Betfair CTO Tony McAlister puts bets on R&D

Despite the reduced budgets and increased pressures the world economy has experienced since the collapse of Lehman Brothers, some sectors and companies have performed well and in fact have even benefited from the slow-down. One such company is online betting exchange Betfair, which this year announced that it has over three million customers and reported revenues in 2009 of £303m – even in this supposed depression, there are still many individuals with money available to bet on everything from football and horse racing to politics and the winners of reality television shows.

Tony McAlister became CTOin January­ 2009, replacing Rorie Devine, now CTO at Yell.com. We met McAlister at his R&D headquarters in Marble Arch, London just before speculation began of the planned flotation of Betfair in the form of an IPO. R&D is close to McAlister’s heart and he chose this location for our meeting to demonstrate the value it has to Betfair.

Revamping Betfair Research was one of the first tasks McAlister set about on his return to Great Britain to take the CTO role at the company. Originally called the Advanced Technology Group, McAlister felt a simple renaming would focus the department on the brand it represented and its basic role – research and development.

“I spend tremendous amounts on R&D, but the generation­ of revenue from it is ­indirect,” he explains. “We are now focusing on mobile usage and event processing. In mobile we are working with partners so that we can allow 5000 people at a ­major match to place a bet at the same time. That is something that mobile operators can’t do at ­present, so I’m talking to the US ­military who have done similar things.”

McAlister is passionate about R&D and there is no question of its value to the business in the mind of this witty and relaxed American from the Deep South.

“There are not the tax advantages there should be. I’m taking advantage of some in the US, but even without a tax advantage, there is always a product advantage out of it, so my research turns into a product and gives me a business advantage and I would argue I could do more [R&D].” Betfair has continued to grow as an organisation despite the economic fear stalking certain corridors. The slowdown in economic activity has benefited McAlis­ter, who has seen his team outgrow the ­organisation’s Hammersmith HQ.

Read the full CIO interview with McAlister’s predecessor

“Central London is good for recruitment,” he says. McAlister hasn’t only been securing the talents of Britain’s IT experts; his hiring policy has been truly global.

“I wanted to find the best talent. We are a web company, but we operated as an IT company,” he says of the distinction.

“We have to operate at web speed. I told the board: the best talent is in Silicon Valley, so we are hiring there. The time expansion is good for us too,” he says of how his geographically widespread technology division follows the sun across Eastern ­Europe, Britain and on to the US to guarantee­ maximum uptime.

“To globalise you need to grow the physical footprint of the business,” he says of the expansion out of the UK. “But we will carry on developing in London.

“I’m trying to streamline as well, so I have hired new managers to report to me including a usability director, which was something Betfair could do even better.”

His next challenge for the new UK R&D team is to move it back to Hammersmith and into the Betfair HQ.

“The landlord has made me an offer I cannot refuse,” he says, adding that he is concerned about the cultural affect the move away from the creative satellite to the formality of head office will have. “They have created their own environment here; there are no exec­utives, so it does worry me to take them back to Hammersmith. Here they have really embraced Agile, the vibe when you come here is like being at a start-up. They interact with each other; I feel I get more done over here.”

He hopes the creative atmosphere can be successfully transplanted from the Marble Arch hothouse to the Hammersmith­ garden and benefit the HQ. “I’m hoping­ it will act like a germ, and infect the company,” he says of the team’s creative vibe.

On a later tour of the building we certainly get a sense of the cutting-edge R&D crew based there. It feels like a space station control room, with groups of casually dressed intellectuals speaking in the ­accents of every European language, they are grouped around pods of multiple screens crashing their brains against a sea of code and computation.

McAlister has also introduced a graduate recruitment scheme as part of his expansion. “That they are graduates mean they are talented, but you can make them Betfair people,” he says.

Their youth value leads to product ­value, McAlister believes, especially when it comes to new technology.

“They are not people with seven or 10 years of experience,” he explains, adding that this is no bad thing because their inter­action with technology has not been shaped by the organisations they have previously been with. As devices like the iPad and iPhone reshape the way we consume and interact on the web, unblemished youth will bring innovation to Betfair.

In particular, McAlister is watching the iPad with interest, and sees its information consumption abilities as powerful while remaining unsure of its potential for the services it could offer Betfair. But then that is what his graduates are there to challenge him over.

