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IDC says supply chain 'killer' among blockchain use cases

Blockchain is gaining ground in the supply chain and financial services, according to IDC, and other third-platform technologies are enabling the digitization of the economy.

BOSTON -- After more than enough hype, blockchain use cases are lately becoming more numerous and real.

In fact, improving supply chain processes will be the "killer" among blockchain use cases, according to Bill Fearnley, IDC research director of worldwide blockchain strategies, who spoke at the IDC Directions 2018 conference held here.

"I get asked often 'What are the killer [blockchain] use cases?' and [supply chain] is it," Fearnley said. Blockchain ledgers can help improve the supply chain in three ways: shipment track and trace, inventory management and proving a product is genuine.

"Increasingly consumers and manufacturers are getting more concerned and more aware of country of origin," Fearnley said. "For example, you're trying to make sure that you're not getting conflict minerals -- you want to make sure that the country of origin is the right place to be buying products from, that it's not in a war zone or from a criminal element."

Other blockchain use cases are found in financial services, manufacturing and distribution and government services, Fearnley said.

A foundation for digital trust

"Blockchain is the new foundation for digital trust which drives digital transformation and business transformation at scale," he said. "This changes security and trust both between companies -- suppliers, distributers, retailers--– and also between you and end-user customers and consumers."

I get asked often 'What are the killer [blockchain] use cases?' and [supply chain] is it.
Bill Fearnleyresearch director, IDC

Improved data security is the primary reason blockchain can reach killer application status, particularly for supply chain and financial services, Fearnley explained. Records are created in a ledger that's secured with advanced cryptography, and all the records are linked, so they are immutably chained in theory. The records are sequential and the ledger gets longer as more records are added, making it more secure the longer it gets.

"The immutability of the blockchain record makes this a very attractive solution for some of the most data secure organizations in the world, including supply chains, financial services, [healthcare] and governments," Fearnley said.

This image describes the five steps behind blockchain technology.
How does blockchain work?

Safer sharing of information

This security allows companies to have trusted records that they can use internally and extend externally. For example, an international company could share information among its operating divisions across borders, or manufacturing could share information with sales and marketing. They can then extend that ledger to partners or regulators.

The growth of blockchain has occurred rapidly in the last few years, Fearnley said.

"In 2016, most of the conversation was 'What is this, what is blockchain, what is distributed ledger, smart contracts?'" he said. "The tone and timbre of the conversation changed in 2017 to 'Why should we care?' and by 2018 we're hearing more questions about 'How are we going to do this?'"

This growth in blockchain use cases will continue: IDC estimates that worldwide blockchain spending will amount to $10 billion by 2021. The spending will be distributed fairly evenly throughout industries, as IDC estimates that 35% will occur in financial services, 25% in distribution and services, 20% in manufacturing and resources and 10% in public sector.

Second chapter of the third platform has begun

Blockchain is just one of the third-platform technologies that are enabling the digital transformation of the economy, according to Frank Gens, IDC senior vice president and chief analyst, who delivered IDC Directions 2018's opening general session.

The third-platform story is entering its second chapter, Gens said, which incorporates three broad themes: the digitizing economy, enterprises striving to become natively digital and the restructuring of the IT industry to meet this digitizing demand.

Gens said we are in the middle of a broad story of the adoption of third-platform technologies that started about a decade ago with cloud and mobile, and now includes AI, internet of things, augmented reality, machine learning, 3D printing and blockchain.

"By 2018, about two-thirds of all of our technology spending ... is on third-platform technologies, and by 2021 it will be 80%, so this battle is over and the third platform has won," he said. "The other part of the story is not about the technology but what businesses are doing with the technology. They're putting them together and using them within new business models and new innovation models to create digital transformation, and as all these bubble from the companies, it has a bigger and bigger impact on the global economy."

Digitized offerings will continue to grow

IDC estimates that by 2021, at least half of the global economy will be impacted by digitized offerings, operations and relationships, with related spending growing at about 18% per year, from $1.3 trillion today to $2.1 trillion.

Gens said that the first chapter of the third platform was the era of experimentation -- developing new applications and solutions and reconfiguring old ones. However, this was done in a traditional company-centric model. The second chapter is all about an era of "multiplied innovation," where companies are not just innovating by themselves.

"They are using platforms, communities and ecosystems with lots of other smart people out here in the world, and saying, 'How can I connect with and use all that innovation that's out there to accelerate the rate at which I can innovate and scale up the amount of innovation that I can bring to the market?'" Gens said. "Companies may be using third-platform technologies, but if they are not using these multiplied innovation approaches with lots of other people, you are going to be isolated and not able to compete."

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