Building The Business Case For Blockchain

Satyanarayana Rao Karri

“Blockchain introduces a new vector to accelerate the move to digital business. This allows enterprise architecture and technology and innovation leaders to create or represent assets in a digital context and to create a new, decentralized economic and societal model.”– Gartner

Gartner estimates that blockchain will generate US$3.1 trillion in new business value by 2030, and the technology is set to be ready for mainstream adoption through 2023. Therefore, organizations should start exploring the technology now. There is a tremendous pressure on CIOs and enterprise architects to understand blockchain and evaluate if and how it can be implemented in their organizations. Let’s look at some of the key factors that CIOs and enterprise architects need to consider.

Multiple parties

Blockchain is based on peer-to-peer, distributed network technology that serves as a decentralized database of information to validate transactions between different parties. It breaks up data and distributes it across thousands of nodes. The technology enables participants to see all transactions as they happen.

A typical blockchain use case involves multiple parties in a transaction. These parties have write permissions on the data during the various stages of the process flow. These parties can belong to different enterprises and geographies. Often, not every party has all the information about the transaction. There is an information imbalance between different parties involved. Blockchain solves this by enabling decentralization, which means that no single entity controls all the computers or the information or dictates the rules. On the other hand, if there is only one party involved in the process chain, a centralized database is a better option.

Take supply chain operations as an example, where multiple companies trade and interact on a global scale. When goods are shipped overseas, there are different parties involved: manufacturer, supplier, storage, ocean freight carriers, government agencies handling imports and exports, distributers, retailers, and customers. Each of these parties has its own information systems where they write/update information on this transaction. Not all parties are privy to the same information, thereby causing information imbalance. A decentralized information system like blockchain can help rectify this imbalance by providing information access to all parties involved. Each party will also be able to update the information if every other party involved approves it.

Process optimization

Blockchain can also be leveraged to achieve process efficiencies and optimizations. Blockchain eliminates the need for third-party verification and its associated costs. Transactions placed through central authorities or third parties can take a few days to settle. This can be reduced to a few minutes, which is the time needed for adding a new block.

For example, consider the banking industry. If you make a deposit, it takes a couple of days to get it verified and settled. If it involves a transfer between banks, there are several parties involved in the verification of the transaction before it is finally settled. With blockchain distributive ledger technology, money can be transferred immediately between the banks. It simplifies interbank payments significantly.

In our supply chain example, there are various parties and several handoffs between the parties involved. Most of these handoffs are paper-based and prone to errors or incomplete information. There is certainly opportunity for process efficiency.

Transparency and auditability

If access to information is important for all the parties involved and there is a need for any party to be able to audit this information, blockchain is a valid business case. With a private blockchain option, all parties in that blockchain can have access to the information and ability to audit.

In the supply chain example, from the consumer’s and the large retailer’s standpoint, it is very important to have the traceability and transparency of the information that a decentralized environment can provide.

Fraud and risk

Consider blockchain if security across the process chain is critical. Every recorded transaction is verified by the blockchain network. Blockchain offers encryption to record the data in the blocks securely and semi-anonymously. Blockchain also offers immutability, thereby cryptographically signing, time-stamping, and sequentially adding each completed transaction to the ledger. Records cannot be corrupted or otherwise changed unless the participants agree on the need to do so.

In our supply chain example, since there are different third parties involved, it is possible for someone to tamper with the information or misrepresent the books. There is a fair amount of risk involved that blockchain can reduce.

Additional factors

Though we have discussed key factors, there may be additional considerations for CIOs before embarking on the blockchain journey. CIOs need to factor in additional storage needs for blockchain, performance impacts of a decentralized database in terms of throughput and latency, technology costs, organizational change management, and training.

Learn more about how blockchain and distributed ledger solutions can help you simplify complex multi-party processes and create trust among participants.

Satyanarayana Rao Karri

About Satyanarayana Rao Karri

Satyanarayana (Satya) Rao Karri is Business Transformation Advisor and Enterprise Architect at SAP. Satya has extensive experience leading digital transformations, mergers and acquisitions, and IT strategy and road-map programs. He has led digital programs that leverage next-generation technologies to accelerate innovation, streamline operations, and simplify the IT footprint. Satya has experience working with leading global organizations in USA, Canada, and Europe.