Jasmine Minoza, the chief information officer of a Canada- based designer of video games, Adventure Gaming, Inc. (AGI), is considering outsourcing her company’s software development activities to firms in other countries. The cost of gaming research and development has become too expensive. The 2020–22 coronavirus pandemic caused many of their key software designers to leave the company, finding employment with other competitors or in different industries. Competitive salaries for potential software gaming employees exceed AGIs salary range, and Jasmine is having a difficult time finding interested potential hires Most of the time, their job ads went unanswered. With key people leaving, it was a good time to consider outsourcing AGI’s research and development work. Ms. Minoza had identified the two low-cost providers of gaming software—one in India and a second supplier in China. Both countries offered attractive tax incentives to outsource their business, and a highly educated workforce trained in Science, Technology, Engineering, and Mathematics (STEM). Ms. Minoza thought they could collaborate virtually and keep a close watch on projects and new technologies to protect their intellectual property. Minoza created Exhibit 3.7 with the following risk assessments, weights, and rank ordering. 

She defined country, strategic, and intellectual property risks:

● Country risk: political, socioeconomic, government, or other international risks.

• Strategic legal risk: different country laws may not protect

“trade secrets.”

• Intellectual property risk: a supplier may learn how to do the business better than the original company.

The AGI mobile game platform, The Extraterrestrial Federation, generated \($104\) million in revenue last year with four million registered players. They played the game on a variety of electronic devices, including smartphones, tablets, and computers. Players join one of eleven federations within the Milky Way Galaxy and build their own alien nation within a unique solar system. The goals of the game are to expand your control over your immediate solar system and then over one or more federations. The ultimate goal is to have dominion over the entire galaxy, but no player has accomplished this feat. AGI research and development designs the game’s webpages, software, and outcomes; adds new innovations and surprises, chooses and adopts an exciting sound track and pays royalties, maintains an engaging, powerful story; and offers interesting characters and galactic challenges. The game must challenge the players, yet allow players to form teams as they decide whether to adopt an offensive or defensive strategy. Augmented and mixed reality is the next step in game development. The game is supported with newsletters; global networking and player opportunities; alien nation player chats; and many fun prizes and recognitions as players build their nation, weapons, and armies. Daily operations of the game requires adequate server capacity, backup servers and telecommunication lines, fast and interactive play, no game delays or long player wait times, quick recovery from interruptions, no software errors or continuous loops, and management of player chat rooms and an always open call center for player questions and problem resolution. As Ms. Minoza liked to say, “Our gamers are in our virtual factory. We must keep them happy, entertained, and engaged.”

Case Questions for Discussion: 

1. Do a web search to find a gaming company and report on their mission, strategy, and competitive priorities.

2. Define possible mission and strategy statements for AGI and define each of the five competitive priorities. Assume you would use these statements in AGI next annual report.

3.What are AGI’s core competencies? Should they be outsourced?

4. How can AGI reduce the risk of outsourcing, if they decide to do it?

5. What is your final recommendation? What actions will you recommend to support your final recommendation? Explain.

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EXHIBIT 3.7 Adventure Gaming, Inc. Competitive Priority and Risk Assessment Adventure Gaming, Inc. (AGI) Case Study Cost per Gaming Software Engineer Quality of Work Timing of Work Flexibility of Work Innovation Country Risk 0.05 0.10 0.10 10 Strategic Risk 0.10 Intellectual Property Risk 0.10 Relative Weight AG, Inc. Canada Ahuiu, Inc. China Katajii, Inc. India 0.45 3 0.05 0.05 m 2 2 2 2 2 8 10 8 B 879764 9 7 10 9 B 4 Totals 1.00 6.70 735 8.80