How IBM's blockchain investments are paying off

The debate about just how big and how important blockchain technology will ultimately become rages on but the fact that it has breathed new life into some of the old battleships of big tech - like IBM, Microsoft, SAP and Oracle - is undeniable.

Last October, Oracle announced the formation of Oracle Blockchain Cloud Service, which helps customers extend existing applications like enterprise-resource management systems. A month earlier, rival SAP said clients in industries like manufacturing were testing its cloud service. And on Nov. 20, Microsoft expanded its partnership with consortium R3 to make it easier for financial institutions to deploy blockchains in its Azure cloud.

But, perhaps the biggest winner among the tech giants now transitioning is probably IBM, which was ranked number one among blockchain technology providers in 2017 in an enterprise survey by Juniper.

IBM was one of the first big companies to recognize the potential of distributed ledgers, contributing code to the Linux Foundation’s HyperLedger open-source effort, and encouraging startups to try the technology on its cloud for free. The effort is paying off.

Demand for blockchain technology, originally known for being the underlying “trust” core of Bitcoin, is growing so much that the company believes it will be one of the largest users of capacity this year at the 60 or so data centers it rents to other companies around the globe. IBM fellow Donna N. Dillenburger explains the appeal that the combination of IBM and blockchain bring to the market:

We need a way to share information that has a pedigree behind it.  We’re creating a system where our clients can be confident that information is secure and verifiable. The innovation of blockchain with the security of our enterprise platform is that it provides a mechanism to stand behind data in a scalable way--whether it’s for banking, supply chain, food safety or healthcare. Once you have a repository of trusted data, you have a foundation for analytics that can be used to responsibly share information for the greater good of business and society.

IBM has already worked with over 400 clients to implement blockchain applications across financial services, supply chains, IoT, risk management, digital rights management and healthcare.  Notable examples include:

• In March 2017, IBM and Maersk, unveiled a new collaboration to use blockchain technology to help transform the global, cross-border supply chain by allowing the shipping and logistics industry to manage and track the paper trail of tens of millions of shipping containers across the world by digitizing the supply chain process from end-to-end to enhance transparency and the highly secure sharing of information among trading partners.
• In June, IBM announced a deal with seven major European banks-- including HSBC and Rabobank--to build a blockchain-based platform for trade finance to facilitate international trade for small and medium-sized enterprises. The project is one of the first real-world use cases of blockchain technology in financial institutions.
• In August, the company announced a major blockchain consortium that includes Dole, Driscoll’s, Golden State Foods, Kroger, McCormick and Company, McLane Company, Nestlé, Tyson Foods, Unilever and Walmart, who will work with IBM to identify food safety and improve food traceability by providing trusted information on the origin and state of food.

Food transparency in China

IBM’s latest blockchain initiative is a partnership with Walmart, JD.com and Tsinghua University National Engineering Laboratory for E-Commerce Technologies on a Blockchain Food Safety Alliance that will kick off with a collaboration designed to enhance food tracking, traceability, and safety in China.

IBM, Walmart and Tsinghua University have piloted the use of blockchain to trace food items, including pork in China and mangoes in the U.S., as they move through the supply chain to store shelves. Recent testing by Walmart showed that applying blockchain reduced the time it took to trace a package of mangoes from the farm to the store from days or weeks to two seconds. Said Bridget van Kralingen, senior vice president, IBM Industry Platforms:

Blockchain holds incredible promise in delivering the transparency that is needed to help promote food safety across the whole supply chain. This is a fundamental reason why IBM believes so strongly in the impact this technology will have on business models. By expanding our food safety work with Walmart and Tsinghua University in China and adding new collaborators like JD.com, the technology brings traceability and transparency to a broader network of food supply chain participants.

The collaboration is designed to help ensure brand owners’ data privacy while helping them integrate their online and offline traceability for food safety and quality management channels. Companies that join the alliance will be able to share information using blockchain technology, and plans include them being able to choose the standards-based traceability solution that best suits their needs and legacy systems. This will, in turn, bring greater transparency to the supply chain and introduce new technologies to the retail sector designed to create a safer food environment and enhance the consumer experience. IBM’s van Kralingen adds:

The insights gained from the work in China will shed light on how blockchain technology can help improve processes such as recalls and verifications and enhance consumer confidence due to greater transparency in China and around the world.

My take

IBM is betting big on the blockchain. It has to given that its traditional SI market is dwindling and data center capacity is coming under threat from Amazon and Microsoft.

So far that strategy has proven to be a key factor in not only driving renewed interest in—and a lot of marketing buzz--around IBM’s technology, but in lending a much-needed veneer of mainstream respectability to an emerging technology that was better known for disguising dubious and illegal transactions via Bitcoin.

IBM’s endorsement of blockchain technology is akin to the Good Housekeeping Seal of Approval of the tech world. If IBM says blockchain has hundreds of uses that go beyond Bitcoin, people believe it.

What IBM brings to mainstream customers is the notion that IBM’s blockchain process provides an extra layer of trust. Think of adding layers of other IBM technologies—like Watson—to the blockchain and you have to believe those good things are going to happen.

What IBM has gotten so far is some low hanging fruit projects and customers, a fresh look from technology and stock market analysts, a rising stock price, new respect among younger tech buyers and an energy that the company hasn’t shown in years.