How IBM is Sprinkling Blockchain Into The Solutions It Builds and Maintains For Enterprise Customers

Audio-Only Podcast

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Why Blockchain Will Be One of Multiple Ingredients Found in Future, Composable Enterprise Solutions

David Berlind: I am David Berlind, editor-in-chief of Blockchain Journal. I'm here in Davos, Switzerland, at World Economic Forum 2023, and I'm trying to catch up with as many executives and business people as possible to talk about what they're doing with blockchain. Sitting with me today is Shyam Nagarajan, who's with IBM. Shyam, thanks for joining me on the show.

Shyam Nagarajan: Thank you, David. Thanks for having me.

Berlind: It's great to have you. So IBM is here in Davos, and they're talking about blockchain, you in particular, and a lot of enterprises, a lot of businesses will want to know what it is that IBM is interested in when it comes to blockchain and what they're doing. And apparently, you're the guy. So it's great to have you here. Just to start off, what is your title there?

Nagarajan: I am an executive partner responsible for blockchain services and Web3 practice within IBM consulting.

Berlind: Well, okay, so you guys are using the language Web3. That's a pretty good language for such an old company like IBM. A lot of people think as being old and stuffy. So you're going on Web3, you're using blockchain. Why don't you talk a little bit about the programs that you're working on right now?

Nagarajan: Well, so to be clear, IBM helps other companies. We consult, we advise, we design, build, manage, run, operate systems for other organizations. So me and rest of my team are really engaged with our clients in helping them use these kind of technologies to build mission-critical solutions, enterprise solutions for their organizations.

Berlind: What kind of solutions are we talking about?

Nagarajan: Look, blockchain at its core is all about trust, and trust in the ecosystem, and this could be applied to all kinds of industries like financial banking, financial services, retail industry, distribution, supply chain industry, all these. Few of these examples is in the world of banking financial services, we are talking about digital assets or Real Estate tracking and things around, let's say insurance.

It's truly coming back to when there is more than one party involved in the transaction. How do you maintain the single source of truth so everyone can decide based on that single source of truth? 90% of the issues is around not access to the same information, and therefore it results in disputes, late payments, and the likes. So that's what blockchain brings to the table.

Now, when you take it to the next level, as with respect to Web3, we are talking about, okay, ownership of data and that dependent on an individual or entity's identity and all of it combined together exchange of value, and exchange of value done with tokens. We are primarily and only interested in enterprise blockchain and enterprise Web3 adoption. And there are a huge number of cases where organizations are very, very consciously thinking about it.

Berlind: So this is one of those areas. First of all, Blockchain Journal's readers, many of them are brand new to blockchain. They only know three words, Bitcoin, Blockchain, Ethereum, and sometimes the concepts as they apply to enterprises and some of the applications in the industries you described, it's a total enigma to them. You talk about, for example, trust and transparency, the idea that multiple parties to some type of contract or transaction can look at a single source of truth. But a lot of our audience members will wonder, well, why can't I just do that with a database? We've been doing that all along. So what is it about blockchain that is a game changer for your clients that makes them want to consider blockchain versus some older technology that has been serving in this role, the same role for a long time?

Nagarajan: Look, blockchain, rather, database technology has been around for a long time. Ledgers go all the way to 16 hundred in the likes, and everyone has got accounting ledgers, and that's your today's database, how everyone manages their business. The issue is [that] it's okay if it's only within your organization, but businesses are not siloed. They deal with other businesses all the time. Their partners, their suppliers their customers. And the issue is when you are dealing with multi-party gets complex because my view of my ledger is not the same as my partners we have the ledger, and how do you get them on the same view so we don't have issues when talking to each other?

Berlind: So is it a situation where maybe two or three or more parties all have their own ledgers, and none of them reconcile that easily with one another? But if you have one ledger and it's on a blockchain, then that simplifies it for everybody.

Nagarajan: Well, that's what blockchain brings to the table. Today, a lot of the issues is because of [the] inability to reconcile between multi-parties. That's one aspect of it. Now, when you elevate it to things like where you bring in smart contracts, well, smart contracts allow you to automatically settle between multiple parties, so when the contract conditions are met, you could advise the software automatically to settle and, therefore, immediate liquidity to all the parties in settling that transaction.

Berlind: So you're automating a bunch of business processes that typically required a lot of manual intervention previously? Who are the companies? Maybe you can't speak directly about who the customers are, but what's a really good example of a company that you are an enterprise that you're doing business with that you're building and running their solution for it?

Nagarajan: Well, I'll tell you, this is one of the premier hardware retailers in North America, and they have –

Berlind: Hardware like hammers and screwdrivers?

