THE FRIDAY INTERVIEW/Brian Hadfield, chief executive, Cryptologic:IT MAY not be axiomatic that having the best product in your business means that you have the most customers and make the most money, but surely it should help?

Well, not necessarily. At least that’s what Cryptologic chief executive Brian Hadfield found after taking over the Irish-based online casino software developer in February of last year.

For three years in a row, it won the best online casino software award, and the games, featuring Marvel and DC Comics characters like Spiderman and Batman, were recognised as the best in the business.

But Hadfield discovered to his surprise that the customers were not beating down the door. “They were buried in the bowels of someone else’s casino,” he explains resignedly.

The problem, as he saw it, was that even if someone playing in one online casino wanted to change, the process of moving did not necessarily mean they would land in Cryptologic’s casino.

At the same time, the company could not find the players who wanted to move, because it did not know who they were. However, it had to find them, because the business was stagnating and beginning to lose money.

The only thing for it was to follow them into the bowels of its competitors’ casinos. “I actually said we will take the best games in the market and we will make them available to our competitors.”

Cryptologic took its games, Spiderman, the Hulk, the Fantastic Four and all the rest, and offered to license them to big players in the casino market, Partygaming and 888, who promptly said yes.

Once the big fish agreed to bite, everyone else followed. The company has signed up plenty of operators since, and its reach has stretched beyond the casino and poker specialists to the broader online gambling world.

Its licencees include betting exchange Betfair, and the familiar bookies, Paddy Power, Victor Chandler, William Hill and Ladbrokes, who have added its games to their internet offering.

Cryptologic runs its games, internet versions of blackjack and slot machines, which morph into arcade-style skill tests at certain points in play, on its own casino platform. The earnings from this pay for their development, which in turn means that licensing revenues are coming in at very little cost to the business.

Hadfield came to gaming from a background that included teaching, banking and a stint at systems and technology giant Unisys. One lesson he learned was that competing and collaborating are two sides of the same coin.

“In every other industry, you compete and you collaborate,” he argues. “When I was at Unisys, you’d be in one conference room competing with IBM, planning how we were going to beat them with Lloyd’s or HSBC, and in another conference room we’d be working together on how we were going to beat Accenture.”

At Unisys, he convinced British banks to work together on a common clearing system for cheques, something they all had to do at a high cost, but with little or no return.

“I spoke to them about the fact that it’s a business that doesn’t differentiate you, it’s a fairly costly business, all of you have a lot of people tied up in it, so why don’t we create an entity in which all the cheques are cleared?

“You reduce your headcount and tidy up your balance sheets and you can still clear cheques,” he recalls. They came up with Intelligent Processing Solutions Ltd (IPSL), which clears 80 per cent to 90 per cent of cheques in Britain.

When he came to Cryptologic, he began applying the lesson. One problem area was online poker. It ran on a platform that was costing the business €10 million to €12 million a year and was breaking even or losing, depending on the quarter. “As a Scotsman, neither was a good alternative, so I thought, what do we need to do with that?”

Online poker operations make money by taking a small commission from winners. Hadfield’s view was that liquidity – the number of players and the amounts for which they are playing – was key to it.

The platform doesn’t matter, because players move from one to the other in search of tables that suit their skills and pockets.

He went to his competitors with a proposal for a collaborative poker network, and they agreed that it was a great idea.

“But it was the classic everyone wants to go to heaven, but no one wants to die,” he says. “They all wanted to do it, but only on their networks.” In the end, the company got into bed with just one other, G-Tech.

The move has boosted liquidity – “the name of the game” – for both and saved Cryptologic €10 million to €12 million a year, the amount in costs he told shareholders he would take out of the business this year.

For the last 12 months, his focus has been on changing the business model and making it profitable. His target was to get Cryptologic back to profit – if not necessarily reporting one – at some point in the second quarter, which ended in June.

The company is in a closed period, so he cannot discuss brass tacks, but he does say he is “comfortable” with its performance.

Along with a lot of other technology companies, Cryptologic began life in a garage. This particular one was in Toronto, Canada, and belonged to founders Andrew and Mark Rivkin, or rather their parents, who set it up in 1995. It is listed on that city’s stock market, as well as New York’s Nasdaq and London.

It moved here two years ago as its industry shifted across the Atlantic following a legal clampdown in the US. The company was not run out of town – there were no such problems in Canada – it moved to where its market was, and the Republic, with its 12.5 per cent corporation tax rate, fitted the bill.

It began with two people, and now employs 24 – a number that is set to increase further – in the usual head office functions, including finance and a data centre. A deal with BT to run its network operations from Belfast will boost its Irish presence further. Over the long term, more of its operations will move to Dublin, but not all of them by any means.

Software development is central to what it does, and this is run out of Toronto, Minsk in Belarus and Kiev in Ukraine, where the staff are “incredibly technically competent and the cost base is attractive,” Hadfield says.

The gambling element of the business is licensed in Malta, from where all its licensing is managed. Hadfield is very complimentary about Malta’s gaming regulation. It’s an EU jurisdiction which is working on trying to attract players in Cryptologic’s industry.

“For us, openness, transparency and fairness are critical and Malta fits that bill very well,” he says.

Last year, a Government report and research produced independently by commercial law firm, AL Goodbody, both highlighted that a good regulation system in this country, combined with its attractive tax rate, would make the Republic very attractive to the industry as well.

Legislation, or the lack of it, did not influence Cryptologic’s decision either way. “We did it anyway because it’s gaming friendly without actually being a Malta,” Hadfield says. This is despite the fact that the Minister for Arts, Sport and Tourism, Martin Cullen, at one stage threatened to ban online gambling.

“There has been a debate backwards and forwards,” he agrees, “but it’s like a a gas burner, it’s quite hot sometimes and then it cools off.”

Proposals to double the betting levy to 2 per cent were responsible for the most recent rise in temperature, but their indefinite postponement cooled things down again.

That was not relevant to Cryptologic, as the levy does not apply to online betting. In any case, it has evolved into a business that is about developing games and licensing them to other operators, more than one which makes money from people playing them.

Now that that’s happened, one ambition is to get more of its shares traded in London. At present, 90 per cent of them are bought and sold on Nasdaq. Hadfield would like to see the old world getting a look in.

The way to do this, he says, is to have a credible and substantiated story to tell investors and go out there and tell it to them.

If everything plays out the way he has predicted, then figures from the next two quarters will do much of the telling.

ON THERECORD

Name: Brian Hadfield

Post: Chief executive of casino software developer Cryptologic.

Why is he in the news? The company is coming to the end of a period of restructuring geared at changing an ineffective business model and returning to profitability.

Background: He began his career teaching modern languages in Britain and joined Bank of Boston following a move to the US. He ran three of its data centres and from there made the leap to Unisys, where he stayed for 20 years. Ultimately he ran its UK, Europe and Middle East business for six years.

Following that he had various roles, including non-executive director at Cryptologic, where he took over as chief executive in February 2008.

Family: Married with one daughter.

Interests: Golf, horse riding and showjumping. He's a "voracious reader" and avid photographer.

Something you might expect: He has just finished reading Alain de Botton's The Pleasures and Sorrows of Work.

Something that might surprise: He recently returned from safari in Africa.