When gambling operators face the decision to build or buy a casino platform, their perspectives often evolve during the course of their business operations. Start-ups typically favor third-party vendors to gain an initial foothold, but established operators, particularly those with deeper financial resources, might be drawn to develop their own platforms. However, this consideration is not a straightforward solution, as changing business needs and staffing can complicate the decision over time.
Steven Valentine, chief commercial officer at Comtrade Gaming, describes this process as cyclical. “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’.
“Over time, through expertise leaving the business, that platform or technology may become old and start falling down, and they might decide to go to market. That is quite a long cycle – typically anything from eight to 15 years – but that story does seem to repeat itself many times.”
Valentine, who has spent over two decades in the gaming sector and joined Comtrade in 2010, emphasizes that scale is a crucial starting point in this decision-making process. According to him, an operator producing less than £250 million in gross gaming revenue (GGR) each year is unlikely to consider building a platform. However, surpassing that threshold opens up the possibility to do so.
“Once you get to that size and scale, it can make sense to sit on your own technology,” Valentine explains, “but that has to be backed by a long-term commitment to it.”
Operators must evaluate whether their current technology is a hindrance to executing their business strategy. They need to assess if developing their own solution would allow them to operate more effectively or if they simply chose the wrong vendor initially.
However, the transition to building an in-house platform requires a substantial financial commitment, with many operators having unrealistic expectations about costs. Valentine points out that the time and resources necessary post-launch are often underestimated. For example, ongoing expenses like round-the-clock technical support must be considered.
“The anticipated budgets and timescales are often extremely optimistic,” he observes. “Building an iGaming platform is not like building a small piece of software; this is a huge enterprise-level piece of software. The size of team it takes to build an iGaming platform for an individual operator is the same size of team it takes to maintain it and continue to build it.”
He poses a challenging question for operators considering this shift: “Are you prepared to effectively become a tech company? It is very difficult from a mindset perspective.” Valuing immediate business needs often distracts operators from planning for future technological requisites.
Valentine notes that few businesses successfully manage this transition, leading even larger operators to adopt a hybrid approach. Many have their own platform but turn to third-party solutions for speed when expanding into new markets.
This hybrid strategy can be effective, balancing control with the agility required in diverse jurisdictions. Valentine explains that using third-party platforms facilitates compliance with local laws and regulations, helping to mitigate risks associated with market entry.
Nevertheless, the selection of a third-party vendor necessitates thorough due diligence. Valentine emphasizes the importance of gathering information from existing clients. “If there are horror stories out there, why do you expect your story to be any different with that company?” he asks, highlighting the importance of client references during vendor selection.
While price is undoubtedly a key element in vendor choice, Valentine cautions that the wrong provider could lead to a significant strategic disadvantage. “There is a real cost of not being able to execute your strategy because you are being held back by a software vendor,” he says.
Vendors typically subsidize much of the initial migration and setup costs. According to Valentine, operators often end up paying a fraction of the real cost associated with bringing on a platform provider. For instance, a migration project at Comtrade might involve teams of 30 to 40 people working for five to eight months.
Conversely, building and maintaining a platform in-house can incur astronomical costs. Valentine points to one prominent operator whose platform investment averages about £60 million annually, while they would likely pay a vendor under 20% of that in a revenue-sharing agreement. “The cost of building could be at least five times, or perhaps much more than, what you would be paying a software vendor,” he estimates.
However, proprietary technology can offer competitive benefits when appropriately managed. Valentine cites Bet365 as a prime example of an operator that built its tech from the ground up, allowing for complete control over its strategies and operations.
This control enables firms to be first to market with new concepts, retaining an early competitive edge over copies that may emerge later. But, if an operator works with a vendor who does not align with their strategic objectives or faces changes in vendor ownership, they may lose that control.
From the vendor side, running costs for casino platforms can often be balanced through economies of scale, though competitors in the space also experience significant losses. Valentine attributes Comtrade's relative success to its selective client strategy, focusing solely on existing operators willing to migrate.
By prioritizing mutual growth with clients and maintaining profitability, Comtrade circumvents the pitfalls that many other companies fall into, especially those created primarily for market exit. For operators weighing the decision to build or buy a platform, a balanced approach is paramount. Developing a casino platform may centralize control, but unrealistic projections could transform that responsibility into a financial burden.
