Around the world organisations’ interest in blockchain is waning. But some enterprise programs are now beginning to demonstrate value, provided businesses can integrate nascent systems and solve blockchain’s often overlooked non-technical challenges.
Nelson Petracek, the global CTO of TIBCO – a software infrastructure company that works with companies like Mercedes, T-Mobile and NASA, and locally, Sydney Water and News Corp – says blockchain rocketed to popularity as part of businesses’ digital transformation and “innovation” agenda of the last five years.
For certain decentralised business network use cases it worked, and often worked well, making existing processes more efficient and in some cases creating totally new business models, Petracek says.
But many organisations suffered from a square peg in a round hole approach during blockchain’s “hype phase”, forcing the technology into applications which never needed it, adding stress and undue requirements on both the organisation and partners.
Petracek says there were plenty of people trying to cash in on the hype at the time.
“For a while there you were able to write kind of a half written white paper and publish it, make a bunch of money; issue a token and a way you went,” Petracek tells Which-50.
“I find most organisations now are a little more realistic.”
According to Petracek, there are still situations today where blockchain is being applied “because it’s cool” rather than solving a business problem, usually without due consideration to its complexity and tradeoffs, but the balance is improving.
Public interest in blockchain has plummeted 75 per cent since peaking in 2017, according to Google search data, although interest has stabilised somewhat in the last year.
Demand growth for blockchain developers fell from an explosive 519 per cent last year to just 9 per cent this year, according to analysis of the software market by Hired.
Gartner says hype for the technology has well and truly peaked, now in the trough of disillusionment phase of the analysts trademark “Hype Cycle”, but expects it to climb again and plateau within two years.
Gartner analysts still advise a cautious and “pragmatic” approach to use cases today.
“While the scope of its impact spans technology, business, industry and society, blockchain is still a longer-term promise, and successful implementations are very rare,” Garner analysts wrote in December.
“Blockchain needs to mature and settle — together with viable business models that use the technology — for it to fulfill its potential.”
TIBCO’s CTO agrees, and advises clients to be very targeted when considering use cases. In one recent analysis TIBCO helped a client whittle 17 potential blockchain applications to just two viable ones.
“Some of them we dismissed because there really was no value in using a blockchain … It would not have brought additional value and, in fact, it probably would have diminished the value because of the complexity and cost by moving to a blockchain. It just wasn’t required.”
The two cases, which Petracek can’t yet publicly reveal, fell into the technology’s two typical buckets: making an existing process better – a case where proof of value is relatively easy to measure and justify – and a new business model entirely.
Petracek explained when enterprises go after the new business model it is typically a much harder task and many of the challenges have nothing to do with the technical requirements of blockchain.
“Because of that [new business model] you’re now dealing with things like, how am I going to govern that? What is that business model – how is it going to execute and run? What’s your competition model look like across all these different participants? Who can join? Who can’t under what rules?
“These are all non-technical questions that come up which actually are in some ways more complicated and more time consuming to solve than the technical aspects.”
Where does blockchain work?
While financial and cryptocurrency applications have gained most of the attention, other industries stand to benefit from a decentralised network too, especially when it can engender trust in networks a business may not necessarily control.
Petracek says TIBCO has successfully partnered on a blockchain initiative in the US healthcare sector, using a distributed network to facilitate claims processing between patients, doctors, and insurance providers. In this situation, blockchain’s immutable records bring a new “level of trust” to the system.
“You didn’t want one organisation to own it,” Petracek says. “This is actually distributed across multiple organisations.
“[It is] very much a decentralised network more around streamlining interactions within a distributed fashion where there is no one owner. And then, of course, a lot of considerations here on things like identity, personal information, GDPR. All that stuff can become part of that [blockchain] conversation.”
He says the best use cases are ones which involve a network beyond an organisation’s typical reach, giving transportation logistics and entertainment as more examples.
“Think of a network that incorporates hotels, airports, airlines, and any other party that might actually become part of this network for the purposes of an expanded customer journey.”