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Oracle Blockchain Blog

  • June 25, 2019

Why Blockchain is Spreading to ERP and Elsewhere

Guest Author
This is a syndicated post, view the original post here

Mike Quindazzi is managing director and sales leader for US Digital Alliances at PwC. In this Q&A, he answers questions on blockchain based on a PwC survey of 600 executives from 15 territories entitled, “Blockchain is here. What’s your next move?” PwC primarily focuses on blockchain in smart contracts, supply chain, cryptocurrency/payments, distributed ledger technology (DLT) security, DLT assurance, and identity. 

Q. What is the current state of blockchain adoption across global business sectors?

Despite the ups and downs of Bitcoin, excitement about the promise of blockchain remains strong. Activity in the financial services industry has cooled slightly, but it's picked up in manufacturing, energy, utilities, and healthcare. Additionally, China has emerged as a leader and is poised to gain ground on the world in the near future. 

There are still challenges, however. It’s ironic but true that blockchain projects intended to bring consensus and engender trust often struggle to gain agreement on standards. Other challenges exist around scalability and interoperability for blockchains from multiple and sometimes not-fully-defined parties. The top three barriers to blockchain adoption in our survey included regulatory uncertainty (48 percent), lack of trust among users (45 percent), and inability to bring a network together (44 percent).

But, there is light at the end of the tunnel. New and refined use cases are underway, and new blockchain platforms are emerging from  technologies providers.

Q. Can CFOs and other finance leaders expect blockchain to be part of the processes they touch in the near future?

Absolutely. The new and refined use cases being demonstrated are far and wide, and people are starting to realize that almost everything businesses do can now be represented on a blockchain. The potential for managing the granular data that is at the heart of critical operations in any modern organization is huge.

Think about the aerospace industry — the number of parts on an aircraft, the multiple parties in the supply chain, the criticality of the data showing a plane’s history and condition. This knowledge is spread across countless systems and could be in the hands of multiple parties that may be competitors and reluctant to share data.  

More broadly, multi-nationals are  running enterprise software platforms to manage finance and operations, and  providers like Oracle are beginning to integrate blockchain with these applications. By using blockchain with ERP systems, companies can streamline processes, facilitate data sharing, and improve data integrity. 

Even in our business, blockchain and its distributed ledger technology has the potential to move us toward a continuous assessment in which blockchain transactions can be monitored in real time. 

Q. What are some of the specific ways people are using or will use blockchain that finance leaders should know about?

A very basic one is tokenization, which is the representation of real or virtual assets on a blockchain. Previously illiquid assets can be converted into tokens and efficiently fractionalized, traded, and settled more quickly and efficiently. This method is spreading to raw materials, finished goods, income-producing securities, membership rights, and more.

Regarding supply chain management, blockchains allow multiple parties to access an immutable record as a single source of truth. Recorded transactions can be appended but not altered with a time-stamped assessment trail and documented in real time across the supply chain. This has the potential to reduce counterfeits, improve compliance, and reduce paperwork and costs.

In healthcare, patient health records are encrypted and more secure, and offer patients more control over their own health data.

Contract manufacturing is another emerging area. Outsourcing complex manufacturing processes require trust, archiving, verifying, authenticating, licensing, the coordination of information from design-to-delivery, and further down the line if the product is returned. Smart contracts can replace paper trials and with digital footprints to facilitate and conclude transactions automatically once conditions for the outsourcing party are completed across the supply chain. By automatically confirming that all parties have rendered their services and fulfilled previously established conditions through blockchain, the process becomes more efficient and cost-effective.

Q. How urgent is the need to evaluate opportunities for blockchain in finance? Are many companies investing in this area?

Nearly 1 in 3 executives we surveyed across the business view finance as an important area in which blockchain will gain enterprise traction. The office of the CFO is in an ideal position to create a real impact with blockchain based on their access to valuable enterprise data, including sales, purchasing, and supply chain data. 

Finance leaders must be prudent in evaluating emerging blockchain solutions, both for business value and to better meet regulators’ expectations, given the enhanced transparency of the technology.

Yet, there are a number of assumptions leaders should evaluate before over-investing time and money in blockchain. Leaders can quickly assess the applicability by looking for areas where parties share and update data, where there is a requirement for verifications, when transactions are time-sensitive, and most importantly, where intermediaries add complexity to the process.

Q. What tips would you give businesses that have not yet explored blockchain applications to get started?

Passing the first set of hurdles is sometimes the most difficult: 54% of our blockchain survey respondents who reached the pilot stage say the result didn’t justify the effort on a grander scale.

It's all about developing the right use case, with the right return, and building trust early on. If project teams are constrained by legacy processes and systems, they most likely will miss the high-value business model that blockchain may unlock. 

For more insights, get the full PwC survey results. 

Mike Quindazzi is managing director and sales leader for US Digital Alliances at PwC. He has 30 years of industry and management consulting experience, leading teams and global companies on strategy and transformational initiatives. He is responsible for growing a $1.5 billion cross-sector digital practice where he works with his team in shaping innovative approaches to solving complex issues for clients. He works with diverse teams across a range of clients (startups to Fortune 500) and tech alliances (Amazon, Microsoft, Oracle, SAP, Salesforce, Workday). Mike is also a keynote speaker on the global megatrends that are shaping future paths for business and society.

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