A fundamental transformation is occurring in the gaming industry as we witness a transition from on-premise technology infrastructure to leading data centers. This evolution in our industry is essential for its survival and organizations who embrace it will continue to be competitive. In this four-part article series, we will dive into aspects of this transformation.  

This article seeks to educate our readers on the impact of the cloud transformation for the gaming industry.  

Impact of Outdated Technology

The impact of outdated technology infrastructure cannot be overstated. As our previous article illustrated, technological innovation builds upon itself and is not a collection of isolated events. The cloud migration of the 2010s paved the way for the Artificial Intelligence (AI) transformation of the 2020s. They build upon each other and organizations cannot leverage the benefits of AI without the cloud. In simple terms, you cannot run modern technology on outdated infrastructure.

The transformation in the gaming industry is unfolding in two ways. First, land-based gaming operators are at risk of being left behind and cannot compete with the technology of  modern rivals in the online gaming vertical. Second, land-based operators  continue to be bogged down by security incidents that shut down their operations for months, while their online counterparts have had no such incidents.  

Going forward, gaming operators who do not transition their services to the cloud and adopt modern technology will continue to fall behind even in verticals they dominate today. They simply do not understand their own data the way modern companies do, they are unable to move at the same speed as modern companies, and their operations are bloated and expensive to run because they are not leveraging efficiency gains modern technology affords.  

Case Study: Domination of FanDuel and DraftKings in Online Gaming

The emergence of online gaming in North America, dominated by FanDuel and DraftKings, serves as a case study for the impact of the cloud transformation. Both FanDuel and DraftKings are cloud-native operators that are modern tech-forward and data-driven companies. Anyone attending an event where one of these companies presents will hear words like “experimentation”, “iteration”, “data science”, and so forth. These are companies with centralized data stores in the cloud, with robust business analytics capabilities that prioritize the use of  modern technology for speed-to-market, data analysis, and the variety of benefits modern technology affords.

The speed at which these two companies dominated North American online gaming shocked the industry. Traditional gaming operators had the business assets, player base, financial resources, and organizational know-how with many decades of experience. But FanDuel and DraftKings had none of these things. They had been around less than six years when online gaming spread across the US. The founders of FanDuel even admitted knowing nothing about sports or betting.  

Modern technology was a key differentiator between the dominant online gaming operators and traditional land-based operators. FanDuel and DraftKings could immediately deploy services because they could leverage the cloud, while traditional casinos had to buy servers, go through regulatory hurdles to stand-up physical equipment, procure physical space, hire local staff, and stand-up operations state-by-state. They could not compete with the speed-to-market of modern online operators like FanDuel and DraftKings.

Another critical differentiator is understanding their own data. Modern online gaming operators have central data stores in the cloud that allow them to analyze all their data. They have petabytes of data on players and their operations, allowing them to empirically understand all aspects of their operations and optimize their services in real-time. Automated software deployments to their cloud allow them to roll out software updates at any interval including daily.

Conversely, traditional land-based casinos have their data siloed in physical servers often dispersed by operational areas and geographic location. They must physically manage their infrastructure, including manually installing software and technology updates. They may anecdotally understand their customer base from decades of experience, but they have limited access to empirically understand the totality of the information in their possession. Updating software and business practices in response to their learnings is often slow and full of friction.  

In simple terms, traditional land-based casinos missed the cloud transformation of the 2010s and are not competitive against modern rivals in the 2020s. As one example, WynnBET wound down its operations  after being unsuccessful at obtaining meaningful market share. All other traditional casinos who are still competing in the online space have so far been unable to capture the market share of operators like FanDuel and DraftKings.  

Security Aspects of Outdated Technology

Security is another important aspect of modern technology. Crippling security incidents have dominated the headlines of 2023 and 2024 in land-based gaming across both the US and Canada. Modern cloud-based infrastructure strengthens operators’ security postures in important ways. To date, no modern online gaming company has experienced a major debilitating disruption to services due to a cyber event.

