Blockchain has progressed considerably as an emerging technology during 2018. Many of 2017’s PoCs have become deployed commercial solutions as standards have begun to solidify, and with more organizations beginning to explore the potential of distributed ledger architecture and smart contracting.

We are still at the very beginning of the lifecycle of this particular technology, and nowhere close to seeing its full potential yet. But as the year comes to an end, what might 2019 bring in terms of distributed ledger maturity and trends? Here are my seven predictions for blockchain in 2019.

The use case landscape shakes out

Blockchain has a clear goodness-of-fit spectrum, as I have written about in a previous blog, and to date, that spectrum has often been tested at the low end with mixed results. Blockchain has clear strengths in a number of well-defined use cases, most notably supply chain and parts management, multiparty shipping and logistics tasks, remittances, securities clearance, and more. As 2019 dawns, we will begin to see providers focus less on exploring the use case spectrum and more on building more capability into those use cases that have been proven to be blockchain-relevant.

Use cases become playbooks

The secondary benefit of a more focused approach on the part of blockchain service providers is the swift emergence of proven playbooks for specific blockchain applications. Already, providers are beginning to slash the number of discussed use cases as it becomes obvious that cold-chain pharma, farm-to-fork agricultural provenance, and airplane parts sourcing and documentation, for example, are functionally multiple iterations of the same basic design with domain knowledge added per the specific deployment.

Interoperability fades as a limiting factor

Blockchain has presented something of a Betamax/VHS (or Blu-Ray/HD-DVD, for younger readers) quandary to date, with multiple standards each offering a unique source of value but on a mutually exclusive basis. But more providers are beginning to focus on hybrid blockchain solutions and platform interoperability, and the announcement in late October that Hyperledger Fabric will be able to execute smart contracts written for Ethereum certainly signals that we are entering the next phase of the market, in which multiple market leaders will need to play responsibly in the sandbox for this technology to take deep root.

Throughput speeds improve – but DB-like operation at-speed/at-scale is more likely in 2020

Blockchain’s primary drawback up to this point is that it can operate at speed, or at scale, but not both. That is slowly changing, with more blockchain accelerators emerging in the marketplace (Microsoft’s CoCo being just one example), and greater attention being paid to purpose-built platforms (like Symbiont Assembly) that are architected for at-speed/at-scale operation. Sharding and layer-2 protocols, both under exploration by Ethereum, show promise for keeping the core value of a distributed ledger system and adding the ability to accelerate transaction throughput to near-database speeds.

Quantum computing comes in from the cold

QC has been the hobgoblin looming over blockchain in the media for years, almost always framed as a technology that sits in opposition to blockchain – either as a security threat or a technology that will make the distributed ledger concept obsolete. But, like most technologies, it will emerge from the threatening media gloom to take its place at the solution table, in the form of a blockchain acceleration and security-improving offering. Quantum computing is still some way off from making a material difference in the IT landscape, but 2019 will bring a dose of sanity in removing the oppositional rhetoric from its emerging presence.

Automation, AI & IoT combine with blockchain for next-gen digital transformation

Blockchain is often discussed as if immutability and transaction security are its primary value proposition. But smart contracting and autonomous action within a DLT environment are at least as important in terms of overall value to the enterprise – and these are capabilities enriched and informed by other emerging technologies, including IoT, artificial intelligence, and cognitive automation. Increasingly, these four technologies are combining to form the basis of next-generation digital transformation for organizations seeking results beyond the limited promise of the initial wave of early transformational work (circa 2014-2017).

Convergence sets the stage for a viable long-term replacement for ERP

What these combined technologies are capable of reaches beyond the ‘four walls’ of the transformational enterprise; they enable whole supply chains to work together as extended ERP fabrics, and to incorporate financial, regulatory, and technology entities surrounding the production and distribution cycle. The discussions around these possibilities are just beginning as 2018 draws to a close, but we expect 2019 to bring more blueprinting and ecosystem construction conversations.

One final, overarching perspective for blockchain and DLT in general: we are progressing past the point of questioning whether these technologies have a role to play in the broader business IT ecosystem. When deployed against the right business challenges, on the right architecture for the task, with the right partner, blockchain is capable of remarkable improvements – and becomes a more strategic technology when considered as a transformational component alongside IoT, AI and automation. The future isn’t built exclusively on blockchain, but it is increasingly a part of the future of business transaction management.

With the rise of every new technology, there is a parallel rush among enterprises to incorporate it into the near-term IT roadmap, and for good reason: new technologies offer cost savings, CX improvement, better risk management, and a host of other benefits that look terrific in annual reports and quarterly earnings documentation.

Nowhere is that trend more prevalent than in blockchain, a technology that has created significant adoption pressure for enterprise clients amid a flurry of questions regarding platform selection, process redesign, and partner engagement. Blockchain’s benefits are much vaunted (security, immutability, fault tolerance, decentralization), but then there is no shortage of drawbacks (throughput speed, fragmented platform landscape, interoperability). Moreover, there is already talk of technologies that could replace or bypass the benefits of blockchain, from hashgraph to quantum computing, adding further to the murk surrounding the process of evaluating blockchain for organizational use.

