SAP Ariba’s Joe Fox Breaks Down Blockchain Adoption Hurdles and Benefits (Part 2)

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As I explored in yesterday’s post, blockchain is starting to see early use cases in several industries, and there are many cases that should give procurement reasons to be excited to learn more about this disruptive technology. Still, that doesn’t mean starting blockchain programs will be easy, either. In Part 2 of this Q&A with SAP Ariba’s Joe Fox, we discuss adoption roadblocks, industries that stand to benefit most from blockchain and which providers procurement should keep an eye on.

Spend Matters: Outside of technology hurdles, what do you perceive as the biggest roadblocks to adoption?

Joe Fox: From an international perspective, there’s not much regulation, so there will be companies that want to wait. Pharmaceutical companies, for example, have to be very careful about how they manage their vendor master file and their interaction with suppliers by law. So they couldn’t just throw their suppliers out on a blockchain.

There’s also the IT component. We don’t think there’ll be an IT integration issue with the chain, but we do think that our customers will want to understand what’s happening with their data on the chain from a security and privacy perspective, just like they did with the cloud.

SM: When you think about blockchain, especially from a traceability  perspective, which industries do you think are going to reap the most benefits from it?

JF: Insurance I think is going to really benefit, and banks are going to benefit, from assets being chained, because it’ll reduce their costs. It’ll reduce their risk relative to what they’re insuring and the time they start and end insurance. Banks will have more things they can finance, because they’ll have more control over, “What is the real state of that asset, both physically, geographically, ownership-wise?”

And I think in the manufacturing world, blockchain track and trace is going to be critical because where their procurement processes and their supply chain processes are very tightly aligned, they’ll have more object control and object tracing.

The industries this will be most important to are the ones where if something goes wrong, they have to quickly figure out the source. Perishable goods, for example. Somebody eats some lettuce. They get salmonella. How fast can you figure out which field that came from? With blockchain, it’ll be instant. It’ll be literally seconds. Now, it takes weeks.

Aviation. Plane goes down. They have to figure out what caused it. They identify the part. Now they have to trace it back to the manufacturer and figure out what went wrong with it. That’ll take seconds instead of weeks.

SM: There are lots of providers in the market today and more emerging. This has the makings of 1999 all over again with a shakeout. Which ones do you track, and which ones do you think are doing unique things at this point and are worth watching?

JF: I try to keep track of the category that are B2B-oriented that do something unique.

There are the platform players and the app players. When you think about the app players, it’s companies like Everledger that we partnered with. Everledger doing track and trace of diamonds, that’s an app on top of chains, right? Keep track of those. We partner with Hijro in North America for trade financing. Why? Because they use chain to post a receivable from a third-party source makes it lower cost of funding for the receivable, and also the funder has less risk.

Banks are very important now, because they’re going to print many of the assets onto the chain and digitize them and back them like the banking asset physical example. If you scrolled, you could use currencies. Once I put $100 on the chain, eventually somebody’s going to want to take the $100 back off the chain, and their bank’s going to have to agree with the other banks that this is okay. So I’m watching them very closely.

Separate from banking, I’m watching anyone that’s putting software at that stage where they’re helping move any type of asset from physical to digital. For example, I’m going to sell my car on blockchain, right? I turn over the receipt to the physical dealer. I give them my car. They digitize the title. Now, all of a sudden, there’s a bunch of people bidding on it. The chain actually gives the title to somebody else, and then they handle the physical delivery of the car.

SM: It’s Carfax meets the DMV meets AutoNation.

JF: You got it.

This interview has been edited and condensed.

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