While Blockchain applications revolved largely around the cryptocurrency experiments in the last decade, recent reports focused on its adoption, especially in the BFSI and related sectors. Studies show, while more and more business leaders are seeking answers on how to fit blockchain into their strategies, the technology comes with its unique challenges that have greatly contributed to its slow-moving adoption.
Nascent and challenging, yet ambitious
A new research by IT services firm Wipro and HFS Research found that about 75% of C-level executives believed blockchain was a strategic priority, but only 10% of projects are on the path to production. Moreover, the survey shows just 25% respondents are looking at blockchain as a means to create new business and revenue models or disrupt an existing business. Of these, only 6% said they were using the tech for eliminating intermediaries.
Earlier researchers projected blockchain would produce $3.1 trillion in new business value by 2030. But not much happened beyond pilot projects. However, the Wipro report observed that the overall maturity of blockchain projects is still low, and very few achieve production. Additionally, almost all live blockchain systems are parallel or shadow environment and have not entirely overhauled legacy systems. Only 14% of the studied projects were in production.
The report highlights some of the key hurdles of blockchain adoption. About 60% of enterprises are still figuring out what is blockchain. Nearly 30% of companies who have identified relevant use cases are planning to start a proof of concept or pilot. The balances of 10% enterprises have had successful pilots but are facing challenges with getting to a production grade.
The challenges of blockchain adoption are clearly visible. For years, lack of scalability, limited interoperability, insufficient standardization and the absence of regulatory clarity have made it difficult for enterprises to go beyond trials and pilots.
Moreover, in her latest report Why Enterprise Blockchain Fails, Stephanie Hurder, a CoinDesk columnist, is a founding economist at Prysm Group, an economic advisory focused on the implementation of emerging technologies, mentions, firms have been putting technical design ahead of economic design. But blockchain platforms are economic systems.
“They prioritize hiring technical teams and developing code, and then delay important discussions about the value that the product delivers and users’ incentives to adopt it. By the time the team addresses incentive design, teams have boxed themselves in to a narrow set of economic design options that are compatible with the existing code, or face deleting and rewriting huge chunks of the platform.
Blockchain-based consortia allow enterprises to share, buy, and sell valuable data and to use that pooled data to create new goods and services, which can then be monetized. Their economic design is just as important as their technical design, and this must be reflected in the development process,” she says.
Wipro VP Krishnakumar N Menon says, “Enterprise blockchain clients are investing in blockchain solutions to get real business impact, but without a crisp use case, it becomes hard to quantify the benefits.”
There are of course some use cases, with huge retailers like Walmart and fast food companies like McDonalds now use blockchain to source materials and food. Brazil also hired IBM to create a blockchain system that would manage the country’s birth and death record system, which had been rife with abuse for decades.
Very recently, Boeing has partnered with Honeywell to use its GoDirect platform to track and sell $1 billion worth of excess airplane parts using blockchain technology.
The way forward
Blockchain is hardly the first emerging technology to struggle to move from inflated expectations to reliable commercial viability. But if it is to have any chance of delivering on its initial promise, the approach that teams take when designing and launching products needs to change.
As Hurder notes, a well-developed monetization plan needs to take this into account. “Charging early users too much, too soon, or imposing too high up-front costs, will stunt the growth of the network and prevent the network from ever reaching market penetration.”
Wipro researchers also advise enterprises to be wary of hype and develop real use cases by initiating collaboration with peers. At the same time, to keep costs down, Wipro suggests partnering with an external service provider and believes keeping an eye on technological developments is the key to success in the future.
Good news is that, a majority surveyed in the Wipro research are already trialing blockchain for near-term business impacts, such as efficiency, data management, and better business outcomes. Those who have taken up enterprise blockchain initiatives have focused on the following areas — identity, crypto, trade, payments, fraud and compliance, supply chain, and finance.
Analysts expect many more such use cases of blockchain to be followed in the coming years. As Jonathan Johnson of TechCrunch.com believes that 2020 could be a blockbuster year for blockchain development that will see the technology “begin to take its biggest, most world-changing steps yet.”