With vendors like Microsoft and Oracle announcing new blockchain products for the enterprise recently, it may seem that the technology has reached a new stage of maturation. Blockchain applications continue to emerge across industries including hospitality, agriculture, and government, blockchain developers are in high demand, and cloud providers are turning out new offerings that help ease adoption for enterprise users.
Despite this progress, new research from Gartner shows that there is still significant hype surrounding the technology which could be preventing some enterprises from even considering how blockchain applications could benefit their business.
In results from a survey Gartner released this month, 77 percent of CIOs said their organization has no interest in blockchain, and no plans in place to investigate it. Eight percent of CIOs were in short-term planning or active experimentation with blockchain, while only one percent said they have adopted blockchain.
In working with enterprises, cloud providers like Microsoft, IBM and Oracle are offering tools and infrastructure shortcuts that help developers get started with blockchain applications quicker than if they were to do it themselves in their own data centers. But developers who start with the technology without understanding how it impacts their business are doing it wrong.
Enterprise developers should be asking how they can reimagine a business process that runs on paper or on a centralized system today that causes inefficiency, Microsoft Partner GM, Financial Services & Blockchain, Azure, Matthew Kerner said.
“I think developers are looking at blockchain for the same thing they look at for everything else, which is how can you make me more productive? How can you enable me to focus on the business I want to drive?” he said.
While the hype Gartner describes around blockchain can be unhelpful, Kerner said, it has been beneficial in some ways as it drives developer curiosity and thirst for knowledge around how the technology applies to business. In one measure of the growing popularity of blockchain, his session at Microsoft Build developer conference where he introduced its new Azure Blockchain Workbench offering had to turn attendees away it was so popular. (You can watch the session online.)
“Most developers out there today are not blockchain developers and if we can empower them to move further faster on top of this enterprise grade infrastructure, that has to be a step in the right direction,” he said.
Azure Blockchain Workbench aims to do just that by helping developers get started exploring blockchain use cases by automating the infrastructure setup. While Azure Marketplace has around 40 different blockchain offerings available, Kerner said that even with the applications, customers were unsure of what to do next.
“What we hear from developers today is ‘I’m not a blockchain expert, I’m going to have to spend a lot of time learning something here, and then I’m spending a ton of time on undifferentiated heavy lifting to build and manage the infrastructure, just the plumbing and scaffolding required to build an application on top of blockchain’,” Kerner said.
In some cases, it could take developers between three and six months to build something at scale. At that point, they bring a “monolithic and brittle proof of concept” to their stakeholders, who may want to change the business process, and then developers face another “long expensive cycle … because there’s no ability to do rapid iteration and development of blockchain-based solutions today for the enterprise,” Kerner said.
“It’s an experiment, we’re calling it Workbench for a reason,” Kerner said. “This is not a scaled, billion-dollar business and we think we’re really in the early innings of blockchain. There are many questions that need to get sorted out, and our focus is knocking down the obstacles that enterprises may face as they look at this technology.”
Oracle, whose flimsy cloud story pulled shares to their lowest point in six years in March, is betting on blockchain to bring new enterprise business. The company said that it will launch its platform-as-a-service blockchain product this month and decentralized ledger-based applications in June.
CIOs interviewed by Gartner recognized that blockchain implementation will change the operating and business model of their organizations, erasing traditional lines of business and silos. This is reflected in the funding of blockchain projects coming from departments outside of IT.
Gartner said that starting costs for blockchain Proof of Concepts (POCs) are around $275,000, and that organizations should choose to treat blockchain as an innovation initiative in their business unit expense lines.
“CIOs need to bear in mind that nearly all use cases are not fully proven and exploration of available use cases today is only one step,” Gartner said.
From a business perspective, Kerner said there are three broad use cases for blockchain. The first is around “asset transfer and provenance of physical, digital or financial assets, where they’re changing hands and the blockchain is used to track who owns what at any given time,” he said. The second scenario is organizational workflows where you may have a set of organizations that need to collaborate on some shared business process to produce a result, and the third is around auditing.
“These sorts of use cases span industries, certainly manufacturing and retail we see a lot of physical goods scenarios, with insurance and banking, with payments we see a variety of financial scenarios and then you’ve got government and healthcare, and we see tremendous interest in these industries.”
While financial institutions were early adopters of blockchain, Gartner sees growing interest from enterprises in the transportation, telecom, government and utilities sectors because of their focus on process efficiency, supply chain and logistics.
“Multiple transactions between peer to peer that happen every day is where you want to put a blockchain, something that’s automated,” Kelly LeValley Hunt, global VP of sales, BlockApps said. BlockApps enables enterprises to build private blockchains, and has partnerships with cloud providers including Microsoft, AWS and Red Hat.
“Our first real production blockchain was a supply chain application and I think that’s where we’re going to see blockchain taking off,” LeValley Hunt said.
LeValley Hunt, who has spent her career in data centers and more recently in cryptocurrency and blockchain, said that latency and power consumption are going to be issues that need to be taken into consideration as key technical challenges around blockchain.
“The more we transact on the blockchain the more latency there’s going to be,” she said.
If cloud providers want enterprises to experiment with and use blockchain, they must help address not only these technical challenges, but also challenges around regulations.
“Blockchain was designed originally as this anonymous, uncensorable technology for micro payments among untrusting participants, but what happens when that collides with, for example, the GDPR and the right to be forgotten and you’ve now got immutable data in your ledger?” Kerner said.
“I think there are some real questions to be answered.”