In an environment spurring on organizations to adopt blockchain, there’s actually good cause to slow the overall technological rush and ensure that a blockchain solution is the right choice for a specific business challenge and commercial ecosystem. Blockchain is a transformative technology; it changes the fundamental way that transactions are encoded, stored, and tracked. In the right setting, it can be a material lever for unlocking value within the organization, in the supply chain, and among banking and regulatory interactors. In the wrong setting, it can be an expensive dead-end that diverts resources and time from a broader slate of digital transformation activities.

So how can organizations correctly sort the real blockchain opportunities out? In the course of my research in this area, I’ve identified seven key characteristics of business processes that form the basis of an organizational blockchain ‘goodness of fit’ checklist:

1. Transactional processes

Note that this is not the same as being financially transactional; any process where information changes hands between parties, even if compensation is not a part of the exchange, can be a candidate for blockchain deployment. Blockchain excels at documenting the transfer of value or information, and fiscal gains tend to accumulate with greater volumes of handshakes. As a result, the higher the transaction count in one cycle of a given process task, the more relevant blockchain becomes.

2. Frictional processes

Process friction can take many forms – from time delays in passing information from one party to the next, to per-message costs (such as SWIFT messaging expenses in financial services), to partner fatigue in disputing invoices or claims. The more time and expense accumulates within the process, the better a fit for blockchain technology a process is.

3. Non real-time, low-volume processes

Speed is not currently a significant blockchain platform strength, so processes that need to happen in real-time at scale may be a poor fit for the technology in its current form. While some specialized platforms – most notably Digital Asset, Symbiont, and Waves – offer compelling speed at scale, most of the big names in the platform space are not yet performing at speeds comparable to a relational database, so real-time processes happening in volume may be good candidates to consider when blockchain catches up in the next two years.

4. Simpler processes

The term smart contracts tends to be a confusing one in blockchain, as it suggests more intelligence than is really present in the technology currently. Smart contracts are smart in their management of the tasks surrounding a transaction, like document processing, notarization, and approval; a smart contract is self-executing in these areas and does not require additional input.

But for all that transactional intelligence, smart contracts remain relatively ‘dumb’ in terms of overall contract complexity. So, while most can follow relatively simple ‘if-then’ logic, complicated transactions with multiple forks and ‘fuzzy’ interpretation are beyond the current reach of most smart contract platforms. Again, this is a development priority for many platform providers, so expect to see this evolve swiftly in parallel with developments in AI – but at the time of writing, simpler processes are a better fit for blockchain implementation.

5. Oppositional processes

Transparency and trust are cornerstone components of an effective blockchain implementation, particularly so when there is an element of opposed goals in a process environment (payor versus payee being the most common such example). When all parties can monitor and oversee the documented process of content or payment through a process transparently from end to end, trust is improved and disputes tend to decline both in volume and in time required for resolution.

6. Fragmented processes

Intra-organizational applications of blockchain can produce meaningful benefits, but the real value is unlocked when a blockchain connects multiple parties operating in different domains – for example, in an ocean cargo management setting, exporters, banks, insurers, regulators, shipping providers, importers, and distributors. In such an environment, where responsibility and input are being passed among many organizations, the relevance of a blockchain solution increases considerably.           

7. Risk-accumulative processes

Corporate risk management is an accumulative function to begin with, as the audit task normally demands a large volume of signed and documented data – so the ability to produce the supporting documentation without significant organizational effort or data reconstruction is a vital task. Blockchain offers historically unparalleled data immutability and signed witness status, making it an exceptionally good fit for processes that accumulate large volumes of risk-relevant exchanges over time.

In conclusion

What can operations and IT executives take from this in planning for blockchain deployment? Currently, the most compelling fiscal and performance returns are coming from highly transactional processes with considerable process friction, prioritizing real-time transparency in low transaction volume, with minimal complexity, high levels of fragmentation, and considerable risk exposure.

However, it is critical to maintain a perspective on the role of implementing blockchain for these processes within the scope of a broader digital transformation initiative; blockchain demands many of the same transformation readiness checkpoints (big data capability, master data management and hygiene, and automation readiness) that other transformational initiatives do.

Finally, in assessing blockchain’s weaknesses, keep a weather eye on the horizon: blockchain’s two principal shortcomings to date (managing real-time transaction volume at scale and handling complex smart contracts) will increasingly become priorities for the major platform providers over the next two years.

EdgeVerve, an Infosys Product subsidiary, this week announced a new blockchain-powered application for supply chain management as part of its product line. Nia Provenance is designed to address the challenges faced by organizations managing complex supply chain networks with multiple IT stacks engaged across multiple stakeholders. Here I take a quick look at the new application and its potential impact.

