and Barbarian, and then stuff on the Amiga, and at that point I sort of stopped programming and worked more on management of teams.

Those were the good ol' days, when you could put a game together with about three people. [Laughs] Most recently, I've been running our studio in Germany with somewhere in the region of 85 or 90 people working on one game.

Q: Yes, the industry definitely has grown a lot in such a short amount of time.

Richard Leinfellner: Hugely. And, obviously, one of the things that has happened is the fact that nowadays with such large teams you have to think about what you do with them between projects.

Q: And that leads us to what Babel is doing. What specific aspects of the development process is the company involved in?

Algy Williams: It's a whole range of services across all platforms.

The largest service line is QA - functionality QA and localisation QA. We also do localisation itself, so we translate on average about a million words a month. We're working in over twenty languages.

We also have a fairly sizable audio operation where we are casting actors, recording in-country and then post-producing audio. Again, that's in probably about twenty languages.

So, there are those areas. We also work in print, we work in certification, mobile QA - the localisation of that as well - and also mobile porting. So it's a very, very broad range of post-production and development services.

Q: With Babel now becoming part of the Quatrro group of companies, what specifically do you bring to the table for them and what will they be able to do for you?

Algy Williams: The background of this is, I started the company with two others in 1999. We had two very small, or pretty small, VC runs. And we've grown from nothing to 500 employees operating in Europe in Brighton, in Montreal where we're talking to you from today, in New Delhi, and Los Angeles.

So, we've grown very, very rapidly on what everybody accepts is a very, very small amount of investment. The company has done phenomenally well. We're very profitable - we're growing at a very, very fast pace.

But what was very clear to me is that, given the massive movement towards outsourcing - the huge opportunity that that presents - we really couldn't take advantage of that opportunity unless we became a hell of a lot bigger very quickly.

And so, what Quatrro has brought to us, is they've allowed us to retain our branding, the management team - obviously, with Richard coming in - our exclusive focus on games. They've brought a huge operational experience and strength in terms of scaling companies that's basically global as well. Clearly, they've brought us very significant financial strength.

Now, put all of that together with our client list and our reputation and our expertise, and you've got a company that will be able to address this huge market. We're one of the leaders at the moment - we intend to carve out a position as the world's largest and leading games outsourcing company.

Q: Quatrro is a global business process outsourcing company. Is this their first foray into the gaming industry?

Algy Williams: It certainly is.

What they do is, they look for various sectors where there is a very, very strong management team, very, very strong growth opportunities and a proven delivery track record with strong relationships.

They essentially leave us alone - and this is the same for all of their acquisitions - but they provide us with operational scale, if you like, and expertise and money.

I'm stepping back because I've been doing this for a long time and I'm more interested in the strategic side, but the rest of the management team - that's the sales director, operations director, finance director, client services director...all the senior staff - are staying with the company.

Essentially, it's business as usual for the company other than the fact that we now have funds for some very, very aggressive expansion - both organically and by acquisition.

I'd also like to point out that I'm actually retaining a pretty significant shareholding in the company, which I'm very happy to do because the prospects for the company are massive. That's a very strong point for me, that I'm able to retain a large stake.

Q: So you aren't "cashing out," then. You obviously believe that this transaction will have a positive impact on your company.

Algy Williams: We can't tell you any more details, but we've already won a very large contract based on our client relationships, but most importantly, based upon the fact that this transaction has just taken place. Because now we're able to take on a contract of real scale, whereas before we just simply didn't have a strong enough balance sheet in order to do that.

If you look at our client list, you'll see that they're all multinational companies and they need to be working with multinational suppliers who are very well funded, and that's where we are now.

Q: The issue of outsourcing in the games industry - is it a matter of the clients you've mentioned not having the capacity to handle every aspect of the projects they are working on, or is it more of an attempt at cost savings? Or both?

Richard Leinfellner: It's a mixture. I can obviously speak with my ex-publishing hat on.

The issue is, for a lot of the big games publishing organisations, it's like feast or famine. There are absolute peaks when you need more staff than you can muster, and there are troughs while you are designing a new game when actually you don't need all the staff on the books.