Three-screen dream

Betfair was the first gambling organisation to have been approved by Apple to have an iPhone App available on its highly regulated App Store, and McAlister said Apps for the iPad and Android platforms will follow soon. This mobile push is part of a three-screen strategy to ensure Betfair is a powerful presence in the mobile, online and television space.

“I expect them all to merge as and when the device becomes available,” he says.Could that irresistible force be the iPad? But McAlister’s team are not just throwing technical possibilities back at the ­organisation. His team are a key part of the gaming creation aspect of Betfair.

“We created Zero Lounge, taking all the zeros off a roulette table, this makes it completely even and means [players] have as much chance of winning as the house does,” he explains.

McAlister and his team also buy in white-label gaming applications when it is the best policy for Betfair. “I don’t want to invent the best bingo applications, so we buy one in: our unique IP is our exchange.

“We take ideas from anybody. Andrew Black (co-founder of Betfair) and the communications team come in with ideas too.”

Analysts predict that the online gaming industry is set to consolidate. A Betfair IPO is expected to value the company at £1.5bn. The company is now 11 years old and is the largest betting exchange operator. It flirted with an IPO in 2005 before pulling back, but many industry insiders expect the company to go ahead with the offer this time. Betfair is 24 per cent held by Black and co-founder Edward Wray, 23 per cent by Japanese media corporation SoftBank and the rest by private investors.

Rivals may see a chance to buy into Betfair’s market-leading exchange technology as too good an opportunity to miss if Betfar does opt for an IPO. The technology itself is based on the rapid event processing systems used in major stock markets like London and New York.

“The founders plugged exchanges and?gaming together. We compare ourselves to Amazon and eBay. Our real key strength is the exchange,” says McAlister. He is ­relaxed about the state of the online gaming market and sees Betfair as being distinct from other players. He describes Bwin as having a strong sportsbook, while Ladbrokes’ strength is in bricks and mortar outlets. Observers may see Bwin as a powerful rival, but McAlister reveals he is a good friend with its CTO Thomas Kiessling (profiled in CIO, March 2010 and at http://tiny.url/cio-bwin)

“We both have centres in Cluj Napoca, Romania and we shared attorneys there. He [Kiessling] was in Asia looking for an outsource provider, we asked his advice on what he found.”

As well increasing R&D, McAlister was tasked upon his arrival with an infrastructure overhaul. Performance 2010, as the project was dubbed in prepar­ation for this year’s World Cup, was a major test of Betfair. The project was completed in time for March’s Cheltenham Gold Cup and April’s Grand National, two annual tests of the Betfair platform. McAlister reports both went well despite an increase in traffic. “Our servers didn’t even sweat,” he jokes.

“I gave my team nine months to change the boxes from Sun to Intel, which has saved the company £50,000.”

Bible bet

McAlister’s southern upbringing almost precluded him from taking the Betfair role when it was offered.

“I grew up in the Bible Belt of the US, so I turned the job down at first, but the recruiter came back and talked about the technology and it made me think again. It is a technology firm, and it was too good an offer to pass up,” McAlister says. Soft-spoken and self-effacing, the smiling CTO wears his ethics and personal predilections discreetly.

“My CV is a unique mix of large multi-­billion-pound companies, but I have also worked for start-ups. So I think that’s what  attracted Betfair to me.”

Rather than a bookmaker, McAlister describes Betfair as a technology company that applies its systems to the trade and exchange of opinions. On a tour of the offices he and his passionate team of technologists demonstrate how they are creat­ing a ‘wisdom of the crowds’ resource from Betfair users. Betfair correctly predicted that the 2010 British general election would create a hung parliament from the betting results generated on its site.

McAlister’s team also created a web inter­face that demonstrated national faith in the home team for the 2010 World Cup based on the behaviour of users and where in the world they bet from.

This is McAlister’s second stint in the UK, having previously been at Vodafone where, joining through a joint venture with Vivendi, he worked towards the three-screen experience of mobile, TV and web. Like WAP and ASP, it was too early for the technology strategy to take hold. But that hallowed three-screen vision is fast becoming a reality thanks to the BBC’s iPlayer, the connectivity of iPhones and the next wave of tablets that will inevitably follow Apple’s lead. McAlister­ is well placed with Betfair to deliver that reality to his organisation.