ERP and block chain
The sales story that drove the ERP industry, and made many a multi-million dollar ERP sales person, was pretty straight-forward –
Build/Buy a relational database, centralize all your data;
Buy an integrated applications for all the business functions;
Share trusted data between and across silos within the enterprise.
Once that’s in place the enterprise’s operating leverage can be leveraged.
Now, if you step back and think about it, what are we doing in blockchain tech?
1. For many (not all) use cases, we are again focused on business process flows, except this time we’re focusing between and across multiple enterprises.
2. From a database perspective, we are focused on offering a single version of trustful data that multiple enterprises can share.
3. From an application perspective, we’re creating new software co’s that integrate and optimize the process flows of multiple enterprises.
Essentially, we are back to eliminating silos and removing interfaces all by facilitating the sharing of trusted data. Except now, we have moved up an organizational level from focusing on optimizing the flows of a single enterprise to that of multiple enterprises, or as we prefer, focusing at the ecosystem level.
To further this idea, consider what central authorities are in most cases, they are interfaces between producers and consumers. For which, if you redesigned the process flows, you can potentially reduce/eliminate their cost. Now, that is not to say central authorities don’t play critical roles. What it does say is that their value is going to be tested versus better/faster/cheaper alternatives process flows and if they don’t match up, well, they’re disrupted. Simply stated, if peer-to-peer has a better value proposition we don’t think any level of intervention is going to stop the drive for optimization.
What Blockchain might mean for ERP
Theoretically, Blockchain and ERP have a lot in common as ERP is all about having a single version of information, and Blockchain too aims to create a single table of information which is shared by millions of users online. Due to this evident similarity, speculations that Blockchain might replace ERP in the near future have started surfacing. However, speculators might be neglecting the core difference between ERP and Blockchain. Unlike in case of ERP, in Blockchain the information is decentralized and can be accessed by diverse enterprises at the same time. In Blockchain, the flow of data is transparent to all its participants but none can manipulate or alter the data without consensus. This particular attribute of the distributed ledger technology lends substance to the idea of integrating ERP with Blockchain. Such an integration can be instrumental in establishing trust between disparate companies.
Blockchain should be seen as a supportive application that can make the sharing of information between diverse parties more seamless, by providing a secure channel. The above-mentioned integration can help organizations in obtaining the existing data from enterprise systems and regulating the shareability of such data. The entities participating in a Blockchain can give selective access to their information. The record of each and every transaction contained in a Blockchain is verifiable, leading to obvious advantages.
Till today, a major chunk of corporate data resides in private silos. The advent of big data has helped businesses in obtaining greater insights from these data silos, but businesses have largely remained apprehensive about sharing such insights, fearing they will lose that competitive edge. Blockchain can quell such apprehensions by resolving the data access or sharing issue.
A few pilot projects in Aviation Industry are also making a strong case for an ERP and Blockchain integration. These projects have tapped the potential of Blockchain to track supply chains, parts shipments, and keep records of maintenance work. For Aviation Industry, Blockchain can establish consensus among disparate parties of Aviation Industry, provide information on the origin or history of data, and can be a source of immutable records. In this industry, where highly complex equipment can move from owner to owner, having complete traceability is vital, and this need can be adequately met by Blockchain.
To understand why and how the blockchain may gain adoption, it is therefore useful to understand why many large organizations end up adopting an ERP system despite its high cost and complexity. The ERP typically replaces a bunch of much cheaper department level software. The logical question is why not harmonize the pre-existing pieces of software instead? For example, if marketing is using an invoicing software and accounting needs this data to account for the sales, all that is really needed is for the accounting software to accept data from the marketing software and use it. The reason this solution does not work boils down to organizational politics. In the first place, the accounting and marketing departments do not typically trust each other. Second, marketing would insist on providing the data in their preferred format and argue that accounting can surely read this and convert it into their internal format. Accounting would of course argue that marketing should instead give the data in the accountant’s preferred format which is so obviously superior. Faced with the task of arbitrating between them, the natural response of top management is to adopt a “plague on both houses” solution and ask both departments to scrap their existing software and adopt a new ERP system.