Supply chain traceability, transparency & trust

Nia Provenance is designed to provide traceability of products from source of origin to point of purchase with full transparency at every point along the supply chain. The product establishes trust through the utilization of a version of Bitcore, the blockchain architecture used by Bitcoin. While this can be a relatively simple task in agribusiness and other supply environments in which a product involves only processing as it moves through the supply chain, environments such as consumer electronics or medical devices are much more complex, involving integration and assembly of multiple components along the way. The ability to isolate a specific component and trace it to its source of origin, through phases of value addition timestamped on a blockchain ledger, is invaluable in case of recall or consumer danger.

Transparency in Nia Provenance is provided through proof of process as the product or commodity moves through the system – so attributes that must be agreed on at specific phases of the supply chain, such as conflict-free or locally-sourced, can be seen in the system as they are accumulated. Similarly, regulatory inspections and certifications are more easily tracked and audited through a blockchain solution like Nia Provenance.

Finally, trust is gained in a system with a combination of data immutability, equality in network participation as a result of decentralization of the overall SCM ledger, and cryptographic information security. Over time, the benefits of a blockchain SCM environment accrue both to the organizational bottom line, in the form of cost savings, and to the organization’s brand as a function of increased consumer trust in the brand promise.

Agribusiness client case

As one example of how Nia Provenance is being leveraged in the real world, a global agribusiness firm undertook a proof of concept for its coffee sourcing division in Indonesia to track the journey of coffee from the growing site, through the roasting plant, the blend manufacturer, the quality control operation, the logistics providers, and on to the importer. This enabled the trader to provide trusted accreditation and certification information to the importer for properties such as organic or fair trade status, or that the coffee was grown using sustainable agriculture standards.

Providing strategic blockchain reach

Nia Provenance provides Infosys with three important sources of strategic blockchain ‘reach’ in an increasingly competitive market, because:

• It is platform-agnostic and purpose-built to dock with multiple blockchain architectures. A supply chain solution that relies too heavily on the specific capabilities of one common blockchain architecture or another – for example, Ethereum or HyperLedger – would encounter difficulty working with other upstream or downstream architectures. By keeping the DLT technology in an abstraction layer, Nia Provenance eases the process of incorporating different blockchain architectures in a complex SCM task environment
• It is designed to benefit multiple supply chain stakeholders, not just the client. Blockchain adoption becomes more appealing to upstream and downstream stakeholders, as well as horizontal entities like banks, insurers and regulators, when the ecosystem is built with clear benefits for them as well as the organizing entity. Nia Provenance is designed from the ground up with a mindset inclusive of suppliers, inspectors, insurers, shippers, traders, manufacturers, banks, distributors, and end customers
• It is designed to span multiple industries. Although the platform has its origins in agribusiness, Nia Provenance looks to be up to the task of SCM applications in manufacturing, consumer goods/FMCG, food and beverage, and specialized applications such as cold-chain pharmaceuticals.

Summary

Supply chain provenance is a core application for blockchain, and one that we expect to be a clear value delivery vehicle for blockchain technology through 2025. The combination of – as Infosys puts it – traceability, transparency, and trust that blockchain provides is a compelling proposition. Nia Provenance offers a solution across a broad variety of industry applications for organizations seeking lower cost and greater security in their supply chain operations.

For all the discussion in the blockchain solution industry around platform selection (are they choosing Fabric or Sawtooth? Quorum or Corda?), you’d be forgiven for thinking that every provider’s first stop is the open-source infrastructure shelf. But the reality is that blockchain is more a concept than a fixed architecture, and the platforms mentioned do not encompass the totality of use case needs for solution developers. As a result, some solution developers have elected to start with a blank sheet of paper and build blockchain solutions from the ground up.

One such company is Symbiont, who started down this road much earlier than most. Faced with the task of building a smart contracts platform for the BFSI industry, the company examined what was available in prebuilt blockchain platform infrastructure and did not see their solution requirements represented in those offerings – so they built their own. Symbiont’s concerns centered around the two areas of scalability and security, and for the firm’s pursuit target accounts in capital markets and mortgages, those were red-letter issues.

The company addressed these concerns with Symbiont Assembly, the company’s proprietary distributed ledger technology. Assembly was designed to address three specific demands of high-volume transactional processes in the financial services sector: fault tolerance, volume management, and security.

Supporting fault tolerance

Assembly addresses the first of these through the application of a design called Byzantine Fault Tolerance (BFT). Where some blockchain platforms allow for node failure within a distributed ledger environment, platforms using BFT broaden that definition to include the possibility of a node acting maliciously, and can control for actions taken by these nodes as well. The Symbiont implementation of BFT is on the BFT-SMaRt protocol.

Volume management

In addressing the volume demands of financial services processing, deciding on the BFT-SMaRt protocol was again important, as it enables Assembly to reach performance levels in the ~80k/s range consistently.

This has two specific benefits, one obvious and one less so. First, it means that Assembly can manage the very high-volume transaction pace of applications in specialized financial trading markets without scale concerns. Secondly, it means that in lower-volume environments, the extra ‘headroom’ that BFT-SMaRt affords Assembly can be used to store related data on the ledger without the need to resort to a centralized data store to hold, for example, scanned legal documents that support smart contracts.

