I’ve written before about how blockchain solves regulatory and compliance issues. In this article, I’ll examine how blockchain promises to fix contemporary and pressing problems within global enterprises, an “Enterprise Resource Planning 2.0” [ERP 2.0] that makes transactions trusted, more secure and efficient — and cheaper.
In his book, Commercializing Blockchain, Antony Welfare argues that an enterprise blockchain — private and permissioned — answers the same need that’s provisioned by public blockchains: “The world of trust has changed, and we live in a ‘trustless’ world — and that includes inter-company transactions. Even though you are part of the same group company, you are still governed and incentivized by different people and leaders.”
Trust enablement is the unique selling proposition of blockchain and is as relevant for inter-organisational business as for external ecosystems, runs the narrative. Hard-earned and easily lost in a hyper-connected world, trust is an essential foundation for building commercial brands and government policy. Maintaining trust within these organisations isn’t easy — enterprises are complex and large, often spanning many divisions, departments, teams and entities.
Supercharge the enterprise with distributed ledger
The value of blockchain in supercharging the enterprise is confirmed by an early adopter sector, the financial services industry. Cost reduction is the main incentive driving live deployments, the Cambridge Judge Business School found in its 2019 2nd Global Enterprise Blockchain Benchmarking Study: 72 per cent of respondents deployed blockchain to cut costs by reducing manual processes and automating reconciliation efforts.
Another sector study, from Santander FinTech, reported that distributed ledger technology could reduce costs for the financial services industry between US$15 billion and $20 billion per annum by 2022. Stripping cost out of compliance and transactional processes, whether in human resources (HR) or accounting, speeds transactions, reduces waste and provides visibility of where costs accrue. The huge saving further introduces the possibility of decommissioning legacy systems and infrastructure, further reducing IT costs.
Slim blockchain for incremental approach
More evidence supporting a pragmatic use of enterprise blockchain comes from the Food Standards Agency (FSA). Julie Pierce, the agency’s director for openness, data & digital, advocates the use of “slim blockchains”, which transport critical, high-value or sensitive data between legacy islands of automation. “Organisations don’t need to rip and replace entire infrastructures”, she says, but can instead use immutable properties more selectively.
The FSA gained experience in slim blockchains when trialling the distributed ledger technology in segments of supply chains (proving the provenance of Australian wines and certifying pork exports). “It’s possible to run the whole of a distribution business on blockchain. We’ve been exploring where you don’t — leaving existing distribution and manufacturing systems in an organisation and interfacing to external parties using a slim blockchain.”
In his book, Welfare, who is also blockchain practice managing director at Luxoft, a DXC Technology company, and a Distinguished Technologist, lists the pain points that distributed ledger technology can alleviate in enterprises:
- Enabling trust in business-to-business transactions, both internally and externally
- Reducing or avoiding the cost of intermediaries, which can add significant costs in a highly competitive world
- Avoiding the risks of intermediaries, which can slow down processes or, worse, allow data breaches or other risks to occur
- Reducing the manual, human error-prone information exchange and processes across enterprise systems, both internally and externally
- Lowering the high cost and delays of offline reconciliations, which slow down analysis and decision making
- Removing the poor auditability of records due to cross-system discrepancies and reconciliation issues
- Reducing the high risk and cost of fraud in cross-company transactions
- Eliminating the lack of real-time information visibility in a trading ecosystem
Getting started: eight questions to ask
Blockchain technology won’t solve every problem in your organization, so a great place for enterprises to start is by asking themselves the following questions, advises Welfare. If the answer is “yes”, then blockchain technology would be sensible in those areas affected:
- Is my business process mainly multi-department and cross-organisation?
- Are there cross-system discrepancies that slow down decision-making?
- Is there less than full trust among transacting entities?
- Do my processes involve intermediaries — charging fees and adding risk or delay?
- Do my processes require periodic offline reconciliations?
- Is there a need to improve traceability or the audit trail?
- Do we need real-time visibility of the current state of multi-party transactions?
- Can I improve a multi-party business process by automating certain steps in it?
As experience in finance and government shows, blockchain properties of transparency and traceability help make enterprises’ internal transactions frictionless, too. Distributed ledger technology inherently increases participation, efficiency and innovation, and as it can be deployed relatively cheaply, blockchain may be an answer to a corporate prayer: a pragmatic tool for enterprises to try out in increments — and then scale up.