Firms turn away from blockchain as it 'lacks practical application'

15 May 2019

Organisations are unwilling to invest in blockchain technology as it "lacks practical application", according to procurement professionals.

Speaking at the Supply Management Forum in London last week, a group of leaders in procurement discussed blockchain and how it is not being used often in their organisations as they are waiting for the value in blockchain adoption to be proven.

Richard Harding, global purchasing transformation director at Jaguar Land Rover Global, said: “I am yet to see a blockchain use case that means I’m going to invest my time into it.”

There are two value benefits Jaguar Land Rover Global use to make decisions on investments into technology, according to Harding: “One is cost savings, and one is capacity liberation: 'How much full-time equivalents in time have you saved by introducing this automation to free up the time of people that should be paid to deliver the value-added strategics?'”

This chimes with Gartner's report on 2019 Predictions on the future of supply chain operations, which found that 90% of blockchain-based supply chain projects will suffer from "blockchain fatigue", by 2023, due to lack of strong use cases.

Stefanie Seff, strategic leader of procurement at Thurrock Council, told the forum: “I can see the benefit but nobody has been able to demonstrate anything and we’re not spending any money on something until its proven.”

Robert Wren, procurement consultant at Robert J Wren Consulting, agreed. “Blockchain is a wonderful theory, but it’s lacking practical application.”

Gartner's survey results of user wants and needs showed that only 9% of respondents have invested in the technology and only 19% ranked it as a “very important technology for their business”.

Alex Pradhan, senior principal research analyst at Gartner, said: “Without a vibrant market for commercial blockchain applications, the majority of companies do not know how to evaluate, assess and benchmark solutions, especially as the market landscape rapidly evolves.

“Furthermore, current creations offered by solution providers are complicated hybrids of conventional blockchain technologies. This adds more complexity and confusion, making it that much harder for companies to identify appropriate supply chain use cases.”

Most blockchain projects remain in the pilot stages and fail to become successful use-cases due to technology immaturity, lack of standards, overly-ambitious scope and a misunderstanding of the benefit blockchain can bring to supply chains, said Pradhan.

Gartner recommended organisations draw a “clear distinction between hype and the core capability of blockchain” before deciding to adopt the technology into a business.

The focus should be on proof of concept, experimentation, and limited areas of operations that deliver lessons, rather than using the technology on a high-risk, vital component of the business, said Pradhan.

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