For the past couple of years, the industry has bought into the idea that operators owning their own tech stack was the best long-term play. Huge deals for tech ranging from Penn acquiring theScore for $2 billion or the $3.3 billion play by DraftKings to buy SBTech had many wondering if the days of outsourcing things like player account management (PAM) were numbered.
However, the tides appear to be turning. Bally’s made a big to-do about its tech acquisitions over the past couple of years, including the Bet.Works sports betting platform and the acquisition of Gamesys.
Now though, Bally’s CEO Robeson Reeves has admitted some of these acquisitions did not pan out and the company has fully reversed course on the idea of owning its tech and announced in May that it would be working with Kambi and White Hat to revamp its Bally Bet sportsbook and online casino products.
SBC Americas spoke with White Hat Gaming CEO Phil Gelvan about the deal and the changing attitudes when it comes to US operators and their tech stacks. For Gelvan, the shift in the direction of owning tech was led more by investors than practical concerns.
IPOs and valuations influenced the move towards owning tech
“My opinion is that a lot of that was led by operators who were mindful of the share price together with a strange obsession by equity analysts that in-housing was somehow a driver of success. I don’t believe there’s a correlation. I really don’t believe there’s a correlation between owning your own tech stack and either higher market share or valuation. I just don’t think those things are necessarily correlated, or even loosely coordinated. I think the real value proposition is in having operators focus on what they’re good at–branding, acquisition, retention–and outsourcing the technology,” he said.
Gelvan also thinks that as the industry spreads into more and more states, managing all that tech might be difficult, which might explain with operators are once again turning to suppliers for assistance. Especially when suppliers like White Hat are making an effort to be in every market from day one.
“I don’t know if it’s a shift back but a shift towards outsourcing because some of the stuff is really hard. I think it’ll become more of a trend in that direction as more states start to regulate and the opportunity grows. There will be increasing pressure for operators to roll out into these newly regulated states, and that puts pressure on all stacks.”
The pros and cons of outsourcing gaming tech
Outsourcing is not for everyone and there are pros and cons to the approach.
“The key pro is that an operator can outsource quickly in a cost-effective way. And, in the case of White Hat Gaming, they have the certainty that the tech stack is scalable, flexible, and right on the cutting edge of innovation,” Gelvan said. “On the con side, I guess the in-house approach gives the operator full control of the roadmap and the perceived innovation.”
“I would argue that it doesn’t necessarily lead to a better product,” he added.
What outsourcing looks like can also vary depending on each operator’s needs. Some may want a full, turn-key solution while others only want certain integrations. There is no one-size-fits-all, nor is that the approach of most suppliers.
“We’re very happy to do some kind of a middle road, so it doesn’t have to necessarily be a full outsource model. We have this concept of dedicated teams, so we’re very happy to engage with a partner with some shared resources and dedicated teams or completely dedicated teams. That way the operator gets access to that innovation, but then also has some control of their own destiny,” Gelvan said.
Supplier and operator relationships can look many different ways
Gelvan also noted that White Hat’s approach is not to sign the highest volume of partners possible. Rather, the idea is to have core partners they believe will succeed.
“Our ethos is a partnership approach. So we do and have always worked with a select group of partners. We like to qualify our partners quite closely. And then integrate deeply with those partners. So we like to become, as far as we can become, part of that partner’s business,” he explained.
In other words, it may seem like owning the tech is the only way the operator can personalize. But with big price tags and a big undertaking, more are realizing the supplier option is not the negative stock analysts are making it out to be.