Why are companies and CIOs slow to adopt blockchain?
Top IT bosses in the biggest firms are not banking on blockchain to boost their business. According to a 2018 Gartner survey, 77% of chief information officers (CIOs) said their company had no interest in blockchain technology.
Of the 3,000-plus CIOs globally who were surveyed, only 1% indicated any kind of blockchain adoption within their organizations, and only 8% of CIOs were in short-term planning or active experimentation with blockchain, according to Gartner.
David Furlonger, vice president and Gartner Fellow insisted this year’s Gartner CIO Survey provides factual evidence about the massively hyped state of blockchain adoption and deployment.
Furlonger said it was critical to understand what blockchain is and what it is capable of today, compared to how it will transform companies, industries and society tomorrow.
He warned that rushing into blockchain deployments could lead organizations to significant problems of failed innovation, wasted investment, rash decisions and even rejection of a game-changing technology.
Is the reluctance to embrace blockchain more than just a lack of familiarity at boardroom level of what it could potentially offer? Is the problem as much about limited access to the people who understand and are at the cutting edge of this technology.
To some degree yes. The survey found that among 293 CIOs of organizations in short-term planning or already invested in blockchain initiatives, 23% said that blockchain required the most new skills to implement of any technology area, while others stressed that blockchain skills were most difficult to find.
CIOs also pointed to the fact that blockchain requires the greatest change in the culture of a firm’s IT department, and that in many instances the structure of an IT department would have to change to implement blockchain.
So even if companies are not ignoring blockchain, they may be veering away from the massive upheaval it warrants.
CIOs may be aware that blockchain implementation will change the operating and business model of their organizations. Even if they are aware of the challenge, do they currently have the resources and expertise within their company to transition?
As Furlonger explains, the demands on a company are significant. “Blockchain technology requires understanding of, at a fundamental level, aspects of security, law, value exchange, decentralized governance, process and commercial architectures. “He adds: “It therefore implies that traditional lines of business and organization silos can no longer operate under their historical structures.”
The speed at which industries accept blockchain will, according to Furlonger, be as much about the psychological acceptance of the innovations that blockchain brings as the technology itself.
Blockchain friendly sectors
Perhaps not surprisingly some sectors are more receptive to Blockchain than others. For instance, the Gartner survey found that CIOs from telecom, insurance and financial services indicated being more actively involved in blockchain planning and experimentation than CIOs from other industries.
Other sectors including transportation, government and utilities are starting to become more engaged due to an increased focus on process efficiency and logistics opportunities. For telecoms, the incentive is to ‘own the infrastructure wires’ and seize a consumer payment opportunity.
But the question remains with regards to how far these industries showing an initial interest in blockchain will progress in their acceptance of it. For instance, Furlonger asks whether companies in these sectors will accept decentralized, distributed, tokenized networks, or stall as they try to introduce blockchain into legacy value streams and systems.
It is too simple to say companies are just slow to move with the times; blockchain represents a seismic shift in company structure and culture. Even if companies accept that blockchain is the future, implementing change may not be something they are able to do (or want to do) at full speed.
Evidence of blockchain benefits
What is likely to accelerate the adoption of Blockchain is concrete evidence that the technology gives competitive advantage to companies. As things stand, the benefits of blockchain are anticipated rather than documented – subsequently senior executives take different views on how pivotal blockchain adoption might prove to company success.
Those sceptical of blockchain’s merits are aware that as the number of users increases, scaling to meet the needs for validation and registration of every transaction into a block can lead to a bottleneck.
Transactional speed has long been a big issue – especially for those sectors that need immediate transaction recording.
Typically blockchain’s capabilities have not always compared favourably with other payment processors – for instance PayPal – but over time the differential has narrowed. CIOs who have been following these developments are split on whether blockchain is the potential game-changer it claims to be.
According to a recent survey from Deloitte, some senior execs are largely dismissive of blockchain whilst others see it as a top priority for their business.
Another concern is that there is a lack of uniform standards on blockchain technology even as new blockchain-based solutions are being developed.
According to the Deloitte survey, 56% of executives consider technical standards as critical for wider adoption. Industry players would need to collaborate better to build uniform standards and protocols rather than develop their own internal versions.
Even if blockchain creators demonstrate blockchain’s capabilities; it is down to business leaders to adopt it.
Being a first mover into blockchain might bring with it huge pressures and significant challenges but if the trade-off is major competitive advantage then fortune will have certainly favoured the brave.
Those companies that have been hesitant or critical of blockchain might suddenly find themselves playing catch-up.