Amid merger mania in the casino industry, IT execs must update aging technologies with an eye toward integration challenges and opportunities
The jostling for dominance along the famed Las Vegas Strip is reaching a fevered pitch. The moguls who decide when and where to build casinos are engineering a historic wave of consolidation. Two recent deals--Harrah's Entertainment's proposed $9.4 billion acquisition of Caesars Entertainment and, only a month before, MGM Mirage's $7.9 billion offer for Mandalay Resort Group--will end up turning the four largest casino and hotel operators into the two largest.
In revealing its intention to buy Mandalay in June, MGM Mirage, whose spiritual leader remains 87-year-old Kirk Kerkorian, even though the legendary deal maker no longer plays a day-to-day management role, noted that it was creating the world's biggest casino company. The move would add Vegas Strip properties Excalibur, Luxor, and Mandalay Bay to a lineup that includes the Bellagio, the MGM Grand, the Mirage, and Treasure Island.
A month later, Harrah's offer for Caesars upped the ante, so to speak, making that proposed entity (it still needs regulatory approval) the world's largest casino company--at least for now. The merger gives Harrah's a respectable Strip presence with the addition of Bally's, Caesars Palace, The Flamingo, and Paris; it also augments its 13-state, 28-property portfolio with additional casinos in regions where it already has operations and adds a smattering of international holdings to complement the company's growing investments in the United Kingdom.
All this wheeling and dealing is causing a makeover of the business technology that casinos depend on to turn glitter into gold. Legacy home-grown systems are giving way to cheaper, easier, and--most important--more-scalable servers and networks. The advantages of standards-based architectures are apparent. And the challenges of data integration--Caesars' 20-million-plus customer profiles with the 30-million-customer database that gives Harrah's its marketing-savvy identity, for instance--are only now being contemplated.
The stakes are sky high--literally. The combined casino operations will be huge by any standard, with sprawling resorts along the Vegas Strip, multiple properties in Atlantic City, and casinos in states all across the country. Based on 2003 figures, Harrah's will employ nearly 100,000, have annual revenue of more than $8 billion, and claim the industry's largest casino footprint; MGM Mirage will have about 77,000 employees, $6.4 billion in revenue, and 50% of the rooms on the Strip.
"We're in nonstop integration mode," Harrah's CIO Tim Stanley says.
Photo by Misty Keasler
The top technology execs at all the companies involved are feeling the pressure. Imagine trying to replace a formula race car's engine in the middle of a race, and you'll have some idea of what it's been like to update aging technologies in an environment where customers come to eat, drink, and gamble around the clock. Add to that a merger mania that keeps ratcheting up the pressure with every new deal. Harrah's CIO, Tim Stanley, and his staff had just started a major integration effort following the completion in June of Harrah's $1.5 billion acquisition of Horseshoe Gaming Holding Corp., when the Caesars deal was disclosed less than a month later. "We're in nonstop integration mode," Stanley says.
If all goes well, the IT units will help their combined companies achieve a gamut of business goals: lowering costs by adopting new platforms that offer more computing power at cheaper prices; improving operational efficiencies by generating more revenue with leaner IT operations; and collecting more customer information, to do more creative things with once they have it. But most of all, they'll make sure the expanded Harrah's and MGM Mirage are set up to more easily add properties and gobble up assets whenever opportunity knocks by bringing flexible IT architectures into an industry that until recently relied on aging legacy technology to run some of the biggest resorts on earth.
Harrah's Stanley likens the current state of IT in the casino industry to a crucial point in human evolution. "We're out of the swamp," Stanley says. "Now we're trying to walk. We'll get there." His peer at MGM Mirage, CIO Glenn Bonner, is planning an evolutionary leap: "The whole objective for me is to get out of the archaeology business and into the technology business."
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