DraftKings and SBTech now are one in theory. In practice, the marriage still will require plenty of counseling and compromise before it is fully operational.
Consider this from Breon Corcoran, then-CEO of Paddy Power Betfair (PPB), speaking at the culmination of a year-long project to combine those two bands onto one platform:
“If we’d known how difficult this platform migration was going to be, we’d have put it off even longer.”
Corcoran said that in January 2018, after a year of negative growth and declining market share for the online gambling giant.
As one PPB employee said at the time: “Nothing new has gone on Betfair for the last 12 months, but now we’ve got 1,000 tech guys who have time on their hands again.”
In other words, tech migrations can be a massive drain on manpower, resources, and operational momentum.
Online gambling’s long history of migration struggles
PPB, of course, was hardly the first to suffer this kind of slowdown. The OG of momentum-crushing migrations is bwin.party, which saw revenues slump after the merger of Bwin and Partypoker in 2011-2012.
The impact of the migration was “slightly higher than expected,” the firm noted dryly in its 2012 annual report.
But how is this relevant for the US? Market heavyweight DraftKings has this exact challenge in its near future, as it transitions from the Kambi platform onto its own SBTech technology. In fact it faces two projects; the migration from the DraftKings platform to SBTech, then the Sportsbook migration from Kambi to SBTech.
Why the DraftKings migration matters
It’s a vital transition too, as owning the entire tech stack is a key part of the DraftKings story.
As analyst firm Redburn put it recently:
“Despite DraftKings referring to itself as ‘the only vertically integrated sports betting company in the US’, the vertical integration has not actually happened yet.”
The company is also in no rush to get there. At its Q1 earnings, DraftKings said it could be mid-to-late 2021 or even later before it is integrated with all SBTech technology.
“Right now, we’re still in the early stages of planning around integration and migration,” DraftKings CEO Jason Robins said. “Really, the goal for us is to make sure we have a high-quality migration and putting that above speed is the approach we’re taking.”
What lies ahead for DraftKings?
“It is a hugely complex problem,” says Andrew Daniels, the CEO of technology firm Sharp Gaming, which is building a sportsbook platform for Betfred. “Kambi and SBTech are not perfect like-for-like platforms. There will be a lot of little differences. So, assuming they want the exact same functionality on the front and back ends, they’ll have to develop it to match it.”
Beyond developing those features, there’s the challenge of migrating a mountain of data that might not be compatible between the two platforms. That includes pricing histories and customer intelligence, which is needed for bonusing and trading decisions.
“It’s more than a headache, it’s an outright concussion,” says Robert Simmons, the principal software architect at The Stars Group between 2014 and 2018. “Trying to migrate your entire infrastructure to a brand-new infrastructure is huge. And then you have to retrain the engineers, the traders on the floor. That takes a massive training budget.
“As a CTO I’d have to budget in the millions for that migration. It takes that much energy.”
Sportsbook tech talent is a scarce resource
DraftKings, of course, has the capital for a project like this, but the human resources could be harder to come by.
As Daniels put it: “The amount of people that understand the technical nuts and bolts of sports betting is incredibly small. It’s so, so complex. All these tech companies, including my own, have literally a handful of people that know how it works end-to-end. You can hire a thousand engineers but only a handful actually know what to do.”
Part of the problem is the unique requirements on sports betting platforms. They might sit relatively idle much of the time, taking 50 bets a minute, but come NFL betting they’d better be able to handle 1000 times that load without any drop in functionality.
It’s also hard to find people who can program the arcane rules of various sports into a platform to appropriately settle bets.And even assuming a company perfectly manages all this, you still can lose operational momentum.
Major business distraction?
“The migration itself is not even the biggest issue,” said Daniels. “It’s having to put your entire business on hold while you do it. You’ve got to spend all your development resource building things you already had. And of course you can’t develop anything new in the meantime or you’d have to build it twice.”
It’s not all doom and gloom, however. There’s one online gambling company that has essentially built its business model around buying failing brands, migrating them to its platform and reviving them: GVC.
GVC learned some lessons from bwin after acquiring it and has perfected the art of platform migration. Most recently it added Ladbrokes and Coral to its core platform, while still growing both brands.
So it can be done with a little expertise, and the rewards of having complete control over your tech are obvious.
“Bet365 are just light years ahead of everyone [in Europe] because they have full control of their tech stack,” Daniels said. “ And then the focus can go on perfecting the product and acquiring customers.”
Of course, the stock market appears to have already priced in that technological advantage for DraftKings. Now the company’s engineers just have to deliver.