For all the hype, blockchain has yet to go mainstream in the enterprise. That may well change in 2018 as the technology’s reputation for trusted transactions continues to grow among IT leaders.
Blockchain is a shared digital ledger for recording transactions. Each transaction among participants in a network is tucked into a record known as a block that is digitally signed to ensure its authenticity and create consensus about the state of transactions at any given second. What has CIOs excited about blockchain is its ability to scale across an enterprise, offering a network effect of digital trust.
For example, every stakeholder in a blockchain-supported supply-chain network receives a copy of the existing authenticated ledger. If an event impacts the supply chain, every party can be assured that what the digital ledger says happened actually happened. Technology chiefs tell CIO.com that using a digital ledger to ensure trust is something rival technologies currently don’t offer.
blockchain pilots are showing big business promise. | Learn the habits of highly effective digital transformations. | Get the latest on digital transformation by signing up for our CIO Leader newsletter. ]
“Blockchain is one of those things where it’s going to be more of a competitive advantage over time,” says Vijay Sankaran, CIO of TD Ameritrade. Sankaran and some of his peers explain why here.
Blockchain for logistics
United Parcel Service has a team dedicated to exploring blockchain’s impact on chain of custody in the supply chain, says Linda Weakland, director of enterprise architecture and innovation at UPS. Weakland sees great potential for blockchain in automating the myriad manual processes that comprise customs brokerage. Such a system could help UPS “modernize the whole practice and clear goods much quicker than we do.” Blockchain would also improve transaction accuracy and reduce costs for physical assets, such as shipping containers.
But to unlock blockchain’s potential, it must be adopted across the entire supply chain. To that end, UPS in November joined the Blockchain in Trucking Alliance (BiTA), which is developing blockchain standards for the freight industry. Weakland says such standards could help UPS and its partners share data across blockchains, which is currently difficult to do. “With BiTA we’re going to be able to get more standards to make the blockchain more useful than it is today,” Weakland says.
UPS sees blockchain as an integral part of its evolving Smart Logistics Network, which also includes other emerging technologies such as internet of things, robotics, artificial intelligence and machine learning. UPS CIO Juan Perez, to whom Weakland reports, is applying these technologies across the rest of UPS businessas part of the Advanced Technology Group he created shortly after his promotion in 2016. “[Perez] challenges us to be on the edge and really take a look at technology that will make a difference,” Weakland says.
Hedging blockchain bets
Blockchain poses almost as many challenges as opportunities for financial service companies such as TD Ameritrade, where CIO Sankaran has allocated a dedicated team to explore how to use hyperledger technologies. Sankaran believes blockchain will shrink windows for asset clearance, automating in minutes or seconds what use to take days. Trading files across a multitude of partners will also become much crisper and cleaner, reducing manual, paper-based processes.
TD Ameritrade’s first main test case is facilitating money transfers between its brokerage service and its TD Bank affiliate in near real time. “It’s a template to continue to work with other institutions to do money movement and account setup much more quickly,” Sankaran says. Other potential enterprise uses for blockchain include information sharing between clients; proxy voting, which typically requires a lot of paper; and replacing credit cards in micropayments. Ultimately, financial settlement is going to be the most interesting use case over time, Sankaran says, reducing time and transaction fees that have bedeviled the industry.
The online broker is testing several hyperledger technologies, including Ethereum, R3 Corda and JP Morgan’s Quorum. “It really has to be an enterprise-grade platform to manage security, privileges, and it must scale and perform well,” Sankaran says.
Even so, Sankaran must hedge his bets against the uncertainty around hyperledger technologies, which have a Wild West aura akin to the early days of emerging technology distributions such as Linux, he says. “The problem is picking an underlying platform knowing that you may need to throw it out because it doesn’t provide the most value,” Sankaran says, adding that he is closely watching what vendors TD Ameritrade aligns with are doing in the space.
Sankaran anticipates significant consolidation, with larger players acquiring blockchain distributions, forcing tidal shifts in the industry. And he says he’s proceeding with full awareness that “we may have to change horses at some point in time.”
Ripe for disruption
While blockchain could revolutionize financial services in several ways, applications of digital ledger technologies get more narrow farther afield. This is especially true in the food industry, where Driscoll’s is known for selling strawberries, blueberries, raspberries and blackberries in WalMart, Stop & Shop, Whole Foods and other supermarket retailers worldwide.
Driscoll’s, along with more than a dozen food producers, is working with IBM to use blockchain to help prove the provenance of tainted food, which Driscoll’s CIO Tom Cullen says could eliminate finger-pointing. Because blockchain can chronicle every data point in a supply chain, it provides a virtual forensic scientist’s paradise of information about the products it’s tracking. “What we’re interested in is that the origination of the fruit and any certification once it starts in the supply chain,” Cullen says.
Driscoll’s currently uses Bluetooth-enabled GPS sensors to monitor the temperature of fruit in shipping coolers. So, for example, if a truck driver in Mexico inadvertently cooks the fruit because the temperature in his truck gets too warm, Driscoll’s will know about it. But that won’t help Driscoll’s track a particular batch of crops in the event of a food-borne illness outbreak. Here blockchain could help. By logging barcodes from pallets and clamshell containers, a blockchain could be used to trace fruit to a specific harvest, Cullen says, enabling Driscoll’s to pinpoint exactly where the fruit originated.
“It’s immutable and can’t be changed, so as you track through the supply chain you can trust the data,” Cullen says. He adds that blockchain, along with machine learning and advanced analytics to help improve genetic marking, are cornerstone aspects of Driscoll’s digital initiatives in 2018.
Research firm Gartner noted in a November report that while blockchain was the most sought after research subject by its clients, the technology remains nascent in maturity, business models, process evolution and results. To get up to speed on the software, Gartner encourages CIOs to test the technology in pilots.
But IT leaders remain sanguine about blockchain’s potential. “I think in 2018 and 2019, blockchain will cross the chasm and move from experimental use case to mainstream in financial services and other industries,” Sankaran says.
Related digital transformation articles