Gtech's new game plan

Electronic News, Feb 16, 1998 by Carolyn Whelan

West Greenwich, R.I.--Most people know GTech as the company that runs lotteries for states. But now the giant gaming company is planning to employ its technology in the data communications market, a highly competitive area, building on its domination of the extremely lucrative on-line lottery business.

As the company enters this new field, it has to put behind it headlines it made lately of a different sort. GTech Chairman Guy Snowden allegedly tried to tempt U.K. high flyer Richard Branson into pulling out of the race for the U.K. Lottery business (the world's biggest), which, when made public in a libel trial, pushed Mr. Snowden to resign--not for attempted bribery, but for libel. When Mr. Branson won the suit, GTech didn't want the damage associated with the trial to stick. So Mr. Snowden resigned.

Companies in the lottery business in the past haven't had a great reputation. As a form of gambling, it's a tough business, no matter how good a company is.

A surprise about GTech is that it has superb technology and is staffed by high tech people with impressive credentials.

Mr. Snowden himself was an ex-IBMer, and most of his former colleagues came from well-known telecommunications companies like Scientific Atlanta and GE. Not only is the company legit, it is highly respected by well-informed analysts for its technology.

That's why the company wants to move into data communications, says Donald Stanford, senior VP and chief technology officer at GTech. He sees opportunity in the world's emerging markets where minor and poorly serviced data communications expertise exists. The company, the world's largest supplier of computerized lottery products and services, knows how to build, maintain and ensure 24-hour operability of its mission-critical lottery infrastructure in places without any telecommunications infrastructure. And if a cash cow like the lottery goes down, governments lose revenue and there's hell to pay.

"When an ATM machine breaks down, you just prevent people from getting cash," said Steve Beason, VP of software at GTech. "But when the lottery breaks down, people perceive it as not being allowed to get the million dollars they would have won if the system was working."

Analyst Ellen Carney of Dataquest agrees, and touts the company's security know-how and intensive transaction processing technology as a differentiator from traditional networking companies. "They know the networking business really well," she said. "(For lotteries), everything has to be secure and highly available. She predicts "If GTech goes to the market with their networking services they will be very successful."

Lotteries operate under the most extreme circumstances and to assure continuous uptime, they employ network redundancies and emergency power generators build into central data centers.

And the lottery business has given the company an "in" in some countries. Gtech is entering into the networking space by supplying EuroNet with data communications services for Automatic Teller Machines (ATMs) in Poland. The company's market knowledge, contacts and a reputation were acquired from setting up an online lottery in Poland.

"This is second nature in the lottery business," said Mr. Stanford, who said that due to the sparsely populated and underdeveloped areas where it installs terminals, it normally relies only minimally on a telecommunications structure, and, more often than not, builds its own wireless infrastructure from scratch through satellite and radio. For years, the traditional approach to lottery networking was to rely on the regional Bell operating company for dedicated tail circuits to retail locations, which, GTech says, is no longer as effective due to recent administrative and procedural changes among the Bells.

Lotteries For The World

GTech, a $900 million company with about 70 percent of the worldwide lottery business, designs online lottery system from the ground up, by designing and executing the operating environment, infrastructure, central computer system, terminal application software, communications network, and quality assurance and testing. The company has installed approximately 30 wireless networks over the past 12 years for lotteries in North America, Europe and Latin America. Today, its radio systems provide on-line communications for more than 17,000 terminals worldwide. An average GTech online system handles approximately 160 million transactions daily.

"We are very vertical, we have all the components here with a minimal reliance on outside factors," Mr. Stanford added. "We do the systems work, the software, build devices and have all the expertise to build and install without partners for the execution," he said, which is not the norm in the industry today. The company has installed wireless networks for lottery terminals in Poland, the Czech Republic, Slovak Republic, Estonia, Lithuania, Mexico, Venezuela, Chile, Argentina, Brazil, Bolivia, Puerto Rico, Barbados, the Philippines, and Trinidad and Tobago.