Exclusives

Blockchain demand and usage is growing across multiple business sectors, but several challenges remain that are preventing the technology from being implemented at scale, according to Lata Varghese, Cognizant consulting head for blockchain and distributed ledger technologies.

There have been a lot of announcements about blockchain applications over the past 2.5-3 years, she said June 28 at a Berenberg Capital Markets “mini-conference” in New York called “Blockchain: From Hype to Reality.”

The banking and financial services industries are “furthest along” when it comes to blockchain implementation, while insurance and retail are “a bit behind” and other industries are “experimenting with the technology,” she said.

But enterprise blockchain implementation at scale is “not yet a reality” due to “multiple challenges,” according to Varghese.

Citing the findings of a survey of more than 1,500 participants from several companies that Cognizant conducted about a year ago, she said one “real challenge” cited was network formation. Fifty-six percent of respondents said working with partners and ecosystem members was a top roadblock, she said.

In comparison, 50% of respondents indicated evaluating the cost benefits of use cases was a top roadblock and 59% cited anticipated consolidation and interoperability between blockchains, she said.

But the issue cited the most – by 69% of respondents – was technology immaturity, with scalability and latency issues cited as a top roadblock.

“In our view, really, at-scale implementation” of blockchain “will happen in multiple, overlapping phases,” she went on to say. And it will have to be done for many years to “get it right,” she said.

The first phase will involve efficiency improvement and cost reduction, mostly targeting support and non-core business processes, according to Varghese. The second phase will be the implementation of blockchain technology into core business processes, placing businesses firmly on the path to “transformation,” she said. The third phase will be business transformation in which blockchain will be used to deliver previously unobtainable solutions and completely overhaul products and services provided to end customers, according to Varghese.

“We think blockchain could rewrite the rules of the market” and create “value chain disruption,” she said, predicting companies may start reorganizing to be ahead of the curve, with decentralization becoming a competitive advantage.

In Cognizant’s experience, however, blockchain is just one part of an overall solution in certain cases and support of a broader ecosystems of technologies and processes is needed, she said. For one thing, “you need systematic data collection with tooling and sensors,” she noted.

Kicking off the presentation, she said: “Very few business leaders will disagree that we live in a time of great change,” adding: “If you look at the previous waves of technology – social, mobile – some industries, like retail, communication and media, have probably been completely disrupted business model-wise. Other industries, like healthcare and insurance, have undergone digital transformation but probably” have been impacted less.

She called blockchain a “general-purpose” and “foundational” technology that “has the potential to completely transform industries.”

Blockchain technology has “evolved far beyond” its Bitcoin and banking origins, she said. It “took some time to evolve, but she said: “As the hype around crypto[currency] reached almost, if you will, a deafening roar, there was this other invention around smart contracts and Ethereum, which really opened up the possibility of this technology to industries beyond financial services. It really moved this technology’s potential out to a wide gamut of industries.”

Advantages of blockchain include the fact that it allows data to be shared privately and securely, without the risk of a third-party intermediary, according to Varghese. In addition, it allows real-time, up-to-date data from a consortium and allows entities to trust the source of the data, she said.

“You need to have multiple parties” for blockchain to be truly useful, she stressed. Other factors that must be determined before figuring out if blockchain is applicable to one’s specific needs include whether trust is indeed an issue when accepting data changes from another party, whether there is value in tracking the origin of data, and whether tamper-proof data is indeed valuable, she said.