Don’t write blockchain off! COVID-19 slowed spending—but didn’t stop it!

Blockchain has been on an upward trajectory for many years. More enterprises understand blockchain’s value, and engagements are finally reaching production. However, the upward trajectory changed course, thanks to the COVID-19 outbreak and the subsequent recession. Enterprises forced to introduce cost-cutting measures could consider IT projects as surplus to requirements, prompting the C-Suite to decide which technologies would offer the highest and fastest ROIs. We’d forgive you for expecting blockchain spending to vanish as a result. However, HFS conducted a study in partnership with KPMG International from March to June 2020, and the results made encouraging reading for any enterprise investing in blockchain. You can find complete study results in our Enterprise Reboot publication.

Research shows that, much like every other emerging technology, blockchain investment has significantly slowed as the COVID-19 outbreak continues

In the current economic climate, you could easily persuade your CFO that blockchain projects are the perfect place for budget cuts. Few enterprises have in-production use cases, and countless business executives still don’t understand how it can help their enterprise. It has thus far failed to deliver much business value. To put it simply, for most businesses, blockchain is not even close to mission critical. Exhibit 1 reflects that. It shows the level of business investment for emerging technologies over two periods, and you can see the impact of the ongoing COVID-19 situation across the board. Every emerging technology reported a decrease in spending of at least 12%, but right at the bottom of the pile is blockchain, reporting the largest decline—an estimated 63.9% spending reduction.

Exhibit 1: Blockchain reported the biggest reduction in spending in the first six months of the pandemic.

Q: What is your current level of investment for these emerging technologies in your organization (or business unit)? Weighted Average Spending $M

Sample: 900 executives across Global 2000 enterprises surveyed in (March-June 2020, combined Phase I and Phase II samples)

Source: HFS Research in conjunction with KPMG International

The drop in blockchain spending isn’t the only takeaway from Exhibit 1—enterprises are still investing an average of $6.5 million into the technology.

Earlier this year, HFS released a POV urging enterprise leaders to not forget about blockchain. We explained that even though cost-cutting was the priority, blockchain remained a worthy investment. While the world has drastically changed since March, our message has not, and our latest research backs it up. The sharp blockchain spending reduction isn’t the only takeaway from Exhibit 1—enterprises still expect to spend an estimated $6.5 million on blockchain technology. While this reflects a significant drop from the $18 million early-pandemic estimate in March, it is still a sizable investment and proves blockchain remains a crucial ingredient for many enterprises’ success equation.

Identifying the best use cases for your blockchain engagement is more important than ever, thanks to the COVID-19 outbreak

Experimenting with blockchain doesn’t mean driving blindly; enterprises must carefully select which application best suits their unique needs while remaining realistic and keeping it achievable. While this may sound simple, the COVID-19 outbreak has completely transformed business objectives. Many firms are fighting for survival, while others look to use this period to drive growth. Although some blockchain applications have remained popular, such as supply chain management, new applications have emerged. We’ve identified four blockchain use cases that have increased in popularity in recent months:

• Supply chain management: COVID-19 has decimated supply chains worldwide, including crucial medical and food supply chains. HFS previously wrote about how the pandemic exposed a lack of transparency in supply chains, and it’s a challenge blockchain is poised to help solve.
• Pharmaceutical traceability: IBM Food Trust is a great example of how enterprises use blockchain to guarantee authenticity and offer traceability. The pharmaceutical industry could apply the same methodology, the COVID-19 outbreak means countless vaccines are being rapidly pushed through clinical trials, and blockchain could be used to guarantee authenticity and provide traceability.
• Health certification: Nobody can be sure how we will finally move beyond this pandemic and resulting ubiquitous lockdowns, but one popular suggestion involves blockchain-supported health certificates. This would mean individuals uploading their proof of vaccine onto a blockchain and, in exchange, receiving a certificate as proof they do not have the virus, allowing them the freedom to live unrestricted.
• Sustainability:Despite the pandemic, enterprises face mounting pressure to adopt a sustainable approach to their business operations, which blockchain supports through increased data integrity and verifiability. One example of this is KPMG’s recently announced Climate Accounting Infrastructure solution, which helps organizations measure, report, and offset greenhouse gas emissions.

The Bottom Line: Enterprises must not lose sight of the value blockchain can offer their business as they continue their pivot into survival mode.

The COVID-19 outbreak and continuing pandemic have forced enterprises to quickly adjust their objectives to prioritize business survival, but they cannot completely lose sight of the future. In our research, we have urged you not to dismiss blockchain at such a pivotal time in its evolution, and we haven’t changed that message. You don’t have to funnel every penny into the technology, but you need to continue exploring the technology to avoid playing catch-up down the line. In fact, the message rings even more true after this survey’s data proves that enterprises are continuing—albeit at a slower rate—their blockchain investment. Ultimately, blockchain is becoming a key ingredient in the technology ecosystem, and cutting investment into this technology could have a ripple effect throughout your organization. If you stop spending, but your competitors maintain funding throughout the pandemic, they could be leaps and bounds ahead.