Going it alone: The pros and cons of taking control with in-house tech

Alongside the headline of posting a 33% drop in Q4 2021 revenue amid the difficulties posed by leaving the Netherlands, Kindred Group took the opportunity to appease investors by announcing it would develop its existing Kindred Racing Platform (KRP) to become a fully fledged in-house sportsbook platform by 2026 and move away from the Kambi-supplied tech stack. The move, which will see Kindred transition into a “customer-first company” according to CPO Erik Bäcklund, follows the pattern that has picked up steam in the industry over recent years. Namely, operators deciding to take off the B2B stabilisers and ride the bike of proprietary sportsbook technology alone. US giant DraftKings eventually migrated onto its in-house SBTech platform and away from Kambi in Q3 2021, albeit with some teething issues, while 888 similarly ditched Kambi in favour of its own Spectate platform – which was built out of the BetBright platform the operator acquired for £15m in March 2019. Kindred will eventually phase out its legacy partnership with B2B giant Kambi by 2026, which throws up not only questions of how operators will manage without the B2B support, but also how this impacts the vitality of B2B firms now staring into a future of shrinking opportunity.

Watch and learn

Perhaps the greatest in-house sportsbook tech story, and perhaps the greatest online gambling story, is that of bet365. The Stoke-on-Trent-based behemoth recognised the importance of owning its tech stack from the outset two decades ago and has since gone on to become one of the leading operators in the industry. This focus on in-house control, which allows operators freedom away from the shackles of a B2B partner, is an enviable position for many. This, along with the value proposition of owning a tech stack, and the soft-sell approach of being a tech company instead of a gambling firm in the eyes of investors, is one of the core reasons why operators are moving in droves to own the tech stack. Matt Howard, partner at Propus Partners, tells EGR Intel one of the positives of owning the tech stack is being in control of one’s destiny. He says: “Being able to build to your own requirements, define your own priorities and direct your own resources as you see fit should, in theory, see improvements in all areas. We believe this is the main reason we are beginning to see some operators who have previously not owned their own tech making moves to do so.” Howard highlights the core reasons why operators are making this shift, but it is not without its difficulties. DraftKings has seen its SBTech platform struggle at times and has had to apologise for unplanned downtimes and other bugs. Elsewhere, transitioning to a new tech stack is an arduous task, with 888 only swapping to Spectate last year, gradually, having purchased the BetBright platform in 2019 following the Irish bookmaker’s collapse. Having seen two transitions play out in front of its eyes, Kindred can take heed of what needs to be done. The Stockholm-listed operator is looking to double its sportsbook team headcount to around 400 in the next two years. Bäcklund notes this has been a process long in development, having initially launched KRP in 2018, allowing Kindred to put everything in place ready to be actioned, in theory. He says: “Strategically, we have known for some time that this is an important step in securing future growth and security for our business. It is worth highlighting that this isn’t a new venture for Kindred. The decision to ensure the capability to develop in-house sportsbook tech was made when we first started designing that platform.” Bäcklund notes Kindred has always had “one eye” on developing in-house sportsbook tech and now the green light has been given, he is wasting no time in building out a team capable of providing results. He continues: “We have a golden opportunity to invest in proprietary tools and talent to enable a significant level of operational automation, using a more efficient headcount to deliver a more consistent quality of offering. “Our recruitment is going very well in all areas, and in fact, we’ve just started advertising for some key operations management roles, which we hope will attract key talent from both within the industry and outside, with the right drive and mentality,” he adds.

In-house or out-house

Control appears to be key in this new-age space race. Operators want total, omnipotent oversight of all operations. Without a reliance on slowed down roadmaps from third parties that have other commercial contracts to honour, an operator with in-house tech can shape the future in its own vision. Along with being able to develop strategy safe in the knowledge you can put your tech team onto whatever project you feel like, the start-up nature of moving in-house, something Bäcklund refers to as a “low-legacy starting point”, means the operator will gain the flexibility to ebb and flow how it pleases in terms of its roadmap. Bäcklund says: “A key part of the tech strategy is having full control of our product suite. We fully expect the tech stack to be a springboard to future growth both in our existing territories and new, regulating markets. “This will give us much greater control and autonomy over our strategic direction and products and the ability to create a dynamic, personalised offering for our customers and a best-in-class gambling experience,” he adds. Unsurprisingly, Kambi COO Erik Lögdberg has an alternative take on the appeal of moving to in-house tech. Lögdberg argues that while the switch may seem an attractive proposition for investors or to create headlines, the reality of the task is not without its difficulties. Lögdberg notes that full control over a tech stack is a somewhat hazy concept, with additional products needed to attract customers in overcrowded markets that third parties specialise in and continue to supply to operators. He says: “Being able to point to having full control of your tech stack can understandably hold appeal, particularly for investors and a company’s equity story. “Yet, even in the scenario where operators do decide to build or buy their own technology, there remains a sizeable role for third parties to play with many products and services outsourced. For example, Bet Builders are being outsourced by a large number of sportsbooks many would consider being ‘proprietary’, which for Kambi partners makes up a large proportion of pre-game bets,” he adds.

