Blockchain has been heralded as a transformative and potentially disruptive technology. However, many are hesitant about the practical application of blockchain outside of limited use cases.
The key to early success is matching blockchain to an appropriate business model, according to Stephen Moore, SAP Australia and New Zealand Executive Director.
During a panel discussion at the SAP Real World Transformation event in Sydney, Moore argued the ERP giant was already finding value in blockchain in industries outside financial services such as agriculture; and in processes such as supply chain management.
Blockchain technology essentially acts as a distributed ledger system, allowing multiple parties to verify transactions or records without the need for traditional institutions or third parties.
The most well known use of blockchain is cryptocurrency where the technology is used to verify transactions and accounts without any direct intervention of banks or financial institutions.
That early use case, and the general hype around cryptocurrency, generated much of the blockchain buzz and inevitable push back as cryptocurrency failed to disrupt financial markets.
But research suggests blockchain will indeed add business value – around $176 billion over the next seven years, according to Gartner – provided the technology is used appropriately.
Track and trace
Moore used less well known applications of blockchain to illustrate his point that ultimately blockchain must match the business model.
According to Moore, blockchain technology can be particularly valuable in verifying supply chains transactions and verification involving multiple parties.
“This isn’t a mature technology by any means but where we’re trialling it is in the whole concept of track and trace in agriculture,” Moore explained.
Blockchain is particularly effective, Moore says, when supply chains become more complex, for example when several ingredients are combined throughout an agriculture supply chain.
“If you’re bringing many ingredients together, such as fertiliser manufacturing, or food manufacturing, where you have many sources for the ingredients that go into food, blockchain is very compelling ,” Moore said.
“When you start to distribute that traceability back to the source and you want to trace the provenance of all of those ingredients, and then in the blend, and in the ultimate use and then the consumption, it gets more complicated.”
In an attempt to improve the oversight of that process, SAP is trialling a blockchain solution, leveraging the technology’s ability to provide a decentralised but consistent and verifiable record, while protecting individual suppliers’ data integrity.
“We’re trialling the use of blockchain technologies to actually bring those strands together to create a, if you like, a concatenated ledger code as they come together and get to the end [of the supply chain]. We’ll see where it goes.”
SAP now offers a cloud platform aimed at encouraging innovation in the start-up community. While enterprise customers adoption of blockchain applications may be some time off, the company believes large scale blockchain application is inevitable.
Despite the early success, blockchain likely has some disillusionment ahead as failure rates remain high and the technology is misapplied in some instances. However, with Gartner’s blockchain business value figure climbing to $3.1 trillion by 2030 the early moves and investments could prove well worth it.
About the author
Joseph Brookes is a writer for the Which-50 Digital Intelligence Unit, of which SAP is a corporate member. Our members provide their insights and expertise for the benefit of the Which-50 community. Membership fees apply.