Addressing security concerns

The same BFT architecture that supports Assembly’s fault tolerance also provides an additional layer of security, in that malicious node activity is actively identified and quarantined, while ‘honest’ nodes can continue to communicate and transact via consensus. Add in encryption of data, whereby Assembly creates a private security ledger within the larger ledger, and the result is a robust level of security for applications with significant risk of malicious activity in high-value trading and exchange.

Advantages of building a bespoke blockchain platform

Building its own blockchain platform cost Symbiont many hours and R&D dollars that competitors did not have to spend, but ultimately this decision provides Symbiont with three strategic advantages over competitors:

• Assembly is purpose-built for BFT-relevant, high-volume environments. As a result, the platform has performance and throughput benefits for applications in these environments compared with broader-use blockchain platforms that are intended to be used across a variety of business DLT needs. To some degree this limits the flexibility of the platform in other use cases, but just as a Formula One engine is a bespoke tool for a specific job, so too is Assembly specifically designed to excel in its native use case environment. That provides real benefits to users electing to build their banking DLT applications on the Assembly architecture

• Symbiont can provide for third-party smart contract writing, should it elect to do so. While this is not in the roadmap for the moment, and Symbiont appears content to build client solutions on proprietary deliverables from the contract-writing layer through the complete infrastructure of the solution, the company could elect to allow clients to write their own smart contracts ‘at the top of the stack’. Symbiont does intend to keep the core Assembly platform proprietary to the company for the foreseeable future

• Assembly may attract less malicious activity interest than traditional platforms. The rising number of blockchain projects based on HyperLedger and Ethereum is certain to attract more malicious activity based on the commonality of the architecture across a broader common base of technology. In much the same way that Windows historically attracted more virus incursions than the OS platform, Assembly will tend to attract less attention than platforms with broader user bases. Moreover, Assembly’s BFT foundations will enable it to deal more effectively with those events that do occur.

Summary

Symbiont isn’t alone in developing its own proprietary blockchain technology architecture rather than choose from the broadly available offerings in the space, and as blockchain enters the mainstream of enterprise business, other provider organizations will surely go the same route.

What Symbiont has established is an exemplar for developing a purpose-built blockchain platform, beginning with the specific needs of the task environment at scale, and proceeding to address those needs carefully in the development process. 

In this article, I look at Mphasis’ Blockchain initiatives and at the segments they are focusing on for further development with their financial services clients. Mphasis began its Blockchain initiatives in 2016, initiating internal experiments and POCs to understand the technology and how it can be applied to business challenges.

Mphasis is working with a global financial services company on POCs and an approach to bringing a customer identity solution to the financial services market, in order to address consumer data challenges in a global environment. The customer and Mphasis are working to address multiple issues including:

• Solution construct, design approach, and related technology considerations to select the right Blockchain technology from different options such as BigchainDB, HyperLedger, Ethereum, Multichain, network transaction currency and conversion to fiat, engagement layer and access point technologies
• Industry ecosystem participation considerations – incentives, privacy protections, regulatory compliance considerations, trust and risk, and access point technologies to join the network
• POC prototype and demo – for an initial MVP.

The POC took 7 weeks to demonstrate that the technology works and compliance is achievable. The solution was set up as a multi-node environment that enables the industry participants to transact, by enabling functions such as set-up and administration, search, crypto-payments, transaction administration, analytics, regulatory oversight and access.

Since then, Mphasis has built an ecosystem of Blockchain tools and best practices, and conducted multiple POCs. Clients are narrowing the range of use cases they wish to pursue further and are driving some of those into production.

Mphasis’ Blockchain services & use cases

Mphasis has a core group of 10+ engineers working on Blockchain initiatives who are based in Bangalore. Key attributes of Mphasis’ Blockchain ecosystem include:

• POCs completed to date: 12, of which 50% were client requested and 50% internally undertaken
• Clients engaging on Blockchain: 7 across banking, insurance, and airlines
• COE founded: 2016
• Platforms employed: Ethereum, Hyperledger, Multichain, and Bigchain.

Mphasis focuses on the Etherium and Hyperledger platforms in its Blockchain work, and expects to add a capability in Quorum soon. Key POCs to date include:

• Trade finance for banks: enabling a decentralized network between importer, exporter, port authorities, and banks. Key issues addressed include document verification, fraudulent activity incidence, and document losses
• Mortgage document management: the goal is to store documents on the DLT as a customer goes through the loan application process. This will allow vendors (e.g. insurance companies) to access the documents and speed up TAT, which will reduce cost of origination and improve customer experience
• Record keeping: enabling a single version of the truth, with additional components including IOT and smart contracts
• Patient health records: enabling confidential sharing of patient records and with intended participants
• Baggage-as-a-service: distributed, decentralized system for tracking bags during travel by passenger using mobile device
• Group insurance claims: stakeholders including hospitals, insureds, insurer, and third-parties transact and exchange documents to enable fast settlement of claims
• Contract management: digital signing of documents on a Blockchain network to ensure transparency
• KYC registry: enabling a KYC market utility using Blockchain.

