IBM is Putting its Chips on Blockchain: With Over 500 DLT Projects, is it Worth the Gamble?


Experts and professional watchers of the industry say it's an incredible gamble, especially considering that, as a piece of technology, it's one with very few practical use cases attached to it and will a great deal of hype surrounding it. But despite these concerns, IBM is in a position to defy these same individuals and make it pay off.

For those that are otherwise unfamiliar, the blockchain effectively operates as a shared digital ledger between users. Once it's entered, transactions become part of a long, immutable record, meaning that transactions cannot be changed under any circumstances. This technology is commonly associated with cryptocurrencies, especially to the average person, but there are a number of companies that have since put it to work.

These companies include Microsoft (MSFT), American Express (AXP), and JPMorgan Chase (JPM), the latter of which utilizes the Ethereum blockchain for its own ‘Quorum‘ system.

Currently, IBM has more than 1,500 employees working on over 500 separate blockchain projects in a wide range of industries to assess its viability and use, these include industries like shipping, banking, healthcare, and food hygeine. In the past, it has forged partnerships with organizations such as Columbia University in order to develop more uses for blockchain technology.

Industry watchers say it's a risky move, given the relative novelty of the technology and the hype surrounding it, but say IBM is well positioned to make it pay off.

It represents a truly bold strategy, but it isn't exactly out of character for IBM, which is often one of the first to embrace innovative new ideas and technology, according to Josh Olson, who works as an analyst for Edward Jones. While IBM is an early leader in the space, it also began rolling out commercial applications, for example, its work with Walmart to improve food tracking, two years ago, but he has said that this doesn't ensure long-term success.

“Historically we've seen IBM invest in a technology early with some early promise, but then they've had difficulty commercializing good technologies or innovations at scale,” Olson said.

Through the company's research, IBM demonstrated that there are three key areas where blockchain could be highly valuable, these include financial services, healthcare and shipping. Thus far, IBM has been placing the greatest amount of focus and emphasis on the financial sector.

And while IBM has been open to the application of blockchain technology on a more broad scope, it is under no allusion that technology isn't some kind of panacea for various industries. But blockchain is best used to turn a once paper-based tracking system into a digital one with great effect, while improving efficiency, and allows for the sharing of data across other industries.

For example, the company, LedgerConnect, brings financial tech companies and banks together to mutually share blockchain technology and improve their daily back-end operations.

The system, called TradeLens, seeks to improve shipping by reducing the level of paperwork, and the documentation errors that often accompany this system. This is where there have already been a great many practical use cases, with more than 150 million transactions being successfully logged on its blockchain. At this moment in time, more than 4,000 shipping containers are already being tracked, with every intention of adding more.

IBM's own Insurance Data Link allows for insurance carries to upload their data directly onto a blockchain platform to demonstrate that they are in compliance with state regulations. This provides another way in which technology is allowing a whole segment of burdensome paperwork to be removed, all while efficiency and security.

Another example of this is Humanity.co, which lets people use blockchain technology to keep track of the accessibility of their personal data.

Now, research is all well and good, but the true challenge lies in finding commercial applications. Olsen in his previous writing, refers to IBM's pioneering work related to artificial intelligence and the development behind the supercomputer, Watson, which is an example of this. The underlying technology underpinning Watson's capabilities proved highly costly and difficult to adopt on a commercial level, this provided IBM's rivals with a way to catch up to, then surpass them.

Since then, the company has announced that it has learned from this mistake.

“Watson's [ambitions are] very complex and difficult,” said Bridget van Kralingen, SVP of IBM's industry platforms group, noting how the supercomputer is working to find solutions to complicated issues, including a cure for cancer.

“I would argue blockchain is much easier because it's a process flow. … We learned a big lesson in implementing new technology: Ease of use has become a very important part of adoption.”

One other thing that has helped is that IBM has been listening to the marketplace, and working with customers in order to determine what they need in terms of technology, argues Marie Wieck, the general manager of IBM Blockchain.

“We didn't start with a big bang,” Wieck stated. “We found [blockchain] had real applicability but not just as an extension of our existing products. We had to create something new, so we started experimenting and doing some customer pilots, and we saw there was enough interest to move forward.”

These responses to customer demands and needs is a crucial step, but it's also important to keep looking ahead, this is according to Catherine Tucker, who works as a professor at MIT's Sloan School of Management.

“I think the biggest risk for IBM is a failure to innovate,” Tucker said. “In their position it is very easy to be trapped by the needs of the customers they are currently serving rather than future needs.”

Before IBM can claim any kind of victory in this endeavor, Olsen identifies two challenges to success. The first being that it needs to find customers who understand the technology and can actually benefit in applying it. Along with this, it must create a standardized system that can scale effectively across industries. As an example of this was IBM's work with its Hyper Ledger, a forum where companies from multiple industries can work together to develop blockchain technologies, as a step in the right directions.

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