Essentially, what they are doing is going through what happened in Hollywood in the 1950s when Hollywood studios suddenly became decentralised and outsourced. For the moment, the studios are still carrying a lot of those costs on their books between projects. And we see that changing towards a much more flexible work force to bring experts in when needed.

That allows the game studios to be much more creative, because they're not thinking 'I'd better start working on this game because I'm carrying a hundred headcount.'

If you've got back-to-back releases, like some sports games are, that works absolutely fine to carry that headcount. If you are trying to innovate and create new IP, it's an absolute disaster to carry that headcount.

So, essentially, you have very good years and you have very bad years, and net-net, you're probably breaking even.

Algy Williams: I want to pick up on something that Richard was saying.

We were one of the first companies, if not the first company, to start "preaching" the outsourcing gospel back in 1999. At that state, there were no credible service companies that publishers could outsource to even if they wanted to back then.

The difference now is that publishers are looking at new business models, more flexible business models, ways of delivering games that are getting ever more expensive in a more efficient manner.

Where we have really benefited, I think, is that we've proved that there is a very credible, expert outsourcing sector now providing services that publishers are beginning to understand can be delivered quicker, more efficiently and to a higher quality if they outsource.

So, if you like, it is really a perfect storm where publishers are really wanting to change their business model, number one. And, number two, the services sector - and obviously I want to talk on behalf of my company - is able to deliver a very, very high profile, high volume contract on time and on budget. So the publishers don't have to get involved in these areas of post-production.

Q: What do you think has allowed these companies to now become credible and able to meet the demand for outsourcing? Was it a matter of education, improved technology or overcoming cultural barriers?

Richard Leinfellner: There are number of factors, actually.

One of them is, there is much more standardisation now, the same way as in Hollywood. Now we have standard packages. That's helped a lot.

Secondly, there always used to be a deep suspicion within in-house development teams to send anything at all outside. The fact is, it is working. People are now doing it, and sending stuff outside, and its coming back exactly the way they want. It is changing their mindset.

Thirdly, you just can't get the scale. You can't just turn the tap on and have 50-100 testers available or 25 people speaking a particular language.

It's really providing all of those, and I think all of those things are coming together - as Algy says - into a perfect storm. Suddenly, there is a great need, a lot of the suspicions people have about sending work outside are disappearing. And you are seeing companies such as Babel coming along and really offering AAA service.

Algy Williams: Just in terms of scale, as I mentioned, we've got 500 employees now - which is a sizable company. We've got 42 "figs" here - French, Italian, German, Spanish speakers - at the moment. That's 170-180 linguists.

Any publisher, whether they are in the top ten or indeed sort of the "tier two" publishers, can now pick up the phone to us and get immediate access to one of the largest QA departments in the industry - one of the largest localisation departments in the industry - so they can tap into immediate scale.

When you are talking about the current generation product, which are requiring very large teams, publishers are beginning to realise that there are suppliers out there who can deal with it.

One other thing - we have invested since 1999 in process. And clearly it's a question of process in how we deliver work, but it's also a question of investing in process in how you work with your clients and your clients work with you.

And we are getting far more sophisticated on both sides on how we do business with each other. That's also delivering huge efficiencies.

Q: Is the weakened dollar a concern for you at the moment?

Algy Williams: There are two responses to that. First is, clearly, the pound is strong against the dollar at the moment. The rupee is strong against the dollar. But the Canadian dollar is pretty much on par.

We are a global company, and we going to remain a global company. We are, in effect, reasonably well-insulated...But of course it's an issue. I'm not getting away from the fact that it is not an ideal situation at the moment.

The second thing is, when the American economy is getting weaker, then large companies must concentrate on being as flexible with their cost base as they possibly can. The worst thing that they can do in a weakening economic climate is increase their fixed cost base.

So, in fact, it is working very much in our favour because cost efficiency, cost savings, is at the top of everybody's agenda. And also, if they can take on a very large QA team of let's say 100 people for a project, and then lose that expense immediately when the project is complete, that is a much stronger financial position to be in - especially in a weak market.

