Blockchain investments grow but reservations remain
Organisations are increasingly shifting from exploring blockchain to identifying and building practical business applications, according to a Deloitte survey.
Many global executives think blockchain has great potential to help them reinvent business processes and are poised to invest in a wide range of use cases during the next year, according to the results of Deloitte Consulting LLP’s 2018 Global Blockchain survey, which polled 1,053 senior executives online in seven countries.
Seventy-four percent of survey respondents report their organisations see a compelling business case for blockchain, while 34 percent say their company already has a blockchain system in production and 41 percent expect to deploy a blockchain application in the next year. Nearly 40 percent say their organisation will invest $5 million or more in blockchain technology in the coming year.
Blockchain is a versatile distributed ledger technology that can record financial transactions, store medical records, and track the flow of goods, information, and payments, among other uses. Respondents’ blockchain use cases span several areas, with supply chain (53 percent), internet of things (51 percent), and digital identity (50 percent) leading the way.
“Blockchain is at an inflection point, with momentum shifting from exploring the technology’s potential to building practical business applications,” says Linda Pawczuk, a principal and blockchain leader for the Americas at Deloitte Consulting LLP. “As more organisations invest in blockchain, the technology is likely to gain significant traction,” she says. Companies could unlock greater efficiencies, create new business models and revenue sources, and enhance security, among other benefits.
Despite this momentum, respondents indicate that for all the talk about blockchain’s promise, there are few active use cases to advance their beliefs. “A certain blockchain fatigue is setting in among those who feel its potential has been over-communicated while its real-world benefits remain elusive,” says David Schatsky, a managing director at Deloitte LLP. “Based on where blockchain is today and, more importantly, its likely adoption rate within the next three years, we strongly believe organisations should stay engaged in exploring the impact of blockchain on their business and their industry.”
Many legacy organisations – well-established financial institutions and traditional brick-and-mortar retailers, for instance – are adjusting their blockchain mindset. Rather than simply educating themselves about blockchain and then finding a discrete use case, they are exploring the broader business ecosystem that can support the technology. In doing so, they are increasingly adopting the approach of many emerging digital disruptors, which are typically less constrained by legacy technologies and are well-versed in the potential benefits blockchain can provide throughout the business value chain.
84 percent of respondents believe blockchain technology is broadly scalable and will eventually achieve mainstream adoption, and 59 percent think the technology will disrupt their industry. By contrast, some 39 percent of respondents believe blockchain is overhyped; in the United States, that number is 44 percent.
The divergence may reflect a shift toward the pragmatists in the blockchain community, according to Pawczuk. While executives in the financial services sector, for example, are leading the way in using the technology to re-examine processes and functions, their counterparts in other sectors may remain more reserved as they work to develop appropriate use cases, she says.
Many executives see a variety of obstacles moving forward. Regulatory concerns (39 percent) are the biggest barrier cited by survey respondents, followed by the need to replace or adapt legacy systems (37 percent). A full one-third (33 percent) believe current ROI for blockchain remains uncertain.
While established organisations may face challenges in trying to make blockchain fit into their existing business paradigm, “it’s important for these executives to recognise this is an evolution in commerce,” says Rob Massey, partner and global blockchain leader at Deloitte Tax LLP. “Companies would do well to focus beyond a solid proof of concept for implementation. Blockchain can be a business model enabler, fundamentally changing how a business operates. We are seeing this impact in every industry.”
*** As organisations put more resources behind blockchain and better recognise how it can improve their business processes and bottom lines, the resulting cost savings, competitive advantages, and ROI will likely grow more pronounced, with the technology enabling a completely new level of information exchange both within and across industries.
1. The survey was commissioned by Deloitte Consulting LLP and conducted online between March 26 and April 5, 2018. The survey polled a sample of 1,053 senior executives in seven countries (Canada, China, France, Germany, Mexico, the United Kingdom, and the United States) at companies with $500 million or more in annual revenue. Respondents had at least a broad understanding of blockchain and were familiar with and able to comment on their organisations’ blockchain investment plans. CIOs and CTOs represented 26 percent of respondents.