Major changes are afoot in the struggling racing industry. Legislation held over from the previous Parliamentary session to merge the Racing Industry Board and the TAB is expected to be enacted this year. For the TAB, it will be a key change, enabling it, as part of the new Racing Board, to become more directly involved in the industry and, most particularly, giving it access to more funds – perhaps doubling its capital budget in the short term.
“That means we will have more opportunity to invest in appropriate technology and to explore new investment,” says the TAB’s CIO, Warwick Wright.
In a business that is largely static in terms of betting turnover, new markets are critical to growth. Overseas opportunities include selling New Zealand racing as a betting opportunity to other markets and, conversely, bringing their races to New Zealand punters.
“We’d like to go further afield, possibly to the US, Asia and Europe,” Wright says. “We’d look at providing racing form to New Zealand bettors through the internet, or to some publication.” The other growth opportunity is poker machines in some of the TAB outlets, though this is contingent on enabling legislation.
In the financial year just concluded, to July 31, the TAB turned over slightly more than $1.1 billion, an increase of around $500,000 on the previous year. What is particularly significant for the racing industry is that just $75 million of that was bet on race courses, which have been experiencing around 5% a year downturn in betting turnover in recent years.
In total, racing contributed $998.5 million to turnover ($995 million in 2001) and sports betting $108 million ($69.7 million). Sports betting had been flat year on year previously but received a significant boost from the soccer world cup.
The TAB targets a return on investment of 20% but, says Wright, has great difficulty in proving cause and effect when it comes to changes in turnover. Was it because of a promotion or had there been surges of confidence in the economy? The figures can also be skewed by major race meetings such as the Melbourne Cup or even by the appearance of a champion, such as Sunline, who draws much bigger crowds than normal to the race track when she appears.
“We are essentially faced with two options: diversify or shrink the infrastructure,” Wright says. “Our outlets are expensive to maintain and the return on some is not particularly good. Our strategy where they are not profitable is to move the agency to a pub or an RSA.”
It is something of a catch-22 situation. Information technology is absolutely critical to the business – probably more so than any other organisation in New Zealand – but it doesn’t necessarily drive new business. Still, the customer base has to be serviced and that means keeping the technology updated and investing in new channels.
Recently, the TAB migrated from an old Concurrent mainframe to Windows NT, a project which won a Computerworld Excellence Award. Wright says the change to Compaq servers has been very stable and successful.
“We’re not pushing the boundary of technology because the business is not growing, so some of the servers are two years old.” The new hardware and software means the system can be rebooted quickly after an outage and be up and running within minutes. Previously, this might have taken a half-hour. Outages are rare, usually caused by either a software or Telecom problem. There is 99.8% uptime during prime betting time.
“We’re turning our attention now to the betting terminals,” Wright says. “They have a wide range of components and you can’t buy an off-the-shelf solution other than from specialist overseas manufacturers, which means a lock-in. Our most recent replacements are assembled locally. We rolled out 800 across the network in April and we have 1000 to go. The big challenge is the multipliers. We’re talking $8000 to $12,000 per terminal, and we’re doing that largely to stand still because they don’t sell any more bets.”
Wright has an annual capital budget of $7 million and the same for operations. “We are pacing the replacement terminals at a rate we can afford.”
Internet betting grew strongly last year, from $38 million to $60 million, and the TAB is currently trialling a text betting service. An interactive TV launch on Sky is planned for the next few months where the bettor can watch the Trackside channel and place bets using a keypad. The major issue there is performance, using a dial-up link back to the host.
New betting products are constantly being worked on. It’s likely a percentage betting option will be introduced for trifectas. Wright gives the example of a combination trifecta costing $64 but the bettor spends only $20 and gets a return of 20 64ths.
The TAB has been working over the past 18 months to better define its demographics. It has found that the stereotype of older people being the major bettors is not borne out by the facts. “It’s not rugby, racing and beer,” Wright says. “One inhibitor [to understanding the demographics] is that, historically, so much betting has been in cash. We’re now getting more account betting, particularly over the internet.”
Wright says the TAB continues to squeeze its cost structure but there are external costs over which it has no control: for example, the increased cost of establishing links to Australian racing; and the problem gambling levy (currently $900,000).
Major newspapers have moved to weekend racing liftouts, rather than the traditional racing page, and the TAB is now sharing the publishing costs. That costs it more than $2 million a year. “We think these have had a positive effect on turnover but it’s hard to measure,” he says.
Wright joined the IT industry in 1966 when he worked as a nightshift computer operator with IBM while completing his degree, first at Victoria University, then at Canterbury. He later joined IBM as a programmer, then became a systems engineer, and was 18 years with the vendor.
He moved to CCL Computing to get management experience, then to the BNZ, initially as its computer centre manager, then as chief manager of group information systems. He left the BNZ when it was bought by National Australia Bank and joined Capital Coast Health where he was CIO for five years. His move from Capital Coast Health to the TAB two years ago was occasioned by yet another restructuring in health.
“The main difference between the TAB and other jobs is that here we have a lot more ownership of our own technology and we are not dependent on third-party suppliers,” Wright says. “We are much more masters of our own destiny but we do have the challenge of retaining in-house expertise. We have a number of people with 20 years’ experience and we have to spread that knowledge around. People stay here because it’s interesting work and many of them are interested in racing and sport.”
The TAB has fewer than 200 salaried staff but many casual workers. There are 80 IT staff, made up of 20 engineers serving the retail outlets, 20 in operations and network support, five in quality assurance, and the rest mainly developers. “I’ve always seen IT as something to meet a business need,” Wright says. “You need to align the technology to the business. I don’t get off on technology for its own sake and I don’t believe in technology religions. At most sites I’ve worked at I’ve tried to rationalise technology.”
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