IBM and Partners Target Casinos with the System i

Published: May 1, 2006

by Mary Lou Roberts

There was a time when the casino industry was the exclusive turf of the OS/400 platform, thanks to a number of strong and established application providers who provided the hotel and gaming industry with the core solutions they needed to turn the key with software on a secure and reliable platform. To be sure, the industry is still dominated by OS/400 applications, although Microsoft has been blasting some holes in the fortifications of one of the iSeries' biggest strongholds. IBM and its partners are fighting back.

Chip McClelland, IBM's senior marketing manager for System i, claims that the iSeries is still the primary platform for approximately 90 percent of all Las Vegas casinos and that it also rules in about 50 percent of all of the Native American casinos (a significantly lower number, given that these installations tend to be newer than and less connected to their Las Vegas counterparts). With the casino business now booming in Asia, there's a lot at stake for IBM and the independent software vendors with expertise in this market. Wynn Casinos has chosen an all-Windows platform. And there have been a few other defections from the iSeries ranks--something the platform cannot afford, especially in light of what has been a heavily entrenched and established market.

Losing clients--even a small number of them--is bad enough. But IBM and its ISV friends cannot be expected to sit back quietly and watch Microsoft pilfer the loot in what is a real growth market. Despite the increase in gaming in the United States, any market increases in this country pale in comparison to what's happening in Asia. Macau, a Portuguese colony that returned to Chinese rule in 1999, may soon dwarf Las Vegas in terms of gaming revenues. Australia is also a well-established gambling mecca. And the rest of Asia is not far behind with the establishment of more and more casinos in other Asian countries.

The Christian Science Monitor reported last year "Singapore's two casino resorts, worth $3 billion and expected to open in 2009, are central to its aim of doubling tourist numbers to 17 million a year, tripling annual tourist spending to $18 billion, and creating about 100,000 new jobs . . . . Singapore has received 19 proposals from major players in the casino business, including Las Vegas giants like MGM Mirage and Wynn Resorts, eager to get in on the action."

Kevin Patterson, director of worldwide System i sales at IBM, points out that, in addition to the strong growth in the Macau market, Hong Kong had more than 23 million visitor arrivals in 2005, a 7.1 percent year-on-year increase over 2004. In fact, in the Asian markets, "the hospitality and gaming industry is expected to double its U.S. $5.6 billion revenue generation by 2010; hotel rooms are likely to multiply by five times to over 28,000 in 2009," says Patterson.

In an attempt to gain new business--especially in Asia--and to stave off any further defections here in the U.S., IBM and four key ISVs announced last week that they are working together to launch a complete and integrated hospitality and gaming solution suite of products for the System i--a sort of "Casino-in-a-Box" solution, if you will. (We previewed this solution back in December.)

IBM's partners in delivering this solution suite are Agilysys, Bally Technologies, InfoGenesis, and SSA Global--all well-established players in the industry--that offer software that runs the gamut of applications needed by the casino industry. Patterson explains the logic behind the move. "Our customers say time and time again that they don't want to be system integrators for their businesses," says Patterson. "This is the only suite that delivers on the majority of what a client needs to fund a large hospitality or gaming operation, letting them focus on their business, not their IT."

The suite of products in the Casino-in-a-Box offering integrates the following vendor solutions:

• IBM: the System i pre-integrated with hardware, database software, storage, and security, with the choice of four operating systems.
• Agilysis: Property management, inventory and procurement, document management, guest express kiosk, and wireless solutions.
• Bally Technologies: Casino management solutions, slot management systems, table management systems.
• InfoGenesis: Point of sale, cashless payment, dining management, dining reservations, self-service solutions.
• SSA Global: Financial management, human capital management, customer relationship management, corporate performance management, workflow.

IBM's press release on the topic describes this as "Integration in action," noting that "The integrated database in i5/OS. . . allows [these partners] to source from a single customer profile optimizing capabilities that these ISVs have built from the ground up and integrated with i5/OS . . . . The team of companies is also working with industry associations, offering its decades of industry experience to drive the next generation of development."

