Technology gap

AT A LUNCH OF gambling industry luminar­ies hosted by a private equity firm late last year, I piped up about why none of these listed compa­nies ““ which depend so heavily on the internet and technology to survive ““ have a single technologist on their boards.

I instantly regretted it. For one thing, it was only a hunch. And it was rude. It was also self-serving. I’m a techie ““ at least, I’ve mostly earned my living from technology ““ and I run a technology-heavy gambling plc.

But it turns out that actually I was right, and this lack of technological expertise on the boards of our largest gaming businesses should worry anyone who cares about the industry’s future, from the people who work in it to those whose money is being put to work there.

Getting your technology wrong can be a very expensive business. Just ask William Hill. In all the rejoicing that took place when it effectively outsourced its online gaming platform to Playtech, few people bothered to look back and ask how it had reached this pass. In January 2008, William Hill an­nounced to the stock market that it was writing off £26m after its in-house project to redevelop the online sportsbook offering collapsed.

Even at the time, online wagering represented 12% of its business. But as there were no techies on the board, there was no-one to fire, so the com­pany got rid of the business instead. It sorted out the mess by getting Playtech to provide world-class back-office technology, and hiring lots of online gaming specialists who actually know the business (and the internet). Guess what: it worked. Last year, online sales contributed over 20% of the company’s revenue (before Playtech’s share).

In fact, across the whole sector, 44% of all rev­enues now come either from the internet or from online terminals in betting shops ““ and that’s not including the pure-play online businesses such as 888.com and Playtech. Get your technology wrong, and your business is likely to go with it.

So I looked at the backgrounds of the board direc­tors on the largest listed gaming companies to see if my hunch was right. The top six firms have 51 directors on their main boards. There are at least 14 accountants, eight bankers, three bookies, two lawyers and precisely no-one who has run the tech­nology function of a single company at any point in their career (unless, of course, they have excised this from their CV). There are a couple of guys from the motor industry, and some hoteliers, though.

You could argue that the boards of large plcs should not need techies, that it is the chief execu­tive and the finance director’s job to bring these matters to the top. After all, you don’t need smokers on the board of cigarette companies. Their role is corporate governance and the best people for that are lawyers, accountants and bankers.

This is true, but not completely. Mining compa­nies put geologists on their boards and pharmaceu­tical manufacturers have clinicians ““ alongside the accountants, the lawyers and the bankers. Yet just as mining businesses are dependent upon geology, all the listed gambling businesses I looked at are dependent upon gambling technology. And innova­tion in the gaming industry is now driven almost entirely by opportunities created by new technolo­gies, from fixed-odds betting terminals (FOBTs) to mobile and beyond.

Having an expert in technology on the board is already a matter of corporate governance, if only because half-informed strategies can get you into a William Hill-sized hole very quickly indeed.