Going forward, Mphasis will focus on:

• Consulting for clients considering Blockchain initiatives
• Delivering Blockchain implementations (POC or operational) with integrated application suites to reduce time to market and increase platform efficiency
• Delivering operational support for Blockchain environments based on its solution experience.
• Continuing to create use cases around KYC registry, mortgage document management, trade finance, baggage-as-a-service, and group insurance claims.

Conclusions

To date, most Blockchain services vendors have been focused on enabling small groups of direct stakeholders to use Blockchain to eliminate the need for third-party support. Mphasis has focused instead on enabling stakeholders to bring in third-parties as customers, and use Blockchain as a highly secure, reliable self-service tool. This should allow data holders, the sponsors of these initiatives, to monetize their investments in customer data and documents. This will allow Mphasis eventually to transition its Blockchain services towards operations support and cybersecurity. By supporting its clients’ efforts to drive revenue growth, Mphasis is able to support compelling use cases for employing this technology.

We recently caught up with Infosys to discuss where its Infosys Validation Solutions (IVS) testing practice is currently investing. This is a follow-up to a similar discussion we had with Infosys back in July 2016 that centered on applying AI and making sense of the data that client organizations have (see here).

Our most recent discussion looked at technologies such as AI, chatbots, and blockchain. The focus of IVS has expanded from immediate opportunities within software testing to Infosys’ overall development of new IT services offerings.

AI: more use cases are the priority

AI remains a priority for IVS, with the attention to date having centered on developing use cases in test case optimization and defect prediction. Its PANDIT IP correlates software new releases with past defects, feature changes, test cases, and determines what part of the new release’s code is responsible for defects. IVS points out that its implementation (in identifying the lines of code responsible for the defect) is relatively difficult. IVS is taking a gradual approach, and starting with COTS, the underlying rationale being that new releases of COTS are much more documented than custom applications: identifying the part of the code that is responsible for a bug is therefore easier and is likely to be in the custom code of the COTS.

Chatbots: testing response validity

The use of chatbots/virtual agents challenges the traditional functional testing model, which largely relies on a process, and on executing a test case (e.g. a user tries to login to a website), and to make sure the transaction outcome is valid (e.g. user is indeed logged in). With chatbots, the goal is not so much about process testing, but lies in response testing, for example:

• Interpreting questions correctly
• Dealing with the wide range of expression options end-users have for the same idea
• Selecting the most appropriate response from a high number of potential responses.

Of course, as with any ML, this requires multiple iterations with SMEs for the virtual agent to learn, in addition to using language libraries; this is a work in progress with early PoCs with clients.

Blockchain: integration complexity & business rules testing

The complexities with blockchain are different from those with chatbot testing. With blockchain, as with IoT, the complexity lies in its principles: a decentralized architecture, and many parties/items involved. IVS is assessing how to conduct testing around authentication and security, communication across nodes, also making sure transactions are processed and replicated across nodes.

Looking ahead, there will be a challenge with functional testing, in testing the underlying business logic/ rules, while also complying with different local business regulations, and languages. IVS is developing approaches to validate these contracts and is in early phase of PoC with clients.

Conclusion: the challenge is to automate testing of complex software at scale

The challenge of testing chatbots and blockchain, also IoT, and physical robots, is not so much about effective functional and non-functional testing but about moving the testing of such technologies to an industrial level, using automation software that only exists partially today.

The good news is that the ecosystem of testing start-ups is vibrant, and larger software testing services providers like Infosys are investing now in preparation for the surge in adoption of such technologies. 

In this blog, I look at Capgemini’s Blockchain initiatives and what segments they are focusing on for further development with their financial services clients.

Initially, Blockchain engagements were focused on: 

• Using POCs to develop an understanding of the capabilities and limitations of distributed ledger technology (DLT)
• Developing business use cases, trying POCs to determine if there is an effective business application of the technology
• Conducting due diligence on vendors to understand the supplier ecosystem.  

Recently, financial institutions have been narrowing the range of use cases and vendors they are willing to consider. They are looking to drive forward one or more use cases to full production, and their focus with Blockchain services vendors is to develop a selective roadmap for operational deployment of a few high priority engagements.

Capgemini’s Blockchain services & use cases

Capgemini has been pursuing Blockchain for two and a half years, and it has a group of 25+ engineers working on Blockchain initiatives, with seven engagements currently in play. Capgemini’s Blockchain practice believes successful initiatives require a combination of business domain and technology expertise, and it focuses on five areas:

• Technology expertise: especially DLT, cybersecurity, communications, and data management
• Domain expertise:
  • Structured finance: trade finance and factoring, non-listed, non-codified bilateral agreements
  • Payments: real-time international payments transactions, including compensation, settlement, and reporting
  • Capital markets: Post Trade Automation (including optimized Collateral operations), Syndicated & Commercial Lending, and Non-Listed Securities
  • Insurance and reinsurance: focused on European companies for smart contract management 
  • Digital identity: security and personal identity for access to the DLT
• Program management: DLT projects are complex and agile, with the client and vendor are working together on the project  
• Alliance partners: cloud providers, and product vendors. Capgemini participates on industry panels, especially on Hyperledger Fabric, to create and support roadmap development
• Partner on business: platform-based operations delivery. Creation and governance of the utility that will provide service to the clients.