Together, members of this partnership can deliver approximately 80 percent of the software solutions that a casino needs, claims McClelland. What's the remaining 20 percent? Primarily network security, high availability, and disaster recovery. It's not difficult to figure out why ISVs that offer those solutions were not included in the partnership. It's true that these are all necessary components of a total IT solution set, but they are not ones that are, as a rule, industry specific. Further, one can only imagine the reaction of one System i high availability provider if it had been chosen over the others to fill the role of the high availability partner. IBM cannot afford to alienate any of the six providers of HA software for the OS/400 platform. So wisely, neither IBM nor the other partners in the group would see it in their best interests to include these ISVs. The problems and the strain on what are otherwise good relationships would far outweigh the benefits of bringing them into the fold.

But getting back to the 80 percent that the partnership does offer, what exactly does "integrated" mean in this context? To what extent are the solutions offered by these partners truly integrated? According to McClelland, the four ISVs participating in the partnership have been working together for a long time to make their products talk to each other. "They have well established points of integration between them," he maintains. But he acknowledges that, beyond what's been done in the past through prior cooperation of the ISVs, no additional work has been done for true technical integration. They are all working together, however, to "lay out a roadmap for further integration," McClelland says.

What's on the roadmap? While McClelland declined (as Blue Suits tend to do) to offer any detailed information about future announcements, he did say that "there's a lot of opportunity, using IBM's portal technology, to deliver a more consistent look and feel for the products." Translated, this means, I think, that despite the fact that the partnership has referred to this announcement as "Casino-in-a-Box," it's really a casino in several different boxes, all of which are available from ISVs who've agreed to play nicely with each other from a marketing perspective.

The ways in which this "integrated gaming suite" will be marketed and sold raises some additional questions. Is this "one-stop shopping"? If so, who will market it and who will sell it and how will it be priced? Bundling usually implies a single point of purchase and support, as well as discounts.

McClelland points out that "this is not a hard bundle." While there has been some cooperation thus far in preparing cooperative marketing materials, including a demonstration of the system components working together, for trade shows, it appears that each ISV will continue to approach customers independently, engaging the others when/if desirable as the sales process moves along. But, "the customer is king," McClelland reminds us, and some customers may have already installed various components of the suite from other vendors or may have a preference for a vendor who is not participating in this partnership. Additionally, there are a few areas of overlap between the partners themselves that may be problematic. But, as McClelland says, "There is nothing restraining any of these partners from freely competing in this market."

What we appear to have here, then, is a collection of partners, with IBM playing matchmaker, that are prepared to approach aggressively a high-growth market (specifically, the hotel and casino business in Asia) together to maximize the possibility of success for all of them, not the least of which is IBM and the System i platform. And that's a good thing, for the partners and for the platform.

McClelland believes that the model that IBM has created here is a good one for other "sub-industries," predicting that IBM will play matchmaker again with partnerships for industry segments like state and local governments, truck-fleet management, and some areas of health care.

Again, this is a good thing, and industry observers should be wary of being critical of the partnership's fairly loose use of the word "integrated." One definition of the word is: "To make into a whole by bringing all parts together; unify." By this definition, it would be a stretch to call this offering integrated. On the other hand, integrated can also mean: "To join with something else; unite." And by this definition, the partnership meets the test.

For decades, OS/400 platform lovers have been carping at IBM to market, market, market. It seems to me that's exactly what IBM is doing here for the casino market and what it intends to do in the future for other appropriate sub-industries where a group of proven and established ISVs can come together to share in presenting a better offering as a group than any of them can demonstrate individually. Further technical integration of the products will be icing on the cake.

Patterson is correct that most businesses--especially SMBs--want to focus on their real core business issues and not on IT. If they can see a full set of proven products that will meet their business needs, running on a platform that's reliable and easy to operate, they're likely to go for it, especially given the track record of a Wintel alternative with software solutions that are far less integrated than these. To that extent, "Casino-in-a-Box" is an accurate description of this partnership, the "box" being the System i.

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