Richard Leinfellner: Just to add...The money you save by going out of house is actually the money you never spent - it's not the difference of money in different locations, it's the fact that you don't have to carry the resources between projects.

So, you go from something to nothing. That's a huge savings.

One of the things I identified when I was working on the outsourcing initiative with EA is that there was a massive savings by just not carrying certain teams between projects, and then actually having a project manager trying to find them something to do while you are working on new IP.

You are always going to have [currency] fluctuations, but as Algy said, we're a multinational company. We will be able to put particular jobs wherever the price is right.

Q: So, basically the cost of inactivity is being transferred from the publisher to the outsourcing company, but they've got to have enough work to do or otherwise they'll have the same problem.

Richard Leinfellner: Absolutely. And that's what we specialise in.

If you look at companies like EA or Ubisoft, what they specialise in is creating IP or licensing IP and bringing it to market. What we specialise in is people flow.

Algy Williams: One of our major skills is how we recruit, train and deploy staff. Of the 500 employees we have at the moment, a large number of those are on contract or are contingent staff. So, a lot of the skill here is being able to deploy large numbers of people and to maintain a very high utilisation. That's a core part of our business. And if we're not good at that, then we wouldn't have been able to grow at the rate we have.

Q: In terms of future growth for outsourcing, many people are looking to Eastern Europe and Southeast Asia. Do you concur, and what sort of investment are you making in those and other regions?

Richard Leinfellner: First of all, we've got fairly major investments in Canada and we're going to continue that. We also have an investment in the UK which we will continue.

We are looking into Europe and also Eastern Europe - especially for localisation work. There are a couple of things which I unfortunately can't announce at the moment because we are just going through the contractual phases, but we should have a European announcement soon.

And your point about Asia...I think one of the things that is very interesting about Asia is that there are certain skillsets that are available in Asia to a greater level than they are in the west. And, again, I can't really announce it at the moment. There are going to be some new service lines which we are going to be adding to the company, and I think some of those will be based in Asia.

Also, we honestly don't believe in a one location solution. That's not what we want to do, it's not what the customers need, it's not where the skills are. So, we are always going to be a multinational, multi-site facility.

To give you an example, some of our customers like to have us close to home because it makes it easier for their producers to get to see what's going on. There are other customers who would actually quite prefer us to be further away so that they can use the time zones to actually manage their bug reporting.

At the end of the day, we need to do what suits our customers.

Because we are a company of some scale, we can also look at having some services packaged together to actually really help them have a single point of contact for services which they used to have to purchase separately from separate vendors - and incur the engagement overhead three or four times.

Q: It seems like you are so involved in every facet of game production, have you ever considered becoming a publisher yourself?

Algy Williams: I thought about it for one millisecond once, when someone mentioned it once. [Laughs] No, absolutely not....Categorically no!

It would be commercial suicide to set yourself up in competition with your clients, but also...I was in games development ages and ages ago, and it is a very difficult business.

We're very good at what we do, and there is absolutely no point in starting to move into an area that other people do very well in. We've carved out a niche - it's a very significant niche, it's getting larger every day, and this is our business.

Let me put it this way. When we started in 1999, someone asked "What do you want to become?" And I said I want to become the Technicolour of the games industry, and that's where we're aiming. Now Technicolour have very much concentrated on delivering a whole range of services to their clients.

Q: Your services are being used by all the major publishers, on big name titles, and yet your company stays under the radar as far as the public is concerned. In order to get new clients, isn't it important to publicise the work that you've done?

Richard Leinfellner: Well, the good news, in a way, is that it is a very small industry and a lot of deals happen by reputation. It's word of mouth. It's not the case that we have to advertise.

We're definitely not a consumer story. And I don't think we should become a consumer story, because that's what our customers do - they're the consumer story.

It's only right, because they're the guys who take the risks launching original IP. We're quite happy being the backbone boys that actually help them get it to market.

Richard Leinfeller is CEO of Babel. Algy Williams is Babel's co-founder and now a non-executive director. Interview by Mark Androvich.

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