Follow the crowd

Like London buses, you wait for one and then two come at once. The race to in-house tech sometimes feels akin to this as no sooner does one operator signal its intent to remove itself from B2B support than another joins it on its venture. While no operator would confess that fear of missing out, or FOMO, would dictate macro-strategies, it has to be said that the industry is a watchful one. Propus Partners’ Howard notes: “There must be an acknowledgement that other large operators who have taken the in-house route have benefited from the move. Market forces are similar for all major operators and are pushing them all in this direction.” Following on from his point that the move to in-house would make Kindred a customer-first firm, Bäcklund says that external movements in the industry had somewhat forced Kindred’s hand, but in general going down this route is not for every company. He says: “All operators have to make a decision on what suits their reality. We have a duty to our employees, shareholders and customers to remain and respond to industry developments, and a narrowing of supplier options through M&A carries of course an increased risk. There are a number of factors that support our current direction.” Whatever copycat antics are at play and regardless of how tasty the flavour of the month is, a mass migration to proprietary tech for operators is not a viable option, or a needed one. Smaller firms simply do not have the capital or resources to develop an in-house tech stack and corresponding team, while others are more than happy with the convenience and ease with which working with third parties brings. Lögdberg says that a move to in-house is reserved for a select few operators, but even then, the challenges that present themselves could be more difficult than anticipated. “Building a sportsbook at scale is a huge challenge on a structural and technical level, to say nothing of the need to develop new product innovations and the latest functionality players expect. Therefore, proprietary sportsbook technology is only really a viable option for operators of the size and scale that can make the maths work as it comes at significant cost,” he adds.

New world

While it may seem as if every man and his dog wants to be seen as a tech-first, in-house company, there is still a viable ecosystem available in which outsourcing tech continues to grow. Flutter, parent company to some of the world’s biggest brands, still uses OpenBet’s technology to power its sportsbook platform in the US and Europe. And to no small measure. FanDuel is the largest operator in the US, while Paddy Power and Sky Bet are among the largest betting brands in the UK. Speaking to EGR Intel, a Flutter spokesperson said: “As it currently stands, Flutter’s brands use a mixture of proprietary and third-party technology. Where appropriate, the group will look at operating on proprietary technology to leverage the market-leading products that exist in the wider group and lean on the significant expertise of our people. There will, however, be some brands and products where the use of third-party technology is more effective, so we would continue to operate in this way.” It is this dual approach that may well come to shape the market. Bäcklund says he expects to maintain a future partnership with Kambi post-2026, which will see the “evolution” of the supplier’s services to align with Kindred’s aspirations. He also confirmed Kindred will look to integrate data, content and managed trading services from third parties as part of this strategy and that a full rollout of the KRP to all brands has not yet been confirmed. Lögdberg notes that the changing appetite of operators has to be reflected in Kambi’s offering and that the supplier is shifting with the times to produce a solution that allows for a combination of proprietary and third-party tech. He says: “Operators can take a hybrid approach to technology which Kambi and many already do to varying degrees. We offer a sliding scale of control and flexibility depending on their individual strategies.” This can manifest itself as an operator pasting its own front-end on top of Kambi’s core platform to differentiate from the competition. Kambi also offers its partners the option to take “granular control” over its odds offering to allow firms to offer different odds in different markets, a move Lögdberg says allows operators to take “greater control over their strategies”. However, the desire to move to in-house tech is an apparent one throughout the industry despite potential workarounds which still include B2B firms. It is a question of if this hunger becomes so great that suppliers cease to be key cogs in operations. It is not unimaginable that operators soon become the top suppliers in the space, monopolising an industry that faces the risk of cannibalisation already. Howard concludes: “Some suppliers will inevitably not survive, but those who listen to the market and respond with appropriate client-driven improvements, and those who futureproof based on automation, should continue to do well.”