It is easy to see this dynamic playing out with the blockchain as well. There is a need for a single version of the truth across all organizations involved in many complex processes. Clearly, organizations do not trust each other and no organization would like to accept the formats, standards and processes of another organization. It is a lot easier for everybody to adopt a neutral solution like the blockchain.
A key insight from this analysis is that for widespread adoption of blockchain to happen, it is not at all necessary that the blockchain be cheaper, faster or more efficient. It will not be subjected to an ROI test, but will be justified on strategic grounds like resilience to cyber threats and Byzantine actors. A lot of challenges have to be met before realizing the idea of a regulated supply Blockchain. For instance, there is still no concrete mechanism by which the participating entities in a Blockchain can be notified of an event-completion in real-time. Also, enterprises are still a bit wary of security and privacy when it comes to adopting this technology. The original Blockchain was entirely public, which is understandably not ideal for most business transactions. While most of these companies may end up opting for public Blockchain, it will be safe to say that in the initial phase, private Blockchain will be preferred for business operations, as in the private space tried and tested methods already exist for managing security and privacy.
From ERP(Enterprise resource planning) to ERP(Ecosystem Resource Planning)
Of the major ERP providers, SAP looks clearly ahead in blockchain experimentation. Through their SAP Leonardo platform, they are facilitating the integration over time of blockchain into both SAP ERP apps as well as custom apps developed on the SAP platform by partners and even individual corporate customers, with much of this experimentation revolving around provenance and supply chain management.
One good use case for the blockchain is manufacturing. In the blockchain, manufacturers can include who designed a part, its specifications, and the history of each iteration. Within this same chain, a manufacturer also can record where each instance of a part was made, and what machine made it.
An early test case is Moog, an aerospace defense firm. They are working with SAP on using the blockchain for digital manufacturing and 3D printing. Serialization and the unique CAD file for each custom-printed part can be stored in the blockchain for greater provenance, a boon for individual 3D-printed parts.
It also allows the installers and the maintenance and support people to quickly have access to a lot of information related to that specific part, including updates or recalls and all kinds of other things that might be of value to them.
Another experiment includes smart contracts on SAP Ariba platform, since blockchain technology enables triggers. If-then logic and notifications can be embedded in contracts added to a blockchain, creating more automated and dynamic contracting—as well as provenance and a history of the contract.
IBM Global Finance currently is using the blockchain for contracts, and the company has reduced the time spent resolving disputes by 75 percent since adopting the technology.
Microsoft and its partners are working to bridge enterprise gaps in blockchain technology, making it easier to get from pilot to production. With Blockchain on Azure, build apps that deliver the scalability and distributed governance enterprises need without sacrificing the security and immutability they expect. With a handful of user inputs and a simple single-click deployment through the Azure portal, you can provision a fully configured blockchain network topology in minutes, using Microsoft Azure compute, networking, and storage services across the globe. Rather than spending hours building out and configuring the infrastructure, we have automated these time-consuming pieces to allow you to focus on building out your scenarios and applications. You are only charged for the underlying infrastructure resources consumed, such as compute, storage, and networking. There are no incremental charges for the solution itself.
Conclusion
Where this all is going might be much bigger than provenance or smart contracts, however. Some predict that the peer-to-peer nature of the blockchain could transform ERP and businesses processes more fundamentally.
Currently, the ERP business model is centered around individual enterprises. Blockchain technology allows an ecosystem of companies to organize and share data where the primary metric is the performance of the ecosystem and not the individual enterprise, however.
Consequently, its believed that these blockchain-enabled ecosystems can be viewed as a new type of enterprise. Blockchain tech forces you to consider your role in the broader set of business processes that occur across the ecosystem of players in which you operate. It forces you to be able to justify your value add, otherwise you will be made redundant.
Enterprise resource planning might evolve and eventually include ecosystem resource planning, in other words.
