When gambling operators face the decision to build or buy their own casino platforms, they must weigh a multitude of factors, a process that is seldom static throughout the life of their business. Start-ups typically lean on third-party vendors to establish a market presence, while well-established operators with sufficient funds may consider creating an in-house platform. Yet this path isn't always conclusive; as business needs evolve, so too do the decisions surrounding technology.
Steven Valentine, the chief commercial officer at Comtrade Gaming, illuminates this cyclical reality. He notes, "Operators will often use a third-party vendor, but after a while, they may feel the provider is potentially holding them back or not delivering what they want. So they decide, ‘maybe we should do this in-house.’
“The cycle, typically spanning eight to 15 years, sees operators alternating between in-house development and market exploration depending on evolving expertise and technology needs."
Valentine highlights that the scale of an operation significantly influences this decision. He explains that operators generating less than £250 million in gross gaming revenue (GGR) annually are usually not inclined to build their own platforms. However, once they exceed this threshold, the option to develop their own technology becomes viable.
"Once you get to that size and scale, it can make sense to sit on your own technology, because you have the resources, but that has to be backed by a long-term commitment," he says. The key question remains whether adopting proprietary technology will improve their strategy or if their previous vendor was simply not the right fit.
Yet, the prospect of building an in-house platform brings considerable financial challenges, often underestimated by operators. Valentine emphasizes that many overlook the ongoing costs of maintaining such a platform post-launch, including vital components like 24/7 technical support.
He reflects, “Building an iGaming platform is not like constructing a small piece of software; this is a huge enterprise-level piece of software. The size of the team it takes to build an iGaming platform is the same needed for its ongoing support and development.”
As complexities increase, operational costs tend to rise, and operators are frequently caught off guard by the cultural shift required to pivot towards more technological innovation.
He poses an essential question: "Are you prepared to effectively become a tech company? It is difficult from a mindset perspective. You are normally focused on the business’s immediate needs rather than planning two or three years ahead regarding technology."
Few businesses successfully manage this transition, with larger operators often maintaining a mixed strategy of building in certain areas while relying on third-party platforms to expedite market entry and satisfy compliance requirements. Valentine argues that this approach allows operators to mitigate risks when entering unfamiliar markets, as vendors bring local expertise and capabilities.
Given the potentially overwhelming amount of information available, Valentine suggests conducting thorough due diligence on potential vendors. He recommends talking to a vendor’s existing clients to gather insights about their reliability. “If there are horror stories out there, why would your experience be any different?" he queries, highlighting common oversights in client-vendor vetting processes.
Selecting the wrong provider can be detrimental, as Valentine warns that the costs of not executing effectively due to vendor limitations can be significant.
He notes that while up-front costs with vendors may seem low, they often mask deeper financial implications; comprehensive onboarding typically involves substantial investment from the vendor's side.
A standard migration at Comtrade can require a team of 30 to 40 people over a span of five to eight months, with fees rising in alignment with the operator's revenue growth. Comparatively, building a platform can escalate quickly, as evidenced by one prominent operator, whose platform investment averaged £60 million annually. In contrast, operating costs when working with a software vendor may be less than 20% of that amount. Valentine states, “The cost of building could be at least five times, or perhaps much more than what you would be paying a software vendor.”
Despite the challenges of managing such high costs, proprietary technology can provide competitive advantages under certain conditions. Valentine cites Bet365 as a prime example, emphasizing the benefits of developing in-house technology that allows control over their future direction and market speed.
In the context of operational efficiency, larger vendors like Comtrade attempt to leverage economies of scale to minimize running costs, although Valentine also points out that some competitors continue to experience significant losses.
Comtrade’s strategy revolves around becoming selective with their client base, adding value for existing operators migrating to their platform. The aim is mutual growth and profitability from the outset. As Valentine explains, “The landscape has shifted from valuing sheer revenue growth to prioritizing sustainable partnerships and profitability."
For gambling operators contemplating the build versus buy strategy, valuing a balance between control and financial feasibility is crucial. While in-house development can offer autonomy, unrealistic expectations concerning costs could lead to unsustainable commitments.