Regardless of how hackers penetrate systems, on-premise infrastructure often increases the severity of incidents due to the following:

• Legacy application architectures and deployment models;

• Networked machines so the same applications run across all infrastructure;

• Mismanaged and unsecure encryption keys; and

• Use of virtual machines to maximize server output.

These common practices and limitations mean that if a hacker penetrates one service, they can often gain access to everything. The only way to protect data is by shutting everything down. Additionally, once everything is shutdown, a forensic analysis must occur, the servers must be wiped clean, and all software programs physically reinstalled on the servers. This process often takes weeks or months to complete – and for large organizations over 6-12 months to fully complete.  

Leading cloud providers like Microsoft Azure and AWS operate worldwide, giving them unique access to analyzing cyber-security threats both locally and globally at hyper-scale to the tune of 70+ trillion threat signals daily. Additionally, protecting data is mission-critical for them and they invest billions of dollars annually for the best cyber security professionals, hardware, and software. Gaming operators simply do not have the resources and scale to come close to the security levels of leading cloud providers.  

Availability is another benefit of the cloud. Data centers provide nearly 100% uptime and the ability to deploy out to different geographic regions, further ensuring  widespread availability. The data centers have robust physical and infrastructure security, including long-lasting back-up power generators at levels that a land-based gaming operator could not provide with its own infrastructure. Of critical importance, services can be quickly stood up again  in the event of a cyber incident. Services can be quickly deployed to fresh machines and even new regions, providing for immediate business continuity as opposed to the long and arduous process of wiping physical servers and manually reinstalling software after a breach.  

Scalability Aspects of Cloud Computing

Scalability is one of the most important benefits of cloud computing to the end-user of software. Everyone wants to click a button and have the software instantaneously respond. The only way this can happen is if some machine somewhere runs a calculation or data processing job for the user immediately. If the user is stuck in a queue waiting for 100 other jobs to process, well, everyone dreads that loading prompt, hourglass or  spinning circle.

Restricting on-premise computing machines (i.e., servers) to a set processing limit  is not a good idea. This means that, regardless of the time of year from the Superbowl to the World Series of Poker to a random Thursday night, there is only a set amount of computing resources available.  

This situation is exacerbated by modern software that consumes incredible amounts of processing power. At a high level, every time ChatGPT is trained, it costs OpenAI over $100,000,000 in computing resources and models in 2025 could reach over $1 billion to train.¹ A casino is not trying to train an AI on everything on the internet, so at a micro-level, an operator wants to do things like:

• risk score all their your players for money laundering against 15 risk factors, with each factor having its own calculation;

• monitor transactions against active players for patterns of suspicious activity;

• view and interact with analytics in real-time;

• search a wide range of data in real-time; and

• pull a wide range of reporting.

All of these tasks use incredible amounts of computing resources to accomplish and would consume more technology resources than any casino has available. A casino would have to completely shut down its operations by attempting to do these types of things – and would still need to buy more servers to get it done.  

Layering in machine learning and AI capabilities is simply untenable with a fixed number of servers. Buying thousands of additional servers at $500,000 each, only to use them infrequently for mere seconds or minutes to submit queries, just does not make sense.  

The cloud provides these capabilities and at much lower costs. Organizations essentially rent space in real-time across millions of machines, enabling businesses to scale up and  down instantaneously as needed and pay only for the computing resources used. This is a key reason why modern technology relies on modern infrastructure. The software we expect to have today, where we can perform a range of incredibly useful things in real-time, relies on massive amounts of computing resources that are available in real-time.    

While the cloud is not a magic bullet, it is a far more effective way to manage technology infrastructure. Taking advantage of leading data centers with deep pockets, and allowing companies to focus on their core competency, is advantageous to gaming operators. These cloud providers offer millions of machines for scalability, maintenance of the equipment, data security, availability, and provide ease-of-use.

Stay tuned for the next article in this series: Data Control in the Cloud: Public, Private, and Sovereign

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