Currently, Capgemini works with four key technology stacks:

• Symbiont
• Hyperledger
• R3 Corda
• Ripple.

Capgemini believes it is differentiating to understand the current state environment within a given client (both business processes and technology processes). Further, that understanding is required to be able to effectively reimagine processes using any advanced technology, especially Blockchain.  

Ultimately, Capgemini wants to act as a universal integrator, partnering with technology providers to support clients redesigning their business with Blockchain centric services that also leverage complementary capabilities like AI or machine learning. Capgemini is aiming to serve as the Transformation Partner for their clients, where Distributed Ledger Technology is the transaction framework to deploy next generation, collaborative operating models. Working with key partners, they will continue to evolve core technical competencies in Blockchain to its clients, such as:

• Blockchain as-a-service
• Security as-a-service
• Identity management as-a-service.  

Conclusions

To date, most Blockchain services vendors have been:

• Delivering POC engagements to clients as clients work to identify opportunities to use Blockchain technologies, or…
• Building Blockchain POCs for utilities they might productize for clients.

Capgemini is pursuing a third path of building on its extensive work with client legacy systems, and coupling that domain knowledge of the client with its own ability to coordinate multiple technology vendors to create faster, more effective business restructuring around Blockchain capabilities.

Ultimately, as Blockchain technology matures, Capgemini will transition to providing Blockchain infrastructure services focused on security and technology platform outsourcing. While the technology is still at a very early stage, adoption is increasingly looking to be done primarily by tier-one institutions. The technology will mature rapidly, and infrastructure providers will be harvesting most of the revenues being created for vendors in Blockchain.  

Most Blockchain use cases have focused on reducing the need for (and cost of) infrastructure. And in Virtusa’s case, the vendor has focused on engagements where it can combine Blockchain technology with other emerging technologies such as QR codes, IoT, and encryption algorithms to deliver enhanced security and cost savings for environments lacking adequate supporting infrastructure. Here I take a look at Virtusa’s Blockchain initiatives.

Virtusa’s Blockchain services & use cases

Virtusa has been pursuing Blockchain for 3 years, and it has a group of 20+ engineers working on Blockchain initiatives, with 35 additional engineers in training in Hyderabad, who will be fully deployed by Q4 2017. Virtusa provides consulting and pilot services including:

• Strategy and design:
  • workshops for awareness and adoption
  • Use case creation and validation
  • Advisory on technology and vendors
  • Research on 400+ Blockchain startups  
• Sandbox:
  • Cloud-hosted experimentation
  • ~7 Blockchain variants, including: R3 Corda, Etherium, Multichain, Chain.com, Hyperledger, Quorum, and VP Blockchain
  • APIs to key platforms (primarily CRM and ERP)
  • Testing capabilities with very large datasets
• Accelerators:
  • 100+ pre-compiled use cases across multiple industries
  • Solution accelerators (listed financial industry only): payments, credit monitoring, check fraud, trade finance, OTC derivatives, interest rate swaps, and covenant management
• Advanced: 
  • Security (keyless cryptography, and homomorphic & format-preserving encryption)
  • Industry steering council participation in ISO TC-307 Blockchain and distributed ledger technology

To date, Virtusa has worked on ~100 use cases with clients, of which ~50 have been moved into pilots and remain active engagements. Of the active use cases, ~40 are in the financial services industry. Currently, Virtusa is working on three key use cases to develop them into operational deployments. The top three business patterns that establish strong use cases are:

• Provenance: check books or other financial instruments can be validated as authentic from a chain of ownership. Example: use of QR code on checks for retail bank customers to reduce check fraud
• Chain of custody: KYC, AML checks on transactions moving through an ecosystem. Example: rather than conduct comprehensive KYC/AML checks, as updates are required, banks can conduct KYC/AML checks from the last verified point in the Blockchain  
• Permission-based sharing of information: third parties can now share information securely based on homomorphic encryption (low cost) and format preserving encryption (used extensively today in the cards processing business) and benefit from the blockchain enforcement of rules to remove the need for a trusted third party. Example: use of IoT to log usage of farm equipment leased to multiple parties. 

Virtusa is moving all three of these use cases into production with its clients over the next ten months. It believes that its most differentiated offering is the permission-based sharing of information, due to its access to very low-cost, strong encryption technology. All three of these engagements are based in APAC/Middle East markets. Deployment of operational Blockchain environments in the mature markets of the U.S. and Europe are less likely in the short run due to strong existing infrastructure and the need to establish industry standards. However, changes in the mature markets, such as Brexit in Europe, and the recent announcement of support in production e.g.  Hyperledger fabric version 1 are likely to drive adoption because those changes will either require costly new infrastructure or a group of partners sharing a Blockchain environment.   

