After much hype, it has been quieter around blockchain in recent years. Expectations were high — did the technology fail to fulfill them? Where and how is blockchain being applied by now? Blockchain experts from SAP offer answers.
“At a very early point in time, people were already surrounding blockchain with a sort of blaze of glory,” says Torsten Zube, former head of SAP Innovation Center Network and current head of SAP Cloud Platform Business Services.
“The technology’s decentralized approach allows for any number of equal partners to use the information stored in the network as a digital single source of truth – there was a strong appeal to that vision. To some, this promised to become the actual digital revolution everyone had been waiting for. Obviously, the technology couldn’t satisfy such inflated expectations.”
Bitcoin in particular fired up the hype around blockchain. Beginning in 2009, the cryptocurrency promised to revolutionize banking and the way we deal with money.
“Even then, it was evident that a lot of people who had jumped the bandwagon didn’t understand bitcoin, or the technology behind it,” Zube says. “They didn’t differentiate between the two them.”
Just a few years before the blockchain hype started, SAP had launched the SAP Innovation Center Network as a sort of research and development laboratory for the software giant. The network was designed to identify early trends in technology and evaluate their potential for use in enterprise software. Blockchain first appeared on the radar in 2016.
Many assumptions about blockchain have been put into perspective by now, but the most important pain point that the technology promised to resolve – the lack of a single source of reliable data – still exists.
“It’s such an effort for companies to connect their own systems to each other and exchange and harmonize always the same data,” Zube says.
“In part, enterprise software depicts business processes that stem from the 19th century, including sometimes 10 or more partners,” he explains. “Data is being transferred from one system to another when in theory, it could be parked one time for good on the blockchain with no need for further validation or integration. At that time, this still seemed a realistic option.”
In spite of, or perhaps because of the hype, many at SAP were at first skeptical about the technology. “Within SAP, we had to do a lot of persuading: Why and in which cases should we invest in blockchain? How is it working and what is the benefit for companies?” Zube shares.
In the meantime, the hype around blockchain continued to grow. As a result, SAP customers were requesting the new technology. “This helped a great deal to position blockchain within SAP,” he says.
In October 2017, a dedicated blockchain team was founded at the SAP Innovation Center location in Potsdam. Thomas Uhde heads the team. He recalls: “From the start, we were working with actual customers on actual business problems. This enabled us to assess what the technology can do, despite the hype around it.”
This also meant collecting experience about when blockchain is the right technological solution to a problem – and when it isn’t. According to Zube, “We had to communicate within SAP and to our customers time and again: Blockchain is not always the right fit.”
A first milestone was achieved in 2017, when the city of Bolzano in South Tyrol, supported by SAP, started using blockchain for its digital municipal administration. “This project combined the most important benefits that blockchain promised at the time: simplification of processes, reduction of efforts, and improved data security,” Uhde explains.
However, success stories such as this one were not as frequent as blockchain promoters would have liked. Increasingly, it was understood in and outside of SAP that blockchain was not a magic wand to simplify cross-system data exchange overnight. It was going to take a long time before the technology was widely adopted. The pedestal that some in IT had put blockchain on started to crumble.
Toward the end of 2018 blockchain entered the next phase in the Gartner hype cycle for emerging technologies. From the peak of inflated expectations things sank into the trough of disillusionment — there was even talk of a “blockchain winter.”
“It was clear from the beginning that blockchain, just like any other trend, was sooner or later going to lose steam,” Zube says. “We weren’t fazed by this, however.” SAP had just launched Blockchain as a Service via SAP Cloud Platform. For the first time, SAP customers are able to use blockchain technology as a module in their solutions without having to start from scratch.
“We knew that those who really got blockchain would hold on to it,” Zube says. “Exactly because the hype around the technology subsided, we were looking toward 2019 with great optimism. The blockchain winter would come, and it would be good.”