Forget about banking or biotechnology—one of the hottest emerging markets for makers of server hardware, software and services revolves around elves and magic potions.
Inspired by predictions of brisk growth in the $1 billion online game market, IBM, Sun Microsystems and other companies normally not associated with dragon-slaying adventures have launched projects recently to handle the complex infrastructure needed to run online games.
IBM is one of the main backers of , a growing effort to apply grid supercomputing techniques to operating online games. The company is busy adapting other aspects of its "on-demand computing" strategy to .
Sun last year formed a aimed at expanding the use of Java as a game foundation and promoting Sun hardware and service to run online games.
Then there's database giant Oracle, which adapted its grid computing technology to host the high-profile game, and telecom giant Alacatel. They and other companies make it look like the game industry is turning into a new playground for enterprise technology companies.
"The gaming industry is really going through a transition now," said Steve Canepa, vice president of IBM's media and entertainment group. "We think there's a real opportunity for IBM to play a role in that transition."
Revenue from the North American online game market is currently estimated at just short of $1 billion, according to research firm IDC, with 20 percent annual growth expected over the next few years. Researcher Themis Group expects the worldwide market will grow to $9 billion in 10 years, thanks to .
Playing with outsourcing
One of the most significant changes in the game industry includes a new willingness by developers—once epitomized by do-it-yourself perfectionists such as —to look at outsourcing.
Online game-playing has multiplied the complexity of the game creation process and prodded developers to think about what they're best at, said David Cole, founder of research firm DFC Intelligence.
"One of the big challenges people are realizing with online games is that it's a completely different business and a whole new skill set from offline games," he said. "You're not shipping a product as much as creating a service and a backbone that needs regular maintenance and updating. It's a big headache and not necessarily something that gives you a competitive advantage if you do all the networking chores on your own."
Canepa said game makers have seen that outsourcing can give them more time to focus on creative tasks. "You ask yourself, 'Do I really want to invest a lot of time and money in managing this infrastructure?'" he said. "As the game firms are busy building their brand strategies and game platforms...I think they'll increasingly turn to us to handle some of the fundamental blocking and tackling."
Dave Cerra, CEO and executive producer of game maker , said industry attitudes toward outsourcing began changing several years ago with the advent of ready-made middleware to handle complex visual and computational tasks such as rendering and in-game physics. Developers have gotten comfortable with the idea they can make distinctive games using off-the-shelf tools, and now the outsourcing approach is extending to online components.
"It's just not really viable anymore to do everything on your own," he said. "You have to consider if it's more cost-effective for somebody in my shoes to say, 'I'm going to spend massive amounts of cash doing something completely homegrown...or do I just focus on the core competency of this company?'"
Sojourn went with Butterfly.net to run the network components of Glympse, the company's online game, which should debut later this year. Cerra said he had doubts about whether the technology that IBM and Butterfly's founders had developed for military projects and business uses would translate to the game world, but at least he knew the technology would be bulletproof.
"A lot of the technology in Butterfly.net came out of the Star Wars missile defense research," he said. "There's a wow factor there, but the question becomes, 'Will this actually work for a game?' They showed us it would."
Outsourcing also allows developers to benefit from advanced technology that can improve the game experience. Butterfly.net touts its capability to accommodate larger online worlds, since players aren't bound to a single server.
Sun is promising similar improvements from its technology, currently in development. The system will store game logic and databases on a central server connected to smaller servers accessed by players, as opposed to the typical approach of replicating all game content on each server available to players.
The approach will not only boost reliability and scalability, said Chris Melissinos, Sun's chief game officer, but allow players to experience bigger online worlds by not restricting their interaction to the 3,000 to 10,000 players a single game server can host.
"The way online games are run now, you experience things in shards," Melissinos said. "You can be looking at the same things as another player, but you're in a different shard and so you have a completely different experience."
"Sharding" is a commonly accepted technology limitation now, he said, but "I'm not so sure consumers are going to be willing to put up with that in the next generation of online games."
Sojourn's Cerra agreed that improvements in server and networking technology will change what consumers expect from online games, with larger online worlds and faster responses becoming key. "Things like having a no-sharded world will be real differentiation factors for a successful multiplayer game," he said.
Game developers also count on outside help in taking advantage of growing broadband access. Derek Kuhn, marketing director for Alcatel's information, communications and entertainment group, said the telecom giant regularly consults with game developers and service providers looking to gauge the state of Internet connectivity.
"Ten months ago, I'd say most games were still being designed for dial-up speeds. Now there are a number of publishers breaking that barrier," he said. "We've actually gone out to some of the publishers and said, 'Let's talk about the future. If you had a 25-megabits-per-second bidirectional link, how would that change the way you design games?' The ideas are pretty amazing."
Playing for money
Outsourcing also provides significant opportunities for cutting development costs, an area of increasing scrutiny after high-profile fizzles such as "The Sims Online" have failed to recoup their multimillion-dollar development budgets.
"A lot of the pressure is coming from the publishers doing the funding," said analyst Cole. "When the budgets start getting up into the millions of dollars, it becomes imperative to really scrutinize where that money is going."
Cost is especially critical for small publishers, said Sun's Melissinos. Typical online game networks can require large hardware outlays to accommodate a few additional players, he said. Sun's central database approach permits quick and cheap capacity increases and allows multiple games to reside on the same database, dramatically cutting hosting expense.
"There is a viable business model for a game that can hit 10,000 players, but the cost now is so prohibitive that small companies can't survive," he said. "By allowing multiple games to reside on the same piece of hardware, you balance the cost of the infrastructure against 10 games, and that enables niche content to exist in the marketplace."
However, technology companies shouldn't expect an immediate boon from the game world, warned Billy Pidgeon, an analyst for research firm Zelos Group. Game publishers are still searching for the that will push subscription-based games to a mainstream audience. By the time a breakthrough game does arrive, networking infrastructure will be well along the way.
"There's just not a lot of profit to be made," Pidgeon said. "The infrastructure stuff is not really that expensive or difficult a piece of the online game process, so the outsourcing players can't charge a whole lot."
But the game industry is likely to remain an increasingly attractive target for technology companies as profit and growth in their traditional markets are squeezed by pressures ranging from open-source software to commodity hardware.
Melissinos said the game business gives Sun an attractive new area to apply technology it developed for more traditional markets, such as financial services. "We found there's a lot of crossover," he said. "If you look at the technology involved in a Wall Street trading system, there's almost a one-for-one correlation with what you need in an online game environment."