Conclusions

The case for Blockchain operations is developing fastest where institutions operate with little infrastructure (physical or institutional) and services vendors can combine multiple technologies beyond Blockchain itself, to deliver the functionality of a mature marketplace without the industry-wide investment required to create a mature marketplace. This favors business cases where banks operate in an emerging market or where a new bank product is getting deployed which does not have competitors in the market today.

By developing a set of use cases for Blockchain in banking, Virtusa can support clients who differentiate themselves by unique product offerings. Virtusa can help those clients reduce their time to market, which will provide the longest time in market with a product which has no close competitive offerings. By adapting the mix of technology products it combines with Blockchain technologies, Virtusa will also benefit from time in market with few or no close competitive service offerings.   

Many Blockchain services vendors have observed that up to 75% of proofs of concept for Blockchain fail to meet their goals. Analysis of drivers for such widespread failure indicates that the initial use case was flawed because it was constructed to justify experimentation rather than solve business challenges. However, TCS has focused its Blockchain efforts on developing uses cases that can drive successful adoption and, more importantly, define the ecosystem for successfully meeting a use case’s key performance criteria. In this latest blog on current Blockchain activities in the financial services industry, I look at TCS’ approach to Blockchain in banking.

TCS’ Blockchain initiatives

TCS has been pursuing Blockchain for 3 years, and it has a group of 100+ engineers working on Blockchain initiatives across all industries. In banking, TCS’ Blockchain group is based in Chennai. TCS’ primary goal is to develop effective Blockchain use cases for the banking industry, and to date has successfully developed 150+ uses cases across all industries.

The use cases for banks segment into key areas of interest for banks:

• Trade settlement (securities, FX, payments, etc.)
• KYC/AML
• Trade services (import/export). 

The largest demand for Blockchain services so far is for KYC/AML services. The key drivers for these areas of interest are processes where one of the following conditions apply:

• Process requires frequent document re-verification: KYC requires re-verification periodically, and for each new product sale. Trade finance requires re-verification as the documents pass along a chain of activities, with multiple counterparties
• Timelines and chain of activities must be attested: dispute resolution in trade settlement and trade services requires the ability to trace back to the point in time where a discrepancy in the interpretation of activity occurred.

The processes are primarily from closed loop transactions.

TCS offers consulting, ITS, and process audit services for Blockchain activities. In financial services, TCS has blockchain initiatives in retail banking, investment banking, capital markets, commercial lending. While TCS has not completed the implementation of blockchain project in operations delivery, it has done several POCs for customers in payments, securities settlement, trade finance, "know your customer" and supply chain finance. It is currently involved in a live Blockchain operations environment for a large global bank for Blockchain support of payments), providing audit support for the project. This allows TCS to enhance its understanding of what works and doesn’t work in a Blockchain environment, of which there are few, and none of scale, at present.   

TCS works with major Blockchain technology vendors including Ericsson-Guardtime, IBM, Microsoft, and associations (e.g., MIT Media Lab Digital Currency Initiative) as well as through its COIN partners. It has a proprietary Blockchain solution, which it deploys as required in its POCs, but does not sell as a standalone solution.

Conclusions

Global financial institutions are heavily experimenting with Blockchain to understand how and where to use it in their business – or even better, how to use it to change their business model. However, our research shows 70% to 80% of Blockchain POCs fail to meet their initial business case. The biggest challenge in Blockchain is understanding what makes a good business case, and getting stakeholders to cooperate on adoption. The technology, despite its arcane and novel characteristics, is not the primary impediment to adoption.

TCS is focusing its Blockchain efforts on developing a granular understanding of how Blockchain works, and when it succeeds in a business environment. This approach will create efficiency in Blockchain adoption for financial institutions because they will waste less effort on “a solution in search of a problem” and spend more resources applying the right solution to business challenges. TCS is not there yet, but headed in the right direction.    

This is the second in a series of blogs on current activities, use cases, POCs, and pilots with Blockchain in the financial services industry. In this one, I look at some of what Wipro is doing to support banks and financial services companies in deploying Blockchain solutions.

Blockchain technology & services

Wipro has been active for the past three years in offering Blockchain consulting and development. During that time, it has worked primarily with Ethereum, and Hyperledger, to develop its Blockchain solutions. Wipro has decided to be agnostic about technology partners because of the rapid pace of development and innovations in Blockchain technology, but it does have partnerships for cloud-delivered services on Blockchain. Current partnerships for cloud-delivered Blockchain services include:

• IBM Bluemix
• Microsoft Azure DevTest Labs
• AWS.

In Blockchain, Wipro provides the following sets of services:

• Advisory: engagement with thought leaders and CXOs to ideate strategies, plan roadmaps, and build use cases
• Technology: building POCs, pilots and production solutions with clients
• Infrastructure:  BLaaS – Blockchain Lab-as- a-Service (which allows clients’ internal teams to experiment and co-develop with Blockchain technology).
• Blockchain network services : to build Blockchain networks

Use cases & POCs

Wipro has developed use cases and POCs across industries. In banking and financial services (excluding its insurance use cases), Wipro has focused its efforts on five critical use cases to date:

• Banking:
  • Skip trace
  • Cross-border payments
  • Trade Finance
• Capital markets:
  • Triparty collateral management
  • Delivery-versus-Payment (DVP)

Each of these use cases has active POCs deployed on Ethereum and Hyperledger. Blockchain POCs could potentially use additional technologies. For example, skip trace could be deployed in concert with Wipro HOLMES Artificial Intelligence Platform, to engage predictive analytics on where the skipped person may have gone to.

