Blockchain Is Restructuring Industries, But Some Cloud Implementations Are Questionable

29. December 2017.

This Bloomberg article describes how old school companies such as IBM, Microsoft, Oracle, and SAP have profited from selling Blockchain tech, mostly as a cloud service. So what is the value of a Blockchain implemented in a single supplier cloud, accessed using API’s provided by that supplier, and secured using the cloud access controls:

“Demand for the technology, best known for supporting bitcoin, is growing so much that it will be one of the largest users of capacity next year at about 60 data centers that International Business Machines Corp. rents out to other companies around the globe. IBM was one of the first big companies to see blockchain’s promise, contributing code to an open-source effort and encouraging startups to try the technology on its cloud for free.

That a 106-year-old company like IBM is going all in on blockchain shows just how far the digital ledger has come since its early days underpinning bitcoin drug deals on the dark web. The market for blockchain-related products and services will reach $7.7 billion in 2022, up from $242 million last year, according to researcher Markets & Markets.

That’s creating new opportunities for some of the old warships of the technology world, companies like IBM and Microsoft Corp. that are making the transition to cloud services. And products that had gone out of vogue, such as databases sold by Oracle Corp., are becoming sexy again.

“All of these things will get a new life because of blockchain,” said Jerry Cuomo, vice president of technology for IBM Blockchain. “Our sales team loves blockchain because a customer that is buying blockchain rarely walks out of the store with just blockchain. They walk out with multiple things in their cart.”

Because multiple companies — such as all parties involved in a supply chain — can use the same blockchain, it’s spurring IBM to revise the way it compensates sales associates. In the past, sales reps got paid when their clients bought IBM technologies directly. Now they will also receive a commission when clients encourage other companies to join them on a blockchain network and use Big Blue’s systems and services, Cuomo said.”

The article makes the benefits for cloud providers abundantly clear, but one must wonder about the customer benefits associated with paying for and operating an independent distributed database node, when all participating nodes are implemented within a single cloud provider:

“ ‘Blockchain is one of the bright sectors in technology,’ said Roger Kay, president of Endpoint Technologies Associates Inc. ’Since blockchain infrastructure is fairly beefy, there will be a large pool of revenue associated with sales of equipment, software and related services for blockchain installations.’

In addition to hiring third parties for cloud use, companies will rely more on their own databases for storage, said Amit Zavery, senior vice president of Oracle Cloud Platform.

‘In traditional database systems, there is only one copy of the data for all parties to reference, but blockchain’s distributed nature means all of the peers now hold a copy of the data,’ Avery said. ‘That will expand the data storage requirements on businesses, especially those in industries with typically high transaction rates.’ “

Mercator recommends that during the development of a new system, the basic assumption should be that it will be deployed utilizing traditional cloud technology, not Blockchain. The decision to replace traditional technology for blockchain technology should be predicated on implementation details that can’t possibly be resolved with the traditional technology, recognizing that traditional technology can implement a trusted ledger more efficiently and cost effectively than Blockchain can.

Overview by Tim Sloane, VP, Payments Innovation and Director of the Emerging Technologies Advisory Service at Mercator Advisory Group

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