Research firm Gartner, whose past evaluations of blockchain have been conservative to say the least, expects the distributed ledger technology to transform the ways businesses operate in most industries within five to 10 years.
Right now, however, blockchain for most industries remains mired between inflated industry expectations and general disillusionment with regard to how it can improve business processes, according Gartner's latest "Hype Cycle" report.
The report was released at the firm's annual IT Symposium/Xpo 2019 conference, which took place this week. At the conference, CIOs were surveyed about how they perceive blockchain technology.
"Even though they are still uncertain of the impact blockchain will have on their businesses, 60 per cent of CIOs in the Gartner 2019 CIO Agenda Survey said that they expected some level of adoption of blockchain technologies in the next three years," David Furlonger, a Gartner distinguished research vice president, said in a statement.
"However, the existing digital infrastructure of organisations and the lack of clear blockchain governance are limiting CIOs from getting full value with blockchain."
Gartner's annual survey of CIOs was conducted from April through June and had 3,102 respondents from 89 countries and across major industries, including manufacturing, government, professional services, banking, energy/utilities, education, insurance, retail, healthcare, transportation, communications and media.
Last year, a Gartner CIO survey revealed on average that only 3.3 per cent of companies worldwide had actually deployed blockchain in a production environment.
In a blog post at that time, Gartner distinguished research vice president Avivah Litan listed eight hurdles needed for the technology to meet the goals stated by tech providers hawking it as a cure-all for virtually any international, transactional network need – from fee-less, cross-border payments to supply chain tracking.
Those hurdles included technically scalable blockchains, advances in smart contract technology, transaction risk assurance, data confidentiality, and an efficient consensus algorithm.
Blockchains require a consensus among users before new data can be saved to the immutable ledger; most often, at least 51 per cent of computer nodes validating ledger entries must agree before new blocks can be added.
In the latest Gartner research data, banking and investment services industries continued to see high levels of interest from innovators looking to improve decades-old operations and processes. But only 7.6 per cent of respondents to the CIO Survey suggested that blockchain is a game-changing technology.
That said, nearly 18 per cent of banking and investment services CIOs said they have adopted or will adopt some form of blockchain technology within the next 12 months, and nearly another 15 per cent plan to do so within two years.
Blockchain proofs of concept or pilots are showing up in several key areas in banking and investments services, "primarily focused on permissioned ledgers," Furlonger said. That refers to centrally-controlled blockchain networks whose participants are previously vetted before being allowed to participate.
"We also expect continued developments in the creation and acceptance of digital tokens," Furlonger continued. "However, considerable work needs to be completed in non-technology-related activities such as standards, regulatory frameworks and organization structures for blockchain capabilities to reach the Plateau of Productivity – the point at which mainstream adoption takes off, in this industry."
Gartner gauges the maturation of new technology through its "Hype Cycle," a graphic-based life-cycle that follows five phases: from the Technology Trigger, when proof-of-concept stories and media interest emerges, to the Plateau of Productivity, when mainstream adoption occurs - if the technology is more than niche.
Among those five Hype Cycles is the "Peak of Inflated Expectations" followed by the "Trough of Disillusionment," when interest wanes as pilots and fail to deliver and tech providers either work out the kinks and improve the technology, or ultimately fall short and die out.
In retail, blockchain is being considered for "track and trace" services, counterfeit prevention, inventory management and auditing – any of which could be used to improve product quality or food safety. For example, Walmart has adopted blockchain to track produce from farm to shelf.
While supply chains have value, the real impact of blockchain for retail will depend on supporting new ideas — such as using it to transform or augment loyalty programs, according to Gartner.
For example, through loyalty cards, retail businesses can offer customers digital currency such as bitcoin that can be exchanged for various other currencies, goods or services.
"Once it has been combined with the Internet of Things (IoT) and artificial intelligence (AI), blockchain has the potential to change retail business models forever, impacting both data and monetary flows and avoiding centralisation of market power," Gartner said.
As a result, Gartner believes that blockchain has the potential to transform business models across all industries — but the opportunities demand that enterprises adopt complete blockchain ecosystems. Without tokenisation and decentralisation, most industries will not see real business value.
The journey to create a multi-company blockchain consortium is inherently awkward, Garter said.
"Making wholesale changes to decades-old enterprise methodologies is hard to achieve in any situation. However, the transformative nature of blockchain works across multiple levels simultaneously (process, operating model, business strategy and industry structure), and depends on coordinated action across multiple companies."
In particular, Gartner recommends that CIOs:
- Continue to educate executives and senior leaders about the blockchain opportunities and challenges most critical for business
- Build thought leadership within IT and fight unwarranted vendor hype
- Expect different industry domains (upstream, midstream, downstream and marketing) and functional areas (such as commodity trading, international cash management, field supply chains and data integrity) to adopt blockchain on different timelines
- Continue to develop proofs of concept internally as well as part of market consortiums
- Expect complicated challenges as early solutions will likely be a mix of significant process redesign, agile solution development, multiple cloud integrations and a large number of integration points with legacy systems