Technology expertise, industry insight and regulatory knowledge as well as business sense are required in order to survive in the gaming industry. The whole package is important. Being licensed in a reputable jurisdiction can give you the edge over your competitors and Malta is such a jurisdiction. Sonja Lindenberg from Fenlex looks at the reasons why ICT and business-savvy is a winning combination. Article appeared in InsidePoker Business (Quarter 4 2009/Issue 4).
What kind of online gaming character are you? The techie? The gamer? The entrepreneur? Techies are attracted to the online gaming industry because of the heavy dependence on underlying technologies and the vast budgets that companies throw at building and maintaining systems. The gamer has a passion for gaming and betting. Their knowledge of the psyche of players, the game itself, and the people within the networks encourages them to set up their own business. For the entrepreneur, online gaming offers an opportunity to make money. Finding the right people or companies to invest in can reap some excellent returns.
The online gaming industry is a very colourful and diverse industry, with most operators and employees specialised in one or more of the above mentioned areas. However, in today’s competitive gaming market companies need to be forward-thinking in order to be successful. The right technology expertise is of utmost importance since it is crucial to have a secure and robust technology behind the gaming website.
Getting off on the right foot
We have all heard of horror stories where start-ups cut corners, do not properly ‘spec out’ their systems and end up making some serious mistakes. There have been cases where virtual cash has accidentally been exchanged into real cash because the system could not handle bonus or free money schemes, or large periods of downtime caused by system errors or failures in internet connectivity because no proper redundancy systems are in place. Worse still, long delays due to technical issues that postpone the launch of a website or a new product, resulting in loss of business.
But even the most extensive testing of your software cannot prevent fraud. The large amount of money involved in online gaming constantly attracts criminals who seek to defraud both operators and customers through a varied and evolving repertoire of schemes and scams. Gaming companies are systematically attacked and have been victims of organised hacking attacks, attacks on customer databases, collusion and now more commonly through the use of bots. Such attacks could lead to cash flow problems, investigations by the regulating authorities, as well as the loss of credibility and trust of the players. While technology can assist in fraud prevention, human intervention and constant monitoring are imperative.
Furthermore, it is imperative that access to the internet is sound and solid. Setting up operations in Malta is attractive to many online gaming companies because Malta is regulated, is a member of the EU, is accessible and because the information and communication technologies (ICT) infrastructure is strong. The World Economic Forum Global Information Technology Report 2008-2009 has confirmed Malta’s place as the 26th ‘most networked economy in the world’. International connectivity has been expanded significantly with three operators providing international gateway services.
More than cables and wires
Recently, after a few issues with downtime caused by faults on cables or hardware, the Malta Communications Authority, knowing that a stable supply is important for online gaming companies, has issued new regulations for international connectivity. The new regulations stipulate that network operators should have effective contingency plans in case of a fault in their network infrastructure and offer cross network redundancy. Although a lot has been done in terms of technology infrastructure in Malta there is definitely still much more that needs to be done.
Being only ICT savvy is not enough in the gaming industry. While technology and the online gaming industry do need to complement each other since the industry is technology driven, the goal of business is not just to create sexy sites that keep players coming back, the goal is to make money and this is where business savvy comes into play.
Most people tend to forget an important part of setting up their operations. That is the manner in which the corporate structures are set up to allow the business to grow. Looking at structuring, shareholder agreements, ownership of intellectual property and perhaps hiving this off into a separate legal structure, tax efficiency, short and medium term plans for the company are an expense that could cost much more if one avoids it at the onset.
The whole package is important. Being licensed in a reputable jurisdiction can give you the edge over your competitors. Malta is such a jurisdiction. A licence can provide greater credibility to your website and knowing once it is regulated, it does attract a greater number of players because they see such sites as safer and more trustworthy. Applying for a licence and going through the process that the Malta Lotteries and Gaming Authority (LGA) has implemented to evaluate licensees is also an excellent way for applicants to have their systems checked and audited following international standards by qualified system auditors.
The audit process looks at business plans, financials, policies and procedures and the technologies used for the operation, a ‘health check’ provided for a small fee, prior to a licence being issued. This exercise – originally designed to ensure player’s safety – will also help operators avoid some of the described disasters.
The finer details
Even after being granted a licence, it is important that the system is not only in line with the stringent LGA requirements but also serves your business needs. Changes need to be carried out diligently and reported to the LGA if of substance. Strong reporting structures need to be in place as all gaming companies, licensed in Malta, have to send a number of monthly reports to the LGA.
Technology expertise, industry insight and regulatory knowledge as well as business sense are required in order to survive in the industry. As an established management and corporate services company, Fenlex assists clients right from the start, prior to the licensing process in structuring companies and then through the licensing process to make sure that your gaming system matches the requirements of the Maltese Lotteries and Gaming Authority.
We also have excellent relationships with service providers to the industry both in Malta and overseas to whom one can outsource part of the business operation, be it developers of gambling software, fraud and risk experts, content management, payment service providers or hardware suppliers.
In addition, we also assist start-ups by providing experienced persons to act as directors, company secretaries and the key official. We also work to analyse the company’s business concept, business procedures, goals, and stakeholder relations and carry out, in agreement with the client, the administrative tasks that may otherwise be a burden around the neck of a start-up in Malta.
The financial and administrative reporting is a crucial aspect for the running of the business. In fact, this is where quite a few people fail. Whereas a good product is often the key to a successful gaming operation and most companies have very qualified IT managers, traders, customer service and risk managers everything that is not part of the core operation such as accountancy and compliance with legal regulations is sometimes neglected. Do not make this error with your business.