Blockchain In The Context Of Enterprises


In Future Shock published in 1970, Alvin Toffler describes the feeling of being overrun with data and knowledge as “information overload”.  It has been over four decades since, and even though technology has evolved significantly, enterprise business users are still struggling to have the full context, tools and information to ensure that they are able to fully execute processes without the hassle of looking for information.  Seventy-four percent of employees struggle with the amount of data they have access to and would prefer access to only the data that is personalized to them. There is a sixty-eight percent productivity loss because of employees feeling that there aren’t enough hours in a day to get their work done.

Blockchain has been in the radar largely in the financial services space with Bitcoin. However, in the past few years, this technology has started seeing some waves in enterprises, to influence business process agility and governance. While it is still very early stages to even speak about perceivable impact, it would be interesting to understand the possibilities and limitations with distributed ledger technologies which as Gartner says will evolve into a large scale programmable economy.

Blockchains are distributed ledgers, that is a very secure and verifiable solution for transactions of any kind. Given that they are crowd validated, they have a built-in mechanism to get a consensus from participating computers for any alterations. The technology follows a “chain of blocks” data structure, where a block of a group of transaction records are added periodically in a never-ending series. This enables therefore a decentralized ecosystem that allows many participants who don’t know each other to trust and transact with each other in a way that doesn’t require any regulatory intermediary.  

There are several use cases of Blockchain to handle business process automation to manage unstructured content within enterprise business processes. Typical enterprise processes rely on data that comes from systems both within and outside the enterprise. In addition to the complexity that this entails, there is also an element of trust that could get compromised.  With smart contracts, not only is the execution of contractual obligations enforced, but all information and transactions on the blockchain are only available to network members who have the right permissions. The impact of Blockchain on records management is significant given its ability to secure, authenticate and provide a governance trail. This just opens the door to several new applications that can be built on blockchain.

In the medical industry, this could mean that all medical records could be accessed and updated by medical providers and insurers as permitted by an individual. For patients and facilitators therefore, this could be a natural facilitator for electronic health records with the information sharable between organizations without impacting its security. The use case in the healthcare sector could include improving the supply chain security and traceability by tracking the full extent of counterfeit drugs that is a rampant problem in developing economies.  In the automotive industry, this could mean sharing the ownership of vehicles, log the usage etc.

Companies in the financial services industry have several use cases in settling payments, clearing houses, settlements, trade finance, mortgages, compliance checks etc. Likewise, in manufacturing, this could mean addressing counterfeiting, addressing supply chain etc. In energy and utilities, this could be used for energy trading between utilities or for that matter even expanding the ecosystem such that producers and consumers can both produce and sell electricity. Blockchain could make smart grid management systems much more efficient by diagnosing network emergencies and reconfigure reaction to them. Blockchain could increase the transparency and traceability of how money is being spent in governments. With the introduction of smart contracts, there are bundles of coded logic that sits besides entries in a ledger – the operations under the contract will automatically commence if the conditions of the contract are satisfied. Likewise, say in the case of land or other assets, the registration of property rights can be realized in a very efficient way.

As blockchain evolves, and new use cases emerge, the complexity and array of issues will only increase. At the most foundational level, there is limited awareness about the technology in sectors other than perhaps banking. Several start-ups are creating their own blockchains and applications to run on top, which could again lead to a siloed approach. Again, to make this transformation happen, there needs to be a fundamental shift in thinking – away from a more powerful, centralized institution to a decentralized network that is self-enabled.  Given the way they are designed, decentralized network has a direct impact on participants and has a much less cushion. Collaboration comes with risks of losing privacy and lack of autonomy as competing companies are trying to co-operate on a data sharing platform.

Highly regulated industries may need to deploy new regulations for blockchain. This could mean changes to industry regulations, financial reporting and auditing processes. Laws will need to be enacted to govern blockchain smart contracts. The standards for writing transactions on blockchain is not regulated and could mean different things to different people.

There could also potentially be scalability issues given that every single node in the network needs to process every transaction and maintain a copy of the entire state. As more nodes are added to the network, the inter-node latency tends to increase.  This requires adding more compute to every node, while there is no control over every public node in a decentralized environment. Until a mechanism is figured out to handle this challenge (which may not be very far away), scalability will continue to remain the single largest challenge for this technology.

Again, in cases where regulatory requirements prescribe traceability to a single individual, it could be a challenge as each saved block transaction is traceable, though it cannot be attributed to a single individual. Very sensitive enterprise data may warrant creation of private blockchains to include features like access permissions, modifications etc.

Like any other emerging technology, blockchain will evolve. However, there is no denying the fact that it has a disruptive power across industries. The business problem that it needs to address should be clearly articulated to be able to then design and apply the technology. End of day, the cost benefit should be analyzed and must make sense to invest in this technology. The key questions to ask is what kind of business problem is this required to solve? Does the data need to be constantly updated? How important is it to ensure that this is tamper proof? Are there other solutions and if so how does it compare? Can the solution be better to administer if there is a central party to run it? How are compliances required to be managed? In other words, rather than be obsessed about the technology, it is far important to be completely convinced that blockchain does add significant value for the specific use case.

Although new is always exciting, it needs to be relevant to the business to ensure that it is able to meet the expected outcome. While blockchain is an interesting and a likely disruptive force, its utility depends on how well an enterprise can map the relevance of its use case to how blockchain can best fulfill.