While this may or may not be the direction of things for ERP systems, what is more clear is that blockchain technology within ERP is just around the corner.
Build/Buy a relational database, centralize all your data;
Buy an integrated applications for all the business functions;
Share trusted data between and across silos within the enterprise.
Once that’s in place the enterprise’s operating leverage can be leveraged.
Now, if you step back and think about it, what are we doing in blockchain tech?
1. For many (not all) use cases, we are again focused on business process flows, except this time we’re focusing between and across multiple enterprises.
2. From a database perspective, we are focused on offering a single version of trustful data that multiple enterprises can share.
3. From an application perspective, we’re creating new software co’s that integrate and optimize the process flows of multiple enterprises.
Essentially, we are back to eliminating silos and removing interfaces all by facilitating the sharing of trusted data. Except now, we have moved up an organizational level from focusing on optimizing the flows of a single enterprise to that of multiple enterprises, or as we prefer, focusing at the ecosystem level.
To further this idea, consider what central authorities are in most cases, they are interfaces between producers and consumers. For which, if you redesigned the process flows, you can potentially reduce/eliminate their cost. Now, that is not to say central authorities don’t play critical roles. What it does say is that their value is going to be tested versus better/faster/cheaper alternatives process flows and if they don’t match up, well, they’re disrupted. Simply stated, if peer-to-peer has a better value proposition we don’t think any level of intervention is going to stop the drive for optimization.
What Blockchain might mean for ERP
Theoretically, Blockchain and ERP have a lot in common as ERP is all about having a single version of information, and Blockchain too aims to create a single table of information which is shared by millions of users online. Due to this evident similarity, speculations that Blockchain might replace ERP in the near future have started surfacing. However, speculators might be neglecting the core difference between ERP and Blockchain. Unlike in case of ERP, in Blockchain the information is decentralized and can be accessed by diverse enterprises at the same time. In Blockchain, the flow of data is transparent to all its participants but none can manipulate or alter the data without consensus. This particular attribute of the distributed ledger technology lends substance to the idea of integrating ERP with Blockchain. Such an integration can be instrumental in establishing trust between disparate companies.
Blockchain should be seen as a supportive application that can make the sharing of information between diverse parties more seamless, by providing a secure channel. The above-mentioned integration can help organizations in obtaining the existing data from enterprise systems and regulating the shareability of such data. The entities participating in a Blockchain can give selective access to their information. The record of each and every transaction contained in a Blockchain is verifiable, leading to obvious advantages.
Till today, a major chunk of corporate data resides in private silos. The advent of big data has helped businesses in obtaining greater insights from these data silos, but businesses have largely remained apprehensive about sharing such insights, fearing they will lose that competitive edge. Blockchain can quell such apprehensions by resolving the data access or sharing issue.
A few pilot projects in Aviation Industry are also making a strong case for an ERP and Blockchain integration. These projects have tapped the potential of Blockchain to track supply chains, parts shipments, and keep records of maintenance work. For Aviation Industry, Blockchain can establish consensus among disparate parties of Aviation Industry, provide information on the origin or history of data, and can be a source of immutable records. In this industry, where highly complex equipment can move from owner to owner, having complete traceability is vital, and this need can be adequately met by Blockchain.
To understand why and how the blockchain may gain adoption, it is therefore useful to understand why many large organizations end up adopting an ERP system despite its high cost and complexity. The ERP typically replaces a bunch of much cheaper department level software. The logical question is why not harmonize the pre-existing pieces of software instead? For example, if marketing is using an invoicing software and accounting needs this data to account for the sales, all that is really needed is for the accounting software to accept data from the marketing software and use it. The reason this solution does not work boils down to organizational politics. In the first place, the accounting and marketing departments do not typically trust each other. Second, marketing would insist on providing the data in their preferred format and argue that accounting can surely read this and convert it into their internal format. Accounting would of course argue that marketing should instead give the data in the accountant’s preferred format which is so obviously superior. Faced with the task of arbitrating between them, the natural response of top management is to adopt a “plague on both houses” solution and ask both departments to scrap their existing software and adopt a new ERP system.
