Analysis: Why Svenska Spel is outsourcing its sportsbook technology

Sweden’s newly regulated gambling market has become something of a hotbed of debate and frustration of late, and amid the regulatory uncertainty and fight for market share, former monopoly operator Svenska Spel, along with former horseracing monopoly ATG, is dominating.

According to figures released in May by the Swedish Tax Authority, Svenska Spel accounted for 16% of the overall market with the group’s digital revenues up 14% in Q2 2019. Market share of its sports and casino site spela.svenskaspel.se dropped to 10% in subsequent months, despite its lottery and scratchcard games maintaining a 28% market share.

As part of the shift into regulated gambling in the Nordic market, the operator faced a major restructure as it split its operations and sought to amp up its IT systems to meet the stringent regulations enforced by the Swedish Gambling Authority. But despite many complications, the firm met the deadline to be among the first to switch on its offering on 1 January 2019.

Despite maintaining a relatively steady position during the last nine months of operation, the operator announced last month it was shifting its sportsbook onto betting supplier SBTech’s platform to update its current offering which uses a combination of in-house tech and Sporting Solutions-powered feeds.

Out with the old

Speaking to EGR Technology, product manager for sport and racing at Svenska Spel’s Sport & Casino arm, Björn Kjellsson says the current platform was out of date and in order to continue to compete in a highly competitive market with a premium betting experience, the firm needed to update its offering.

“With SBTech we believe that we will manage to do just that. It will give us an improved customer experience and a future-proof platform. It will give us a competitive offering and improved functionality with the same level of security as before,” Kjellsson continues.

The deal will see consumer favourites like bet builder and cash out become available to Svenska Spel’s players. “It will also allow us to offer a wider range of markets when it comes to different sports and more leagues than before. That said, it will still allow us to limit and monitor our offering with regards to player safety and match fixing related issues,” Kjellsson adds.

“The realistic picture of them today is they are struggling in a newly regulated market,” says SBTech chief development officer Andy Cochrane. “Their market share is in decline, they’re under pressure as more operators enter the market.

“And in truth their product just wasn’t strong enough really, with specific regards to in-play markets and the industry standard in-play features, like a highly flexible cash-out product, add-to bets and a variety of other features.”

Cochrane highlights a common factor across longstanding operators like Svenksa Spel, old monolithic technology stacks that are not capable of keeping up with constantly adapting betting technologies, particularly in-play features.

Indeed, Swedish bettors are a savvy bunch, having had access to offshore sportsbooks years before the regulation came into force. Most recently they have come to expect instant withdrawal features, simplified registration processes and a smooth and clean UI. Kjellsson says he is confident SBTech can provide that.

Cochrane insists SBTech has proved it is more than capable of competing against Kambi, the Swedish supplier and provider for Svenska Spel’s biggest competition ATG, in other competitive markets like the UK, Denmark and the US.

Talks between Svenska and SBTech date back 12 months, four months prior to new regulations coming into force in Sweden. The supplier will also take over the firm’s retail technology which includes terminals at newsagents and convenience stores across the country.

The age-old conundrum

Svenska Spel’s move away from its proprietary sportsbook technology bucks a current industry trend of operators acquiring supplier technology to cut out the middle-man and have more control over their product, without having to build their own technology.

US-based consultant Keith McDonnell says operators have battled with the ‘build versus outsource tech’ conundrum, but he says that more and more operators are coming to the “sensible view that a gambling operator is not a software house”.

“Focusing on core strengths of marketing, customer service and operations is a better use of resource than investing heavily in in-house tech development,” McDonnell adds.

“In SBTech, Svenska Spel has identified a platform and product provider with a proven track record for delivering reliable infrastructure and innovative product on a multi-regional basis.

“This will not only help future-proof the business against technology innovations that an in-house strategy would struggle with but will also open up opportunities Svenska Spel may want to explore in terms of cross channel and regional developments as the industry continues its march towards a more global economy.”

However, the operator will maintain its in-house trading team which puts them at an advantage in pricing local markets. Cochrane says: “They have got some very high calibre people in their trading team especially focusing on local sports and leagues and I wanted to make sure they were able to get the most out of our risk management technology.”

Kjellsson says the process of finding the perfect fit was a long and arduous one. “Given our background, we believe this is as close as we can get to a perfect fit. We plan to go live with our new sportsbook in May 2020,” he notes.