How IBM is using blockchain to transform the potential of enterprise data
Blockchain can be shrouded in babble about consensus and cryptography and ledgers, leaving IT managers stewing in a cauldron of confusion. But in 2020, IBM made big strides toward bringing blockchain into the mainstream by focusing on the benefits it offers enterprise users.
Those virtues include the ability to connect with a wider range of partners to share data across secure networks built on trust and transparency. For large enterprises focused on digital transformation, blockchain is becoming a critical tool for accelerating those efforts.
“I think almost every CIO that is driving transformation has pivoted to thinking how to attack this in a way that’s going to be iterative, agile, fast, and open,” IBM blockchain general manager Alistair Rennie said. “Where we’ve had success is getting blockchain onto their radar as a really useful business tool. It’s not an esoteric technology discussion at this point. If you are trying to do multi-party integration with security and privacy, and you need to do it quickly in a way that is going to have a rapid business impact, then blockchain is a suitable technology to pursue that business goal.”
Blockchain is taking its place as another way to help companies leverage the surging amounts of data they are collecting, and IBM is trying to advance the adoption of blockchain along three pathways.
Blockchain uses distributed ledgers that are stored in multiple places, allowing for greater transparency into transactions happening across the system. It also enables secure identification of individual products, which has the potential to cut fraud and trace shipments on a very granular level.
IBM’s most fundamental blockchain effort involves contributing to Hyperledger, the Linux Foundation’s open source program to develop blockchain specifically for enterprise users. The foundation was formed in 2016, and its 30 founding corporate members include IBM.
“We early on decided that we were going to concentrate our efforts on helping to contribute to making Hyperledger a success with a strong focus on creating a blockchain platform that was really suited to enterprise needs,” Rennie said.
Part of the challenge was ensuring a clear distinction between blockchain and cryptocurrency, technologies that at the time often seemed synonymous in the minds of IT managers. In the case of Hyperledger, participants have created a basic peer-to-peer platform using distributed ledger technology that can then be adapted to projects in industries such as finance, manufacturing, IoT, and insurance.
Creating a cross-industry standard has eased the way to building digital exchanges that foster data-sharing in new ways, Rennie said.
According to the latest Hyperledger annual report published in early December, there are now 67 corporations and organizations building projects using the blockchain platform. IBM has become the largest contributor to the program, with 3,631 commits, more than triple the number of the second-largest contributor.
“For enterprise users, it’s important to make sure people had a strong and clear idea of who is participating in the networks,” Rennie said. “So we have contributed pretty significantly.”
While Hyperledger might be seen as a foundation, IBM decided it wouldn’t be enough to just create the tools. It would need to find ways to demonstrate what blockchain could do to overcome skepticism. To that end, the second part of its strategy has been to convene blockchain projects that could be used across different industries.
Perhaps the project that has drawn the most attention is the IBM Food Trust Network.
“It was designed to help create transparency across the food supply chain,” Rennie said. “From the farm through consumer and working with all the parties in between — such as processors, retailers, [and] transportation.”
Rennie explained that each of these different actors uses their own IT systems, creating a massive obstacle to integrating them into a single system. Even if it could be done, they’d only want to share limited information, and creating the trust to do that would be difficult.
By using blockchain, IBM created a neutral terrain that allowed for a multi-party integration hub. The system allowed each participant to connect and share data and have total transparency into what everyone else had shared with the networks.
That convinced major retailers such as Walmart and Carrefour to join so they could monitor the products that arrived on their shelves. This may sound simplistic, but tracking the provenance of something such as lettuce has always been remarkably difficult. By the time a head of lettuce arrives on a shelf, the store typically has little or no idea where it came from. That’s why whenever an E. coli outbreak involves lettuce, huge amounts have to be destroyed because no one can be sure which shipments came from the tainted source.
In the process of building the Food Trust network, IBM had to show partners how they could share sensitive information and what would be possible if they did.
“We had to show them what decentralized trust really looks like in a business world and then what does it look like when you put a real-world application together to try to move up or down the supply chain so that when you do product recall, then you know how to do that accurately,” Rennie said.
IBM partnered with Maersk on a similar initiative around shipping, called TradeLens. The platform allowed port owners, global container companies, logistics companies, customs officials, and shippers to organize around a centralized platform that used smart contracts to facilitate transactions. For an industry that still often operated by phone and fax machines, it was a big step forward.
“Ocean shipping is a very competitive business,” Rennie said. “And it’s pretty complicated if you look at everything from your supplier through transportation logistics, through docks, customs export controls, onto a ship and then unpacking it all on the other side. A typical container comes with a pretty significant volume of paperwork that travels with it. Having somebody who is trying to ship something and be able to get total clarity on where that pallet is at any point of time is extremely valuable.”
During the early phase of the pandemic last spring, IBM introduced the Rapid Supplier Connect, a blockchain platform to connect purchasers and suppliers of equipment needed during the pandemic. Rennie said that with sudden and massive shifts in supply chains — like fashion houses making masks and protective gear or spirit producers making hand sanitizer — all sorts of new players needed a way to connect.
The goal was to help buyers who might have little or no experience with such purchases sort through these new providers in a way that allowed materials to be verified. Rennie said the blockchain platform allowed these actors to quickly plug in and share data that made such purchases more transparent.
In this case, participants could be confident they were sharing just enough data in the blockchain for buyers and sellers to find each other. That made people more comfortable sharing data about purchases and prices and verifying new suppliers who joined, which helped create a trusted marketplace.
“Every one of these people coming to the table had a different supply chain system that tied into their hospital or their production factory,” Rennie said. “So you’re never going to get all of them onto a new supply chain in our lifetime, or even onto a common set of supply chains.”
Blockchain for the enterprise
Having used these projects to establish blockchain’s viability, IBM is now increasingly focused on attracting enterprise users.
Via its Global Business Services, IBM has been working with companies to set up their own blockchain platforms. So far, it has developed more than 100 of these.
“I think we’re getting through to partners that blockchain is a suitable technology to pursue their business goals,” Rennie said. “There’s enough people that have proven these patterns so that you’re not going to be the first one trying that approach. So I think we’re making progress helping with some of the anxiety people have.”
The advantages again include more flexibility and more transparency, Rennie said. This has become critical as more enterprises push for digital transformation.
“Over the last 18 months, there’s been a rapid acceleration as business leaders are starting to understand that some of the multi-party integration they wanted to do is now possible and understanding how to apply blockchain to some of these pretty difficult business integration and data-sharing problems,” Rennie said.
Going back more than two years, Rennie said most of these projects were primarily pilots. But over the past year, more partners have been putting them into daily use. That includes such high-profile partners as We.trade, which is using blockchain to facilitate financing for small and medium-sized businesses, and Home Depot, which uses it to manage relationships with its suppliers.
Going forward, IBM sees blockchain as an important tool for its expanding hybrid cloud strategy. Rennie said blockchain is another way to help manage the complexity that comes with using different cloud services.
“When you think about the hybrid cloud capability, a big part of what we’re helping people do is automate and integrate business processes in lots of different ways,” Rennie said. “Blockchain plays a pretty critical part because it allows integration automation and multi-party integration. Blockchain has gone from a future thought to a current thought.”
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