It is easy to see this dynamic playing out with the blockchain as well. There is a need for a single version of the truth across all organizations involved in many complex processes. Clearly, organizations do not trust each other and no organization would like to accept the formats, standards and processes of another organization. It is a lot easier for everybody to adopt a neutral solution like the blockchain.
A key insight from this analysis is that for widespread adoption of blockchain to happen, it is not at all necessary that the blockchain be cheaper, faster or more efficient. It will not be subjected to an ROI test, but will be justified on strategic grounds like resilience to cyber threats and Byzantine actors. A lot of challenges have to be met before realizing the idea of a regulated supply Blockchain. For instance, there is still no concrete mechanism by which the participating entities in a Blockchain can be notified of an event-completion in real-time. Also, enterprises are still a bit wary of security and privacy when it comes to adopting this technology. The original Blockchain was entirely public, which is understandably not ideal for most business transactions. While most of these companies may end up opting for public Blockchain, it will be safe to say that in the initial phase, private Blockchain will be preferred for business operations, as in the private space tried and tested methods already exist for managing security and privacy.
From ERP(Enterprise resource planning) to ERP(Ecosystem Resource Planning)
Of the major ERP providers, SAP looks clearly ahead in blockchain experimentation. Through their SAP Leonardo platform, they are facilitating the integration over time of blockchain into both SAP ERP apps as well as custom apps developed on the SAP platform by partners and even individual corporate customers, with much of this experimentation revolving around provenance and supply chain management.
One good use case for the blockchain is manufacturing. In the blockchain, manufacturers can include who designed a part, its specifications, and the history of each iteration. Within this same chain, a manufacturer also can record where each instance of a part was made, and what machine made it.
An early test case is Moog, an aerospace defense firm. They are working with SAP on using the blockchain for digital manufacturing and 3D printing. Serialization and the unique CAD file for each custom-printed part can be stored in the blockchain for greater provenance, a boon for individual 3D-printed parts.
It also allows the installers and the maintenance and support people to quickly have access to a lot of information related to that specific part, including updates or recalls and all kinds of other things that might be of value to them.
Another experiment includes smart contracts on SAP Ariba platform, since blockchain technology enables triggers. If-then logic and notifications can be embedded in contracts added to a blockchain, creating more automated and dynamic contracting—as well as provenance and a history of the contract.
IBM Global Finance currently is using the blockchain for contracts, and the company has reduced the time spent resolving disputes by 75 percent since adopting the technology.
Microsoft and its partners are working to bridge enterprise gaps in blockchain technology, making it easier to get from pilot to production. With Blockchain on Azure, build apps that deliver the scalability and distributed governance enterprises need without sacrificing the security and immutability they expect. With a handful of user inputs and a simple single-click deployment through the Azure portal, you can provision a fully configured blockchain network topology in minutes, using Microsoft Azure compute, networking, and storage services across the globe. Rather than spending hours building out and configuring the infrastructure, we have automated these time-consuming pieces to allow you to focus on building out your scenarios and applications. You are only charged for the underlying infrastructure resources consumed, such as compute, storage, and networking. There are no incremental charges for the solution itself.
Conclusion
Where this all is going might be much bigger than provenance or smart contracts, however. Some predict that the peer-to-peer nature of the blockchain could transform ERP and businesses processes more fundamentally.
Currently, the ERP business model is centered around individual enterprises. Blockchain technology allows an ecosystem of companies to organize and share data where the primary metric is the performance of the ecosystem and not the individual enterprise, however.
Consequently, its believed that these blockchain-enabled ecosystems can be viewed as a new type of enterprise. Blockchain tech forces you to consider your role in the broader set of business processes that occur across the ecosystem of players in which you operate. It forces you to be able to justify your value add, otherwise you will be made redundant.
Enterprise resource planning might evolve and eventually include ecosystem resource planning, in other words.
While this may or may not be the direction of things for ERP systems, what is more clear is that blockchain technology within ERP is just around the corner.
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