Blockchain to be an add-on for ERP and CRM

(Image: Stockfresh)

Gartner predicts distributed ledger tech fragmentation to increase, and collapse into no more than four dominant standards in the next few years

Print

PrintPrint
Pro

Read More:

18 September 2019 | 0

During the next two to three years, all major ERP and CRM vendors will offer blockchain capabilities as an add-on feature for their software and SaaS products, according to a new report from Gartner.

During that same time, fragmented blockchain standards are likely to inhibit adoption of the distributed ledger technology in real-world systems by financial services firms, which have been rolling out a variety of test beds and pilot projects in recent years.

Until consortiums and standards groups come together on several industry standards, or de facto standards emerge, the use of blockchain will be limited mostly to proofs of concept and pilot tests. Gartner released its report at its IT Symposium/Xpo in South Africa.

Without standards,
businesses would have to support multiple blockchains and integrate them
upstream into ERP and CRM systems, said Dale Kutnick, a Gartner senior vice
president of research and co-author of the report.

“We’re going to
have to support five different blockchains? Who’s going to pay for that?”
Kutnick said. “It’s unlikely there’ll ever be just one standard, but
ultimately [there will be] a couple [of] standards bodies who’ll adjudicate….
Ultimately, there will be one or two standards..,. but no more than four.

Kutnick expects one primary standard – and one or two secondary ones – to emerge. In the meantime, de facto standards are also likely to form, though that process is likely two years away. While Hyperledger Fabric has the potential to become a de facto standard because it’s being piloted in several industries, there’s no guarantee it will, he added.

As a result,
companies working with the myriad of blockchain platforms available today
should realise it’s “highly unlikely” the one they’re using now will
become the industry standard in five years. “When standards come out,
you’re going to have to convert yours,” Kutnick said.

And blockchain
ledgers will need to be integrated with existing ERP, CRM, finance, and asset
managment systems, Gartner warned. When SAP or Oracle announce a new version of
their software, companies will have to re-integrate their blockchain platforms,
according to Kutnick.

“If you’re a
FedEx, Alibaba or Amazon, maybe you want to stick your hat in the ring and try

[blockchain]

, or maybe you wait,” Kutnick said. “If you’re a user –
an insurance company, a bank, or a [consumer packaged goods] company – you’re
going to want to wait until your software company – Oracle, Microsoft or SAP –
announce blockchain as an add-on feature for your supply chain software so you
don’t have to worry about integrating it.”

All of the major
software vendors will eventually offer blockchain as a feature; in fact, said
Kutnick, most are already developing that kind of add-on. Likely the most
complicated platform will be ERP, which won’t see a viable blockchain feature
set for anther year or two, he said.

Oracle and SAP, for example, have already announced blockchain
products for supply chain tracking.

The financial
services industry, in particular, is still three to five years away from mature
industry standards, according to Fabio Chesini, a senior research director at
Gartner and co-author of the report.

Standards are
critical for financial services firms because they are constantly moving assets
between clients, partners and other institutions. Today, bank CIOs can choose
from numerous blockchains, available using either enterprise-grade approaches
such as R3 Corda, Hyperledger, and Digital Asset, or the many public blockchain
standards like Bitcoin, Ethereum, Cardano, EOS and Tezos. Each standard’s
consortium is trying to make theirs the de facto basis for value exchange and
digital asset representation, smart contracts and decentralised applications.

Bitcoin, R3,
Ethereum, Hyperledger and others often use differing implementations, data
formats, data interchange and directories – making interoperability among
different blockchains difficult across organisations.

“As financial
services companies constantly move financial instruments and assets to other
financial services companies and partners, cross-industry interoperability
standards are, and will be, critical,” Chesini said in a statement.
“Today, they are looking to replace current banking vehicles for payments
like Western Union, or international money transfers like SWIFT, with
blockchain-based platforms.

“Bank CIOs must
be mindful of this nascent and fragmented state of blockchain standards,”
Chesini continued. “It is unlikely there will be a single de facto
standard like in the Open Systems Interconnection (OSI)
model, at all levels. Given how new and fragmented the state of blockchain
standards is, we expect no more than four standards to lead the market in the
next three to five years.”

For the foreseeable
future, CIOs should take a wait-and-see approach to blockchain, using sparse
resources to test DLT’s ability to offer business efficiencies or cost savings,
according to Kutnick.

“If you look at
companies doing the most hyping about blockchain, it’s consultancies: IBM,
Accenture, KPMG, Deloitte, and people like Don Tapscott with his blockchain revolution that
hasn’t happened,” Kutnick said.

While blockchain
promises to create an open ledger over which businesses can share a single,
immutable version of data – whether that data is for tracking and tracing goods
or cross border financial transactions – it doesn’t offer a competitive
advantage in the end; in fact, it levels the playing field among businesses
players by enabling business partners to see the same data in real time,
Kutnick said.

Additionally, while
business-class, permissioned blockchains give the illusion of decentralisation,
in the end Kutnick said, they’re centrally controlled by a single entity. So
even as ecommerce/social media sites such as Facebook and financial
services companies such as JP Morgan Chase talk up the decentralisation and privacy
benefits of blockchain, the reality is that one company still holds the
network’s governing reigns.

Yet another reality
for blockchain in financial services is the cost associated with transferring
money using bitcoin or Ethereum, which can amount ot as much as 5% to 8% in
fees. Additionally, there are concerns about the volatility of the
cryptocurrency
, whose value has been on a roller coaster ride over
the past year and a half. So if a consumer were to purchase a car using
cryptocurrency, for example, the value of the digital money could rise or fall
even before the purchase was finalised, Kutnick said.

Companies who’ve
accepted bitcoin, Ethereum Eth, Ripple or other forms of cryptocurrency as a
form of payment have found little interest in the tactic from their customers,
Kutnick noted.

For example, more
than a dozen major retailers now accept bitcoin as a form of payment, but it
still represents a tiny percentage of their revenue. For example, Overstock.com
began accepting bitcoin for payment in 2014. Today, it accounts for less than one quarter of one percent of Overstock.com’s online payments, depending
on day-to-day fluctuations; the company, however, continues to see it as an
important part of its retail strategy.

A fiat-backed cryptocurrency, known as stablecoin, like JP Morgan’s JPM Coin would offer a more stable crypto base, since each digital coin is tied to a US dollar or other form of fiat currency.

“Gartner, in
general, is sceptical right now about blockchain. Both Fabio and I are, in
general, more sceptical about the short-term promises of blockchain. Neither
one of us believe it will be transformational for governments or
businesses,” Kutnick said.

Where blockchain
holds transformative promise is as a form of digital fiat currency for a
sovereign nation, such as China, which is already exploring a national cryptocurrency.

“Imagine if
China got a fiat digital currency and they’re able get Russian and Iran and
other bad actors who hate the fact that the US dollar is [the world’s] fiat
currency because the US uses it as a weapon, you could imagine…some
governments choose to use a different [digital] fiat currency,” Kutnick
said. “That would be transformational.”

IDG News Service

Read More:



Comments are closed.

Back to Top ↑