Tech giant International Business Machines Corp. (IBM) has a very different approach to blockchain. It has tried to adopt a private hyper-ledger rather than a public one such as Ethereum in Microsoft’s case. Globally, the company is working with 63 clients on as many as 400 projects on blockchain tech. Recently, the company announced it has come out with a cheaper alternative for small and medium enterprises to test blockchain projects. In an interview with TechCircle, Jitan S Chandanani, blockchain leader at IBM, said the company was working with several consortiums and private firms to implement blockchain solutions. Excerpts:
What has been IBM’s blockchain strategy?
To understand what IBM is doing in India in blockchain, one has to understand what we are doing globally. Being one of the founding members of the hyper-ledger, we all debated the fundamentals on which the firm’s blockchain operations should run. The debate was about whether the technology should be used in just one use-case of cryptocurrency or form a more vigilant solution that can be applied to every industry. But IBM chose to take a third route and asked the question that can it basically be conducted in an open-source format, where there should be contributors, adapters and a push from them to use the technology?
In India, which sectors and companies is IBM working with?
We are using a three-pronged strategy in India. We are dividing use-cases into categories, for example, trade finance consortium. The only way a trade finance consortium can be formed is if we get all the banks in the picture. We can get the Customs guys, we can get the transport guys, but if I don’t have the banks, then the consortium is not possible. Hence, one of the efforts that we have making in India is working with consortiums, be it insurance, trade finance, and bringing in some elements of supply chain, etc. Trade finance and insurance is something we, at IBM, are very confident about.
The next set category of usage is what we form from founder networks, for example, what we have done with (retailer) Walmart. Walmart is one the biggest manufacturers and they have an ecosystem that includes farmers, distributors, logistics guys, certification staff, etc., so they actually are pretty much a client to all of them. What makes it good is that if Walmart says that they want to build blockchain, these guys will want to participate and, in some cases, Walmart will also insist that they participate.
We also work with companies such as AP Moller-Maersk (world's largest container shipping firm) at the global level, where we are trying to implement a solution under which customers of the shipping containers and manufacturers who are shipping the products can see where their products are at sea.
In India, we are working with Mahindra Group, Yes Bank and other FMCG (fast-moving consumer goods) companies to implement blockchain and some of the use-cases including supply-chain finance, supply-chain management, invoice processing, fake goods, and active registry, among others. The negotiations have reached a stage where IBM will have a proof of concept ready in the next three months.
For IBM, the third category is the area under which we want to work with SMEs which have the ideas and expertise to develop a blockchain solution. Having said that, we are also typically working with regulators by conducting studies and publishing white papers. IBM currently is engaged with Reserve Bank of India, Insurance Regulatory and Development Authority, and Telecom Regulatory Authority of India.
Can you give an example or scenario where you have worked with an SME?
IBM worked with Mumbai-based Catenia Technologies to help deploy blockchain tech for Bajaj Electricals to pay their suppliers via Yes Bank. The idea was to help the SMEs scale up their solution or fine-tune them for a larger commercial model, which is why we joined the project as an infrastructure partner. Having said that, there are other projects that IBM does by itself, for example, the trade finance project. In this cases, IBM uses all its resources to build the chain or asset and then make it production-ready and later apply it to a larger commercial model.
Why are these consortiums or private firms looking to employ blockchain?
The answer to this question is two-fold. The first part is to root out efficiencies from the system and the second is to grow business. However, the two might not be related to each other. What I mean to say is that cutting down inefficiencies that result in cost savings doesn’t directly translate into growth in business. Having said that, these consortiums and private firms have found that adding more transparency to the system can help bring in more business. A study we did revealed that cutting down inefficiencies in the trade finance sector resulted in time savings of over 19 days for a transaction and thus resulted in more business. The idea is that when one platform offers ease of use, then people are more likely to choose its services.
What about blockchain’s security and the computational power to run it?
Taking the second part of your question first, I would like to point out that many people mistake blockchain for cryptocurrencies and hence they raise the question of computational power. IBM, unlike cryptocurrency blockchain networks, runs private hyper-ledgers, which means there will be fewer nodes involved in the transaction than in a public hyper-ledger of bitcoin or Ethereum. This means that when a transaction takes place, the system will only need enough computational power to change the logs in a limited number of nodes, bringing down the need for computational power. In terms of security, blockchain can still be safely called the most secure platform as of today.