This is a great article which provides some insight on the development of Lost Odyssey. Click the link below to read the whole thing.
Here's a snippet:
Feelplus president Ray Nakazato was at the 2008 Game Developers Conference to discuss the collaboration between Final Fantasy producer Hironobu Sakaguchi's Mistwalker group and Feelplus to develop Lost Odyssey. It originally began as an in-house Microsoft project before Feelplus assumed a role, Nakazato explained, as he showed a trailer of the fantasy RPG.
Feelplus was established in 2005 to develop Lost Odyssey. Currently, there are 100 developers and artists on staff, many of them Microsoft and Sega veterans, and Feelplus also relied on freelancers to help develop the game. The studio is part of holding company AQ Interactive Group, a larger merger between three development studios: Artoon, Cavia and Feelplus. In addition to supporting Sakaguchi on Blue Dragon, Feelplus contributed to Yoshi's Island.
Cavia was responsible most recently for developing Biohazard (Resident Evil): Umbrella Chronicles for Wii. Altogether, the three studios have some 300 employees. Currently, their primary business is to make games for other publishers, but AQ Interactive has recently become a publisher itself, having recently acquired U.S.-based publisher XSeed.
Nakazato then explained the division of labor involved in Lost Odyssey: The project was funded and project-managed, tested and asset-localized by Microsoft. Mistwalker, with Sakaguchi and award-winning Japanese novelist Kiyoshi Shigematsu at the helm, took responsibility for the story and character design, with well-known Final Fantasy composer Nobuo Uematsu creating the music, while Feelplus devleoped the actual product.
"To develop games, or to try to get professional game developers under the auspices of Microsoft was quite difficult, and it could be that Microsoft employees are expensive. So for that reason, they decided to create an independent studio, which is why Feelplus was established," Nakazato explained. It took the team more than four years, including the earliest days of Lost Odyssey's development, to create the game.
In the middle of 2006, Feelplus developed a Japan-only playable demo. "We developed this, or finished it, around June 2006, and then gave it off to the players in December 2006. But I think this was too early, because it ended up being a version that wasn't particularly polished at that point. But we launched a playable version a year and a half before the full launch," Nakazato recalled.
The game uses Unreal Engine 3 as middleware -- and the team did UE3 integration four times, which Nakazato said was "quite a task."
For the ambitious development project, the team divided into several groups: one responsible for building the game itself, a design group responsible for database systems and AI, and a level design team. A production management group was in charge of the game's cutscenes, of which there are over eight hours, including about 40 minutes worth of pre-rendered movies with the rest as scripted real-time events.
"All of these groups would create these parts and then put them together, and then the game and the cutscenes would be put together by combining these components. And then the Microsoft project manager would be in charge of project management," explained Nakazato. Finally, a Mistwalker-Microsoft liason would coordinate among the groups.