Providers must not forget about blockchain, despite uncertainty from COVID-19

COVID-19 has been stealing global headlines in recent months, and for a good reason. The effects will be catastrophic, with ramifications beyond the obviously devastating human factor—the global economic fallout is front of mind. Business uncertainty is skyrocketing as countries enter lockdown with much of their workforce forced to stay home to protect both themselves and others. Naturally, economic uncertainty means tightening belts and cutting costs wherever possible; despite this, service providers must not forget about blockchain or think of it as somewhere they can cut costs. It’s a crucial time for the technology as enterprises finally begin to realize tangible business value, and projects are finally moving beyond the proof of concept phase to production.
Service providers must ensure that their investment in blockchain isn’t cut significantly through this uncertain time, or they risk being left to play catch-up to those who hold their nerve.

75% of enterprise leaders view blockchain as either a strategic or high priority, while 20% say it is mission-critical

In its beginnings, enterprises often viewed blockchain as nothing more than the latest hype technology; however, as enterprise leaders across many industries understand it better, they realize the value it can offer their business. BFS leads the charge, with 34% of respondents labeling blockchain mission-critical. Exhibit 1 shows us that only 5% of executives view blockchain as a low priority or not relevant, while the other 95% see it as a necessary investment. Clearly, there is enterprise demand for blockchain, which means service providers must ensure they can meet their customers’ needs, despite current uncertainties.

Exhibit 1: Over half of executives across all industries view blockchain as a strategic priority

Source: HFS Research, 2020

Enterprises aren’t just interested in blockchain; they have put their money where their mouth is—almost half of organizations have blockchain budgets in the millions

It’s all well and good that enterprises view blockchain as a priority, but if they aren’t willing to invest in the technology, then there’s little point in service providers doing the same. Fortunately, that’s not the case. Exhibit 2 shows the budgets that different enterprises have allocated to their blockchain projects; 69% of enterprises have a budget over $1 million, and 13% of executives advise their budget is more than $20 million.

While it is possible enterprises will rethink their budgets and reduce them due to the current economic climate, it’s unlikely that a technology with as much promise as blockchain will see its budget completely cut. The decentralized approach allows businesses to leverage the likes of smart contracts, tokenization, and immutability, which can introduce significant cost savings, increased transparency, and enhanced trust, plus a range of other benefits. The upside of blockchain is simply too great to ignore; it’s unlikely that enterprises will ignore the technology—investment will continue.

Exhibit 2: Almost 70% of enterprises have a blockchain budget of over $1 million

Source: HFS Research, 2020

This is a pivotal time for any enterprise with investments in blockchain; we are finally starting to see initiatives reach production

But it’s not just the immediate opportunities service providers would lose if they choose to see blockchain as an opportunity to cut costs. Exhibit 3 shows the current state of blockchain initiatives compared to approximately one year ago, and the shift away from advisory toward prototyping, piloting, and production is giant. It’s easy to see how the tide is changing for blockchain and how much of a crucial phase we are in for the development of the technology. Anybody choosing to slash their blockchain budget is likely to find themselves playing catch up, as the future will see their competitors boasting an armory of solutions and platforms to offer their clients, while they have very little.

Exhibit 3: Comparing the shift in blockchain engagements over a year makes it easy to see how we are moving toward the production phase

Source: HFS Research, 2020

There’s a range of use cases for blockchain which could help with the COVID-19 crisis, but providers must remain realistic – deploying a solution this fast would be unrealistic.

There are countless opportunities for distributed ledgers to lend a hand throughout a pandemic such as COVID-19. For example, supply chain transparency could be useful for medical materials, while insurance claims and charitable donations could also be tracked using the technology. The problem is that while blockchain is at a pivotal phase of its development, large scale blockchains are still few and far between, so deploying one for COVID-19 would be challenging, to say the least. Providers must remember this when evaluating both present and future opportunities; blockchain solutions may not be plausible for this coronavirus, but in the event of another pandemic such as this in the future, there is no reason they shouldn’t be prepared.

The Bottom Line: Print this, put it in an envelope, and open it again in six months. Understandably, blockchain may not be an urgent priority, but providers cannot afford to forget about the technology at such a pivotal time in its journey.

The majority of executives have said that blockchain is a strategic priority for their own organization—and a global pandemic, however big, will not change that. It’s understandable that over the coming months, businesses, including large service providers, will have difficult decisions to make. Their number one priority must be maintaining the welfare of their employees and their own survival, despite economic uncertainties.

However, forget about blockchain at your peril; service providers cannot afford to completely slash their investment in the technology at such a pivotal time, or their competitors will race ahead and leave them behind.