Business executives at clients are the primary buyers of Blockchain engagements. They are concerned with POCs which provide flexibility, quick deployment, and scalability. To facilitate achieving these goals, Wipro has been engaged in the following initiatives:

• Flexibility and Quick deployment: Wipro has been developing a set of use case frameworks to identify what works, including required technical tools, business cases, and product ecosystems. These frameworks of best practices codify learnings as well as challenges to rapid, effective deployment of Blockchain technology
• Scalability: Wipro has been a launch partner for the Enterprise Ethereum Foundation. In that capacity, Wipro has done extensive testing of scalability on various variants of Blockchain technology, including Ethereum and Hyperledger, which has provided it with the expertise to understand the possibilities and requirements for scaling a Blockchain solution for production grade enterprise level deployments.

Also, Wipro actively promotes and expands its Blockchain partnerships to broaden its capabilities in this rapidly developing ecosystem. 

Summary

The key to successful business use of Blockchain technology is the size of the network using the Blockchain. Network size is impacted by adoption, which is in turn impacted by cost incurred and potential value received. Successful technology services vendors must work on building that ecosystem with their clients for it to be successful. Technology services vendors will be able to have the biggest impact on cost reduction by reducing the ideation and buildout costs. However, insight into how technology interacts with business operations will provide precision into how value will be delivered. Value delivered is even more compelling for prospective network participants than cost issues in their decision process.

It will take several years for large-scale adoption of successful Blockchain ecosystems to be operational. The primary driver of successful adoption will be the development of large, effective ecosystems of participants. Technology services vendors have a large part to play in identifying a realistic roadmap and support the realization of that journey. 

This is the first in an occasional series of blog articles over the next year on Blockchain initiatives related to the financial services industry. Blockchain is an emerging technology for which there are no current operational deployments, with initiatives still primarily at the consulting and design stage. Pilots have been deployed, but are relatively rare despite the rapid growth in experimentation and POC trials.

This article focuses on Genpact’s Blockchain initiatives, leveraging its extensive F&A operations experience to develop Blockchain capabilities that can improve financial outcomes, customer experience and operations costs. Genpact has decided to focus on order-to-cash (O2C) processing to begin with because it has the following characteristics:

• Multi-party process, where coordination across parties for technology and process structure is currently lacking or customized on a bi-lateral basis, not on a universal basis
• Lack of consistent data structure and data management frameworks between parties
• Need to drive customer experience by providing operational transparency
• Impact of the process on financial metrics like cash flow and bottom line profits for a company.

Genpact believes any successful solution for O2C will have:

• Blockchain: distributed ledger, which will require counterparties to adopt a common taxonomy and technology platform. To encourage common adoption, it is necessary to minimize the cost and complexity of deployment and maintenance 
• Smart contracts: computer protocols that get triggered based on specific events and are programmed to execute a sequence of actions. Smart contracts aim to provide security and to reduce transaction costs through automation.

Genpact has started developing the solution for the manufacturing industry, given its experience and client base within this industry. The manufacturing industry is looking to reduce the high costs of O2C processing. Even with a focus on reduced costs for superior performance, adoption challenges would have to be addressed until use of Blockchain becomes industry standard. Successful adoption requires both the buyer (manufacturer) and the vendor (supplier) to adopt a Blockchain platform. To facilitate adoption, Genpact’s approach is to segment the client’s customers to identify the few large customers who would be more willing to adopt this transformative solution given its benefits, and for whom this will deliver a significant percentage of the overall benefits.

Banks’ involvement in the payments part of the O2C cycle would automate the end-to-end process value chain. However, adoption by the banks should be easier, due to high levels of bank interest in Blockchain initiatives. Banks will benefit from improved customer experience in their payments service, and reduced risk from disputed payments.

Genpact is developing the solution on the Hyperledger Blockchain platform, an open source collaboration hosted by the Linux Foundation. Design work is done primarily at client sites in collaboration with client teams, with solution development done by Genpact teams in Palo Alto, CA and Bangalore, India. Development teams work virtually with client teams when joint development takes place. Genpact is currently discussing and working with multiple clients who want to be early adopters to develop different POCs.

Blockchain adoption is growing very rapidly for business case development and POC trials. Full operational deployment remains a future aspiration for all vendors of this technology and supporting services. Domain expertise and opportunity prioritization are critical to getting Blockchain initiatives off the ground. Genpact has developed a strategy to go after a highly focused target market with a high value proposition for its Blockchain initiatives. Next, it will need to convert early experiments into compelling operational business cases to drive adoption and a successful business.