Enterprises, don’t be too sanguine about blockchain: Gartner
By Edwin Yapp September 6, 2018
- Hype precedes reality as enterprises aren’t ready to adopt blockchain yet
- Predicts 2023 take off; proceed by experimenting, learning from experience
THE technology surrounding blockchain may have captured the world of cryptocurrency but the technology isn’t ready for prime time yet in the enterprise business world, according to Gartner.
Speaking to the media on Sept 4, Gartner research director Adrian Leow (pic, right) stressed that there is still quite a lot of hype surrounding blockchain use cases in enterprises and that though many of the large companies surveyed have indicated that they are piloting projects, very few have moved these projects towards production capabilities.
“We get the question, ‘Could you give me an example of a successful use case for blockchain?’, and the straight answer to that is a no,” Leow declared. “The only proven use case for blockchain currently is in [crypto] currency [usage] such as in initial coin offerings (ICOs).”
Leow argued that a lot of banks today, for example, are trying to find a way forward for using blockchain in their business but things are still very uncertain. He said surveys conducted by the research firm in Europe and the United States combined, indicated a very dismal outlook for blockchain for enterprise use cases.
“We spoke to 56 banks and all of them put up their hands when asked if they were interested in blockchain,” he said. “They also indicated that they had conducted proof of concepts (POCs), but when asked if they had deployed real life production to [customers], only one bank out of 56 indicated that it had.”
On top of this, Leow claimed that 99% of blockchain POCs tend to be dead ends – they never leave the innovation lab and they never move into production.
“If they do at all, they will be very limited in scale and even so, they will have to move it off the platforms they’re on within 18 months.”
Leow said this straw poll is backed by Gartner’s yearly chief information officer (CIO) survey, which queried 3,160 CIOs in eight countries. The poll concluded that while many enterprises are interested in blockchain, technology is still hyped-up amongst a majority of respondents.
“Based on our survey, enterprises are still at a very early stage in blockchain use,” he argued. “Only 1% of those surveyed indicated that they have already invested and deployed blockchain. And even then, I would argue that even fewer have actually deployed it.
“Eight per cent indicated that they’re in short-term planning or experimenting; 43% said that ‘it’s on the radar but no action plan’; and 34% said there is no interest in doing so.”
Asked why this is so, Leow argued that enterprise executives have misunderstandings or misconceptions about what blockchain can do.
“Enterprise executives need more help in understanding the applicability of blockchain in the business and technology context,” he claimed. “Also, the value proposition is very badly articulated around blockchain in the enterprise.”
Leow said some executives questioned – rightly so – why there is a need to use blockchain when other similar technologies can be used to get the job done.
“For example, there is talk suggesting that blockchain can replace database management systems (DBMS). But the truth is that in a DBMS, you need to create, read, update functionality. Blockchain can only do half of this; it’s an ‘append-only’ data structure; it can’t do deleting, complex queries, reports and analytics.
“You can’t do all that you can do with a DBMS.There is a lot of misunderstanding of what the technology can actually do,” he pointed out.
Leow also said that based on Gartner’s insights, 90% of enterprise blockchain projects today are centralised designs. Effectively, this means that these projects don't need blockchain technology to meet requirements.
Besides this misunderstanding, Leow noted that a lot of POCs are done with very limited scale and they’re being done in platforms that will need to be replaced in 18 months.
“Truth is the project can be done more quickly, at lower cost, with lower risk and better quality – by avoiding blockchain technology,” Leow argued.
Leow said Gartner believes it won’t be until 2023 before blockchain will begin to turn and take off. By that time, all the blockchain startups that have come into the market will taper down; some of them will not exist anymore while some of them will be bought up; and only those players which have lasted will actually come through.
“Through 2023, only 10% of enterprises will achieve any radical transformation with blockchain technologies,” Leow predicted.
Quizzed as to how companies should approach blockchain today, Leow advised against getting caught up with the technology but rather to set realistic expectations.
Executives need to understand that blockchain – the technology, regulatory and cooperative platforms and frameworks are all still nascent, Leow said.
“By all means experiment but don’t build the case on production-ready blockchains. Understand the decentralised nature of the technology and undertake POCs with a view to absorbing the concept.
“Think strategically and implement selective, narrow scope use cases for real deployment and prepare to migrate away from your deployed system because every platform technology will be obsolete in 18 to 24 months.
“Finally, look at blockchain, understand, it but don’t invest more than you’re willing to throw out and don’t think it will be production-ready today.”