Blockchain, a type of distributed ledger technology (DLT), is slowly making its way into the enterprise. Increasingly, CIOs are feeling the pressure to have a plan for blockchain as more large ERP vendors introduce enterprise-grade blockchain solutions and pricing models. Just last week, Oracle announced the general release of its Blockchain Cloud Service which is priced based on a transaction volume metric.
Though enterprise-grade blockchain solutions are becoming available and may represent an opportunity for organizations to gain a competitive edge, nascent technologies of this kind come with risks. Due to the symbiotic relationship a blockchain database has with other systems, it would be extremely challenging to strip it out of a technology ecosystem if something goes wrong after the implementation. This is just one reason CIOs considering Blockchain-as-a-Service (BaaS) solutions must request detailed information in the following five areas prior to purchasing.
1. Industry Specific Use Cases
When discussing blockchain solutions with vendors, be sure to request use cases that are applicable to your specific industry. A blockchain solution that addresses the unique needs of a financial institution might not provide the same value for a retailer. Challenge the vendor to address the use cases and the value of the proposed BaaS solution in the context of your industry so you can develop a solid business case for the technology that is not based on irrelevant business applications.
Requesting industry-specific references and case studies will be the best way to get a sense of what kind of value your organization could receive. If there are no relevant case studies or references available, that could indicate the vendor’s lack of experience within your industry. While that doesn’t necessarily mean the solution cannot be a good fit, it could mean companies within your industry could face more obstacles and receive less value from this technology than those in industries the vendor has experience in.
2. Vendor Blockchain Product Roadmap
We also recommend requesting the product roadmap of the blockchain offering to understand not only its current capabilities but also the capabilities the vendor plans to make available in the future. Is the vendor making improvements that apply to your industry or focusing on an industry that is irrelevant to yours? Are they proposing co-innovation projects that could improve the value of their solution in your specific industry?
Having visibility into the vendor’s roadmap could help your organization plan the best time to make the transition and could potentially be an opportunity for your organization to influence the vendor’s roadmap by offering recommendations that could help them expand within your industry.
3. Pricing and Licensing Model: Ask Now, Budget Later
Even if you’re taking a wait-and-see attitude towards blockchain, ERP vendors will likely approach you with the opportunity to prototype their recently-released blockchain solution. This is a great time to request pricing information for their BaaS offering, associated metrics, and the available licensing models for on-premise and cloud options.
Since this technology is still being developed, vendors are still experimenting with how to price the service and you’ll benefit from having a record of the earliest pricing model. We recommend requesting vendors provide full transparency on their complete price list and pricing methodology associated with their blockchain products.
4. Maintenance Pricing Model
The distributed nature of blockchain makes it a very slow and costly database to run. While data in a traditional centralized database only needs to be written and checked once, data in a blockchain needs to be checked and transmitted multiple times – making the cost of maintaining a blockchain database much higher than a traditional database.
Since the vendor’s utility costs are higher for blockchain solutions, we expect maintenance costs to be higher for customers as well. Be sure to get details on how maintenance will be priced so you can budget accordingly.
5. Consulting and Training
As with any new technology, the pool of talent with blockchain expertise is very limited and therefore expensive. Training your own resources will be necessary and even hiring a system integrator (SI) will likely be pricier for blockchain-based projects as they will also need to invest in resources, training, and education.
When evaluating a blockchain solution, do not overlook the rate card premium on resources with blockchain expertise or the necessary training costs for your employees. Accordingly, we recommend requesting the rate cards for resources with blockchain experience and related training rates. Organizations should fully anticipate the higher costs associated with the implementation of a blockchain solution, so they can develop a realistic budget for adopting this disruptive technology.
What if the Vendor Can’t Provide This Information?
If a vendor cannot provide all the elements listed above, it should be considered a red flag for any organization and a sign that they are still developing their solution and pricing models. Again, blockchain is a disruptive technology that will be extremely difficult to remove once it is ingrained in your technology ecosystem.
Collect as much information on the blockchain solutions in consideration as early as possible. Even if you don’t use this information now, it will prove valuable in the future when prices may change, and you may be more serious about exploring blockchain solutions.
Overall, CIOs should not feel rushed to adopt blockchain solutions since vendors are still in an experimental phase. However, regardless of whether you are currently considering a blockchain solution or not, all organizations will benefit from taking steps to better understand the technology and associated pricing as well as recording the information they collect in the process for future use.