As I was preparing this story about SAP’s research and work done in blockchain related technology I saw a visceral story from Phil Fersht about fake research. Fersht said:
This level of paper-thin “knowledge” in this industry has reached unbearable levels. So many people are just parroting each others’ “thought leadership” and claiming to have real depth and knowledge of complex domain areas such as RPA, Machine Learning, cognitive computing etc.
When we’ve reached the stage where “researchers” are not even bothering to disguise obvious plagiarism, I begin to despair about what’s coming next in this era of #fakenews. Shall we just call it #fakeresearch? Does anyone care anymore, or are we just living in a time of replicated content, fabricated expertise and recycled bullshit? We’re at the peak of this hype bubble and I will be delighted to see it burst very soon… this type of behaviour needs to disappear, or we won’t have much of an “industry” left in a few months…
Equally worrying, at least to SAP, has been the extent to which companies have bought into the hype around blockchain technologies. Regular readers will know that we have been highly skeptical about blockchain as the latest technology drug of choice for media and marketers.
Gil Perez, SAP Senior Vice President of Products & Innovations, Head of Digital Customer Initiatives is equally concerned., He showed me the results of two surveys SAP ran in April (250 customers) and September 2018 (350 customers.) The key question asked: ‘How do you view blockchain?’ with options to answer as follows:
- Great opportunity
- Slight opportunity
- A threat
Astonishingly, in the April survey, 92% see blockchain as either a great or slight opportunity but by September, that number had climbed to a staggering 99.5%. However, in the April survey, only 3% reported blockchain in production environments. Results of this kind are the stuff of dreams to marketers but as Perez said:
We have a situation we need to address. Right now blockchain is seen as the magic potion to solve every problem and I am very concerned about that. What we need to do and what we are doing is educating people that blockchain is not the answer to everything but that there are very specific use cases where blockchain makes sense. We are still early in the adoption phase, we have overhype and when you have overhype then we get called in. We have to bring customers back to reality because if we don’t then they end up disappointed and we end up with a black eye on the customer, SAP and on the technology.
84% said they’re active which could be holding discussions, researching, trying out POCs. That’s a very high number so we know people are getting their feet wet and undoubtedly some will be disappointed but the point here is that there is a very high level of activity from our perspective.
When we went back and asked about live or production, what we found was not what we constitute live or production but more some kind of internal POC but then some people see that as live.
Phew – was I glad to hear that reality check but it begs the question of whether buyers truly understand either the technology as an enabler or are simply making assumptions based on marketing. To that extent, I struggle to understand why IoT and supply chain (the number one use case cited by respondents) should be a good fit for blockchain since much of the impetus behind those activities is machine to machine anyway. So why would you need an ‘immutable ledger’ and especially in supply chains managed by channel masters?
Blockchain for DSCSA
Perez provides an example in pharmaceuticals where, in the U.S., the FDA mandated the Drug Supply Chain Security Act (DSCSA) in 2013. The TL;DR on this says:
Title II of DQSA, the Drug Supply Chain Security Act (DSCSA), outlines steps to build an electronic, interoperable system to identify and trace certain prescription drugs as they are distributed in the United States. This will enhance FDA’s ability to help protect consumers from exposure to drugs that may be counterfeit, stolen, contaminated, or otherwise harmful. The system will also improve detection and removal of potentially dangerous drugs from the drug supply chain to protect U.S. consumers.
Additionally, the DSCSA directs FDA to establish national licensure standards for wholesale distributors and third-party logistics providers, and requires these entities report licensure and other information to FDA annually.
In Europe, there was a similar, almost identical regulation funded out of a central authority for implementing the regulations. In the U.S. the FDA left it up to the pharma companies to figure out how this works. I’m told this is a common way for the U.S. to instantiate regulation. That’s a fundamental difference and created a situation where none of the pharma companies were willing to agree. Perez again:
In Europe, no problem, each of the companies had to pay, they created a central database managed by an NGO. In the U.S. they’ve been fighting over who would manage and run it and as competitors, they couldn’t. Blockchain was successful in this case as a proof of concept because in this case there was a way to overcome the trust issue. Each company has their own node where they have access to their own data but not their competitors although it is held in a central repository.
SAP undertook several pilot projects that center on ‘sellable returns’ where there needs to be a clear audit trail for narcotics that need to be returned for one reason or another. An example might be that a forklift truck flipped and a pallet was broken. The second pilot involved 15 providers and processed more than a billion transactions. The next step will be the launch of a product in Q1 2019 as an SAP managed, permission-based, private blockchain. How does this process start?
The birth certificate for a drug, is the creation of a serial number on a label for the bottle or package. All these companies use SAP’s Advanced Track and Trace for Pharmaceuticals. So what we did is right after the creation of the serial number, we’re writing to the blockchain. We give customers the option to run the blockchain node on their own or SAP’s blockchain platform.
Our first project was with Hyperledger but it was too expensive and it was too slow. For this second one we went with MultiChain which you can think of as less feature rich but much more efficient. It doesn’t have smart contracts or the bells and whistles of others. It is esnterprise ready and you can put a lot of trust in it because it’s been in production for more than 10 years. Other use cases may want to use other blockchains.
According to SAP, there are many such examples in the supply chain where companies want to cooperate but they don’t necessarily want to give up access to their data. And so from that standpoint, blockchain can be the gateway to digitization inside those supply chains where for instance manual transactions and reconciliations are common.
The question then comes – but which blockchain? Perez agrees that in this period of blockchain technology expansion, there will be many blockchains, some of which will emerge as ‘standards’ in much the same way as databases evolved. But for now, Perez believes the next three years will be what SAP calls ‘The permission blockchain era.’ For that reason, SAP has designed its blockchain services to operate independently of the blockchain technology choice or business preocesses in an effort to minimize rework as the blockchain market shakes out.
There are already efforts at interoperability but I’d say it is pretty nascent at the moment. In two or three years’ I think that companies who have built out their networks will see that connecting networks is going to drive a multiplier of impact and will look for interoperability. Five to seven years from now I believe we’ll have some standards. But today? It is early.
As we closed out our conversation, Perez mentioned projects running with the U.S. Customs and about introducing blockchain for audit. We could have a long conversation about the latter because, in my experience, the concept of audit as practiced by global firms is out of touch with what stakeholders believe. Even so, it will be interesting to see how blockchain ideas in this and other areas shake out.
It is refreshing to see a vendor taking a hard look at practical use cases and evaluating the quality of what people are saying to them in regards to a much-hyped technology. In that sense, it is good to see SAP offering pragmatic, practical examples that make the best use of available technology rather than settling on a single blockchain. Its recently formed blockchain cons0rtia for pharma, CPG and high tech take different approaches for different problems – that’s all to the good. More to the point, SAP is cognisant of the dangers of early adoption while also recognizing that this is a fast-moving market.
Image credit – SAP on YouTube
Disclosure – SAP is a premier partner and covered most of the author’s travel and expense for attending SAP TechEd Barcelona