Each week our analysts turn their eye to the procurement tech trends they are observing in the marketplace. This week we discuss the growing use of blockchain by solution providers.
Blockchain has been a buzzword in and out of the media for years now. For most of that time, it was the sole purview of cryptocurrencies and finance institutions. Recently, however, it has found a receptive audience in the procurement space. “Blockchain and DeFi bring significant opportunities to procurement, working capital and asset management,” states Jason Busch, CEO and founder of Spend Matters. “While adoption is nascent today (1H 2023), the potential is significant, and a second wave of start-ups is starting to hit the market which Spend Matters intends to follow closely.” That following closely took the form of a four-part series documenting why procurement teams should care about blockchain, its concrete use cases and how it may theoretically be used in the future.
That nascent adoption is proving a massive hurdle to the development of blockchain on a procurement-wide scale. For example, the beginning of 2023 saw the discontinuation of TradeLens, a blockchain platform that Maersk and IBM jointly launched in 2018 to digitally track global container shipping. Rotem Hershko, Head of Business Platforms at Maersk, explained in a statement that despite being founded upon a bold vision, the initiative did not find the global collaboration necessary for it to become a viable independent business. At the same time, The Wall Street Journal noted that IBM mentioned blockchain with increasing infrequency and that Walmart, which had attempted to track production on a blockchain platform, rarely trumpets the initiative. The technology is both potentially radical and a complex one. Until an easy, mainstream implementation method is laid down, many may not deem the technology a necessary investment.
Even though the widespread adoption of blockchain has yet to happen, the technology has become more common in the solutions Spend Matters covers. dSilo’s contract solution, for example, supports the use of blockchain and has an AI that can convert any contract into a blockchain-based smart contract. A more dramatic example is Circularise, a supply chain traceability solution that is built upon the public blockchain Ethereum.
So, some players in the Procurement field evidently believe blockchain is more than a whoopee cushion of hype. For Procurement solutions to fully capitalize on the opportunities presented by the technology, it would be due to the effort of smaller companies with less to lose and more to gain than more established organizations. In fact, the final installment of our four-part blockchain series explores both hurdles to implementing a blockchain and how organizations can better align themselves to a business model that incorporates blockchain.
Focusing on the impediments keeping adoption nascent, it turns out that even in a procurement landscape dominated by disruption the adage that “The more things change, the more they stay the same” still applies. Measures to prevent blockchain impediments that our series highlights include practices such as keeping passwords in a secure location or verifying that an email is not a phishing scheme. In other words, they are safeguards any responsible employee should be following already!
With those safeguards in place, the procurement landscape offers an open field for blockchain adoption and innovation. Spend Matters analyst Abigail Ommen notes that “While blockchain has been a buzzword for years, only now are we starting to see many concrete, actionable use cases for the technology. I look forward to seeing what else the innovators in our industry will use it for.” The blockchain series first considers what these concrete cases are, e.g., tracking a piece of produce from farm to supermarket. Having established its current capabilities, the analysts proceed to imagine what uses procurement may find for blockchain in the future, such as providing an even more in-depth report of a supply chain’s ESG conditions.
Blockchain has yet to take the procurement world by storm, but that is what makes the solutions toying with the technology so exciting. The second wave of blockchain-based startups is about to crash upon the market, meaning now is a good time to catch up with the state of blockchain in procurement.