By David Loveday, Principal Consultant, Regulus Partners
‘To dream the impossible dream, that is my quest.’ The Impossible Dream, The Man from La Mancha, 1965
The gambling industry is a something of a ‘glass half-full’ business; as shown in the evolution of its technology:
A decade ago betting systems were simple and predominantly focused on horseracing and dogs. Now they have evolved into masterpieces of transactional scalability producing excellent performance figures.
Multi-functional systems encompassing sportsbook, account and wallet are complex and high-performance pieces of technology; however, in spite of this gambling business executives have a tendency to focus on the negative aspects of their own systems rather than looking in to why the elements work better for a competitor.
The technology we see today has ‘stood up to the job’ and grown with the times and needs of punters and operators with few exceptions. For example, at the turn of the decade when high volume in-play betting was in its infancy, most systems were unable to cope with this new demand; yet it is now basic functionality. Not everybody would agree, but I would strongly argue that the deliverers of gambling technology have out-performed in their task and long may this continue.
So in light of this what kind of system would the average online gambling Chief Executive dream of having at their disposal? What are the realities and what are the options?
I would say it is a fair assumption that most CEOs would want as system that:
· Outperforms the competition
· Is developed and IPR-owned by their organisation
· Is flexible enough that new functionality can be developed and added on swiftly
· And the costs of running the system would decrease every year
Of course, this wish list falls into the category of the impossible dream.
SAW (sportsbook, account, wallet) systems are immense pieces of software, heavy in code and complexity. They can’t be re-engineered in a stack and layered model. Interdependencies are common and they will only get bigger. The bigger they get the more they cost, and when they don’t fully support the objectives of the business, then tensions rise as the systems are inevitably the heartbeat of the company.
My view, from experience, is that operators are unlikely to get exactly what they want when it comes to SAW functionality and this could mean that companies could head down one of four possible routes to get something of that original shopping list:
1. Build your own
A small number of companies have built their own software from scratch, and have delivered good systems and performance as a fortunate result, however, I am sure that no one now lives under the misguided impression that this is easy.
SAW systems are huge, complex and in constant need of TLC. The cost of maintaining these systems will only ever increase and the moment you take the foot off the investment pedal they fall behind.
As for attempting this feat in the present climate, I think it is fair to say the investment and logistical demands on any operator with serious hopes of achieving the home-grown option are immense – as is the requirement for suitably large levels of profitability to achieve a return on investment.
2. Mix and match systems
Most operators have followed this route, sourcing individual components from a plethora of suppliers, while perhaps building some of it themselves.
This approach requires a lot of supplier management and there is always the danger of said suppliers playing the blame game when things go wrong. That said, using skill and ingenuity most operators that have chosen this road have reached their destination.
Would they like to do it all? Perhaps. But as with option one, questions arise over whether it is optimal for a gambling company to morph by stealth into a technology outfit.
3. One-stop shopping
It is now possible to buy almost everything you need from a number of the big suppliers.
This route solves the problem of accountability, but does so by passing a lot of control to the supplier. Is this is good thing? Possibly for some businesses, but certainly not all and questions like this can open up lively debates within organisations. However, one thing is certain - the underlying issues of cost and complexity don’t go away.
4. Beyond white-labelling
This is the approach that I find the most interesting:
Bookmakers are, by nature, tribal and territorial, and while the online industry was growing fast this was a sustainable position. But given the multiple regulatory issues the industry is currently facing, most notably Point of Consumption tax in the UK, it might leave some organisations thinking the unthinkable and looking once again at collaboration.
There are a number of companies which have built excellent systems and technology, and it is well within their technical grasp to host their competitors on their architecture. All the tenant would need is a new shop window.
The cost savings would be significant and the hosted operator would be left to focus on their core competencies as well as naturally being part of a bigger liquidity pool.
Though many will see some of the above sentiments as a heresy, the sobering reality is that in the UK the Point of Consumption Tax and other cost increases will force all operators to drive efficiencies wherever they can. Sacrifices will have to be made and the possibility of reducing operating spend to preserve customer marketing means that we could come to see 2015 as the true beginning of the era white labelling.