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How close is Blockchain to changing how corporations do business? A reality check.
Is Blockchain all set to rewrite the economy and change the balance of power across industries? Or is the decentralized database technology a pipe dream? The answer might depend on which research company you ask.
Ready for Primetime
Full scale blockchain applications will roll out soon and drastically change how we record and verify transactions, if research reports from IDC and Deloitte are any indication.
IDC’s research manager of the Customer Insights and Analysis Team, Stacey Soohoo expects to see “rigorous testing, rapid technological advancements, and large-scale experimentation” as business organizations scale to “full blockchain deployment” from current proof-of-concept projects. According to the latest update to IDC’s Worldwide Semiannual Blockchain Spending Guide, spending on blockchain solutions will reach $11.7 billion in 2022. “Enthusiasm for blockchain continues to be universally shared across regions as businesses and organizations alike continue to explore the technology’s potential business application,” she says.
Deloitte has an equally optimistic take. According to their survey of over 1,000 Blockchain-savvy executives, global businesses are shifting from “blockchain tourism” and exploration to building practical business applications. About 40% of those polled expected to spend $5m or more on blockchain technology in the next 12 months. Half of the executives surveyed said that they already use the technology in live environments and 74 percent reported that their company saw a compelling business case and was moving forward with their blockchain projects.
Is Winter Coming?
In sharp contrast, Forrester warns of a “looming blockchain winter”. Martha Bennett, principal analyst, Forrester, warned in a blog post titled Predictions 2019, “There’s a real risk that we’ll experience the beginning of a ‘blockchain winter’, as the continued absence of miracles and revolutionary developments lead decision makers to throw out the proverbial baby with the bath water and stop distributed-ledger-technology-related investments completely.” While she doesn’t expect a major immediate impact, she warned that it “would be a serious setback for the development of enterprise-grade solutions and networks.”
Gartner analysts are even more emphatic and have officially placed Blockchain technologies in the trough of disillusionment —phase of a technology’s life cycle during which interest wanes as experiments and implementations fail to deliver. David Furlonger, distinguished VP and analyst, Gartner said at their symposium/ITxpo 2018, "It's still not appropriate for the vast majority of enterprises to consider blockchain technology at its current level of maturity.”
And majority of CIOs seem to agree. Only 5 percent of CIOs rated blockchain as a game changer, far below artificial intelligence, cloud and data and analytics, according to Gartner’s 2019 CIO survey that gathered data from more than 3,000 CIOs that the research firm claims represent about $15 trillion in revenue and $284 billion in spending. It seems that most of them don’t plan to implement any major blockchain projects anytime soon. Only 11 percent of the respondents in the Gartner survey reported that they have deployed or plan to deploy blockchain in the next 12 months.
The going might be slow because of several reasons. According to Gartner, private ledgers will struggle to achieve positive total cost of ownership for the next four years. “We have yet to find anyone who can produce a cost benefit analysts that shows positive return for private deployment,” Furlonger said.
Bennett believes that the biggest inhibitors are “non-tech issues”, such as agreeing on data and process definitions, smart contract rules, access permissions, or governance frameworks and legal agreements. “I often use the phrase, ‘blockchains are 80% business, 20% technology’. If anything, that 80% is on the low side, and we’ll continue to see projects held up or even fail because companies’ focus is on the 20%,” she explained.
Look Down the Road
So, who’s right? Should CIOs listen to IDC and Deloitte and expect an inflection point in Blockchain? Or should they believe Gartner and Forrester and write it off?
It’s probably too early to say what kind of Blockchain projects will take off and which won’t, but there are a few common themes in the research companies’ predictions. Blockchain is rolling out slower than what research firms expected. But almost all of them expect it to pick up in next decade. Even analysts, like Gartner, who believe that the technology is not yet ready for enterprises, have a much more optimistic view of where it is headed 5 to 10 years down the road. It expects smart contracts and full value proposition of Blockchain including decentralization and tokenization, in the next decade and decentralized autonomous organization and transactions performed by machines after 2025.
Bennett puts it succinctly, “Blockchain will work only for those with a long-term vision and those hoping for immediate industry and process transformation will give up.” And a word of warning comes from Furlonger, “The value will take time to accrue. Nothing is really happening for several years. Be careful about promising anything to the business and show them the reality of the current situation.”