Sports Betting Platforms: Why In-Housing vs. Outsourcing is not a Black and White Issue
We caught up with Jamie Mckittrick, SVP of Commercial Operations at Kambi, who sheds light on the age-old debate, in-house vs outsourcing.
It is a conversation almost as old as the sports betting industry itself – is an operator better served by outsourcing its technology or bringing the sportsbook in-house? Interest has been renewed by the repeal of PASPA in the US, although it is fair to say that this is far from a new debate, one which has been around almost as long as mass sportsbook.
Before analysing the debate in more detail, it is worth first establishing the challenges that come with operating a sportsbook. A Kambi architect once described the sports betting platform as “the most complex piece of enterprise and end-user software imaginable”, noting that the intricacies which accompany the product, processes, offering and regulatory management make it far more demanding to successfully deliver than the likes of Netflix or Spotify.
The complexities and technical strengths that come with building a sportsbook capable of leading the market are vast. Offering a deep array of markets with high combinability across pre-match and in-play to end users is of paramount importance, but there are many other areas a high-performance sportsbook must get right. Managing heavy load with spikes in volume is no mean feat, while smoothly handling bet settlement across millions of wagers, ensuring regulatory compliance and providing 24/7/365 stability offers all sorts of potential complications to technical teams.
Dealing with these challenges requires a supply chain capable of delivering on all levels, beginning with the integration of official data partners and proven algorithms that process the data, followed by excellence in trading and risk, which must all be supplied through a fast and intuitive front end. Only when these elements are working in perfect harmony can an operator begin to deliver a best-in-class service – all of which serves to highlight that the depth of time and resources required to deliver and innovate a leading sportsbook product are immense.
Rethinking the debate
With the complexity that comes with operating a sportsbook established, one of the key points to emphasise is that for any operator this situation is never as straightforward as taking a ‘one or the other’ approach to in-housing or outsourcing this function.
Framing the debate in this manner fails to accurately reflect the reality of the modern sports betting landscape. There isn’t an operator active today which handles all of the sportsbook operations internally, with all employing outsourced services to some degree – be that incorporating third-party pricing feeds or making use of an external bet builder, for example.
The real question is not whether an operator should outsource or in-house, but to what extent should an operator outsource the components of its sportsbook, such as platform, odds compiling, risk management, the sportsbook front end or player account management platform, to offer some examples. The extent of this outsourcing will come down to the strategy of each individual company, but there are none which operate today with a 100% reliance on proprietary technology.
Some markets will see more operators take a limited approach to outsourcing, whereas others will see the majority of operators primarily outsource their solutions. For example, in the Swedish regulated market, around 90% of operator GGR is facilitated by fully outsourced turnkey solutions.
While there has been a trend among some larger operators in the US to bring more elements of their sportsbook technology in-house – which can prove as important a factor for a company’s equity story and appeal to the investment community as much as the product itself – that is not to say that the biggest operators globally either need or want to own all of it. As a prime example of this, bet365 recently entered into agreements to outsource aspects of its CRM and sports betting portfolio to third-party providers, which we believe to be a strong indicator of the industry’s long-term direction of travel.
Indeed, this is not a dynamic which is unique to the sports betting space, with more mature tech sectors displaying this trend of turning to third-party suppliers where those suppliers have a competitive advantage. By way of example, the likes of Apple and Intel outsource the manufacture of certain technical components required to power their products to third-party providers.
It is this outlook for the future of the sports betting industry which informs Kambi’s ongoing strategic approach to modularisation. The majority of operators in regulated markets will continue to require a high-performance full turnkey solution, and our focus will continue to be on pushing the boundaries of our full sportsbook offer, while simultaneously making available standalone elements for those looking to raise the standard of their own sportsbook. Our recent acquisition of Shape Games complements this strategy, with Kambi now able to offer fully native front-end services which are at the very cutting edge of what is possible in sports betting, giving operators the opportunity to craft a user experience which is truly bespoke.