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Blockchain and enterprise IT: A reality check

Christopher Null Freelance writer

The unrelenting hype around blockchain has made it difficult to get a sharp picture of just where the technology stands in the enterprise. A look at the numbers doesn't add much clarity.

IDC has forecast worldwide spending on blockchain solutions to reach $11.7 billion in 2022, with a five-year compound annual growth rate of just over 73%. If current trends continue, though, most of the spending will come from the financial sector, which has been the trailblazer of blockchain in the enterprise. (IDC forecasts it will lead spending with $522 million in 2018.)

This discrepancy may partly explain why a recent Gartner survey found that only 1% of CIOs indicated there was any kind of blockchain adoption within their organizations, and only 8% said they were engaged in short-term planning or active experimentation with blockchain.

With such realities in mind, what's the truth about how blockchain is actually emerging for enterprise IT, and what’s the prognosis for the year ahead? Here’s what TechBeacon uncovered.

Blockchain offers undeniable advantages

If one thing is clear about blockchain, it's that it offers some compelling new approaches for securely storing and acting upon data.

With blockchain, instead of working off of one set of company numbers by way of, say, a MySQL database, all participants are working off the same dataset that is independently verified each step of the way, said Ian Kane, founder and COO of Ternio.

"Blockchain ultimately brings trust to any trustless environment through decentralization. This decentralization allows one source of truth, so there are no month-end discrepancies."
Ian Kane

Much of the attractiveness of blockchain comes from the many ways you can leverage it for enterprise applications. Identity security, multi-party data sharing, automatically actionable data, and payments are just a few of these. 

Some of the greatest promise of blockchains comes from enabling competitive or untrusted parties to safely collaborate on a business process, said Alison McCauley, author of Unblocked: How Blockchains Will Change Your Business and CEO of Unblocked Future.

"Enterprise IT has the potential to deliver an automated, secure backbone to replace the inefficient payment processes and paper contracts still plaguing the business."
Alison McCauley

The devil is in the details, though, and Ternio's Kane cautioned there isn't a one-size-fits-all answer as to how to deploy blockchain technology. "There are many ways to get the same results, so it ultimately depends on what IT problem needs to be solved."

[ Related: The hidden dangers of blockchain: An essential guide for enterprise use ]

Pilot projects show promise

While the financial industry has been the most bullish on blockchain, other high-profile pilots have pointed the way to a broader array of use cases. Walmart recently announced its Walmart Food Traceability Initiative, a system that uses IBM's blockchain-enabled Food Trust Network to make it easier to trace incidents of contaminated food back to their suppliers.

Eastman Kodak Co. has developed a blockchain-based image rights management platform called KODAKOne that helps protect image and photograph copyrights. And the state of West Virginia recently piloted a blockchain-enabled app to allow deployed military personnel to vote more securely.

Kane sees a host of other enterprise opportunities as well. Advertisers and ad agencies want transparency into where their ad dollars are going in the digital supply chain, he said. Some $18 billion out of $224 billion in 2017 was spent on fraud. "Inefficiencies and wasted ad spending make that number significantly higher."

As another example, telecom companies need a way to quickly understand roaming fees associated with users who travel abroad. "Blockchain gives them a decentralized point of truth," he said. In this way a telecom in Norway can pay a telecom in Venezuela and they both have the same tracking data.

Also, governments use a host of antiquated, legacy systems. Connecting those systems across different government agencies is time consuming and often breaks down. Blockchain solves this, he added.

Early days for enterprise adoption

All of this sounds great, but given limited real-world use cases, enterprise adoption is still in its infancy.

"The enterprise is just barely starting to move to production. Many corporate pilots are stalling."
—Alison McCauley

That's due to both technical constraints and the human factor, she explained: The challenge of changing the way a person works, or how partners interact. However, this is evolving quickly, and there are many promising and exciting pilots.

Not surprisingly, international payments is an area that is further along than most, but it’s still going to take a long time to get to the point where this is widely seen as an enterprise-class option, McCauley added.

Roger Magoulas, vice president of Radar at O'Reilly Media, agreed that the enterprise is still just kicking the tires.

"In general, we see more exploration and experimentation with blockchain technology for the enterprise as companies work to figure out what works and best fits."
Roger Magoulas

Many more companies are in the early phases of figuring out if and when blockchain might fit with their plans, he added. "We see examples of leading-edge application experiments in international payments, supply chain simplification and tracking, tracking art provenance, and as a means of escrow that can provide the trust needed to enable transactions between remote parties."

Some secrets to success

Organizations that are ready to move from interest to implementation, should consider several things to ensure a successful pilot. One of the most important, and the most challenging, said Magoulas, is getting complete buy-in from all players involved in what the blockchain is tracking.

Scaling blockchain processes is another challenge. "We expect smart enterprise efforts to learn from more contained experiments with controlled user bases and manageable transaction volumes," Magoulas explained. He said the Hyperledger consortium and Ethereum are tackling the difficult issues of scaling distributed transactional systems.

To find the most meaningful blockchain applications, you need to break out of IT, McCauley said. The use cases that most influence and affect businesses are not going to be identified by technologists alone.

Blockchain may be a more tangible prospect for enterprises in the coming year—if business experts across the organization can help technologists unearth business value from what the tech makes possible, she said.

"My prediction is that the smartest organizations across various industries will kick their experimentation into high gear in 2019 and will get smarter about this experimentation."
—Alison McCauley

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