Remember eMarketplaces (also called Supplier Networks)? They were networks of suppliers and buyers where the goal was to make information sharing easier by standardizing and consolidating platforms, products, prices and policies. In many cases, clients got in “free,” but they still had to pay for some integration cost. Suppliers had to pay to be part of each network, and most clients each used different ones, making it expensive and complicated to decide which networks to join.
As a buyer, you could try to insist suppliers join your preferred network, as long as you were a big enough client, or if you were willing to pay the supplier’s connection costs. As a supplier, you had to decide which networks were important to belong to, either because a lot of clients used them, they catered to specific industries, or offered some other unique benefit.
These supplier networks were a great idea, but the practicalities of connecting everyone was a big headache, and very few of these eMarketplaces survived. Many of those that did survive were bolted on to procurement apps. Without a way to make the networks talk to each other and give trading partners, on different networks, a way to work together, eMarketplaces achieved some limited value for customers, but ultimately failed to deliver the game-changing impact they envisioned with these “super networks” that never quite materialized.
In the example above, go back and replace the word “eMarketplace” with “blockchain.” Minus some of details, it’s pretty much the same problem we’re all about to face today, as companies struggle to understand where, why, and how they can get the most value from blockchain implementations.
When we researched blockchain this past summer, we found that almost all POCs and client examples were focused on internal operations – transferring funds across business units in a bank, for example. Yet, the foundation of blockchain is creating exponential value from a collaborative and engaged peer-to-peer network.
Everyone’s experimenting, and there are a lot of technologies and validation/authentication options being used and explored. There are also no standards at the moment, so everything’s getting siloed into one-off projects. Are you starting to see where the eMarketplace experience gets echoed?
Let’s say you’ve chosen the blockchain technology, as well as an authentication approach with which you are happy, that work for your needs. Now you want to expand your execution of blockchain to connect with partners.
Your partners likely made different choices They may have stricter authentication approaches than you use. And each trading partner’s blockchain implementation is different than everyone else’s, so you need to connect to each one using a separate connector, or you choose to get onto their blockchain. And then you have the initial cost of integration, plus compute costs. And blockchain often isn’t efficient with compute power, so connecting to multiple systems is more expensive that way than you might initially think.
And, of course, the market’s so new that we also don’t know how much cement we’re pouring when we build blockchains. We do know, for example, that no transaction or other data in the blockchain can get erased. Once it’s there, it’s there forever. But, what if we decide to switch to another network or technology? We don’t know the costs of switching from one network to another if we have a lot of data sitting in the blockchain.
In our blockchain guide for BFSI, we recommended that you start talking to trading partners, because the real value comes from using blockchains outside the walls of your company. And this issue of linking networks makes that recommendation all the more important.
Bottom-line: Make sure you fully understand the broader network of partners impacted by your blockchain options
Here are some questions to start asking trading partners (and yourself, if you haven’t already):
- What validation/authentication approaches are you considering?
- Which blockchain technologies do you like and why?
- What criteria do you want to use to approve new members to join a network?
- Who pays, if someone wants to join the network? What if we want them to join? Will we pay only for integration costs or other longer-term costs like the compute power needed to process blocks?
If you have thoughts on this, or know of companies who are already working on the interoperability problem, tell us. We’re always looking to talk to more people about what’s going on in the space.