Nagarajan: Yeah.

Berlind: Okay.

Nagarajan: Yeah. So think of the number of partners that they have to deal with, and they're multiple stores. And their big issue is how do I make sure I and my partner reconcile between each other? What did I place an order for? What was delivered? What is the gap and what status was delivered, and what are the payment terms? How do I settle? All aspects of it. Now, we did a pilot with them. We started in 2019, I think. And we did this for just five partners. They found immense value of it. Now, they rolled it out to 400 partners.

Berlind: Wow. That's a lot.

Nagarajan: And—

Berlind: These are the suppliers to the hardware?

Nagarajan: That's correct. It's the suppliers, it's the partners, it's the stores, it's all. Now, they're bringing in their delivery partners when the FedEx and the ground transportation cruises into it all as part of the same thing. And the other angle on this is that this is not an innovation project. I mean, look, this is not sexy. This is what enterprises do, and the CFO's office is really interested in it because it takes down their reconciliation time, which on average is 30, 60 days to just... it's almost instantaneous when there's no issues. Even when there is issues that are ability to settle the disputes, it's rapid. It's a matter of hours to days compared to months to years.

Berlind: Interesting. So how did that company, the hardware retailer, how did they end up talking to IBM and say... Did they come to you and say, "Hey, we're interested in blockchain," or did they come to you and say, "We have a problem," and then you said, "Blockchain is the solution."

Nagarajan: Well, it's the problem. People try to go and say, "Hey, listen, I got a fancy new blockchain," and you want to build something with it, and that never works. We have been in this business for almost six years now, since 2016.

Berlind: Wow. That's a long time.

Nagarajan: And we know it's always business outcomes first. So when you have a problem, then you look at how you apply [the] right kind of technologies to it. And blockchain is just one part of the technology and it has to work with your data warehousing information, data lakes, and when you apply AI and analytics to it, so you can predict what kind of orders can you place in future, all those kind of things.

Blockchain is just one part of the technology. What we are finding more and more is that organizations, first of all, have these issues. They don't know how to solve them, and they've continued to apply traditional technologies to solve them and it hasn't worked. When you apply the right technology for the right problem, then it has a huge business impact. It's not just that technology by itself. When you complement it by the right other technologies like AI and advanced analytics, it suddenly adds significant levels of business value to our customers.

Berlind: So your customer comes to you, they have business problem, typically you're going to solve that problem with a bunch of different technologies combined, it's you're integrating solutions into one kind of final outcome for them. And there's a fabric of different technologies that provide the end outcome. IBM has really actively got blockchain on the menu. When somebody comes in, and you're like, "Okay, here's a database for this, and here's something else for that. And oh, blockchain for this," you're very active in that.

Nagarajan: That is correct. It's solutioning all end-to-end, not just, "Oh, it's just a blockchain project." Look, in our projects, only 20% of the work is blockchain, 80% is other technologies.

Berlind: Big question, are you recommending public blockchain or are you mostly going with private blockchains?

Nagarajan: I'm recommending what I call is a fit for purpose blockchain. The world is now all gone into this private and public and permission and permissionless, but there is a range. And then there's also this angle of centralized and decentralized as well. And what I would recommend is that there's no one solution that fits all. It depends on –

Berlind: So you're doing some hybrid solutions, some of it public, some of it private.

Nagarajan: Absolutely. I think enterprises if they're trying to solve something that's within their own ecosystem, they can and should start with private and permission. Now when they're at a state where when they need to reach a larger ecosystem that's not just themselves a bigger industry or a bigger market geography, then that's when you start thinking about where does that ecosystem exist.

It may be another private permission ecosystem, and you need to figure out how they connect and talk to each other. Or you want to say, "Okay, I have the best ecosystem that has led to excellent data monetization opportunity, and I want to have the public access to it, and I want to bring in liquidity as a consequence of that. I want to reach to a different geography that it can be done," then, a marriage between a private permission and a public permission list may be interesting. And then there are other worlds just like a public permission one like a rare hash graph, which really is all about government council that takes care to make sure that there's permissioned access to a lot of things while it's a public enterprise protocol that's available to everyone else as well.

Berlind: When you are building these solutions, and suddenly a big retailer is pulling in partners, like you mentioned, some logistics companies, and then they are of course, the manufacturers and the other companies who make the products, the screwdrivers and the hammers and so on and so forth, and they get exposed to blockchain, do they have an aha moment and they say, "Wait a minute, we can use this in another respect." Are you picking up customers that way because they see that you can help them achieve the same outcomes that the hardware retailer is achieving?

Nagarajan: Look, yes and no. Today a lot of these manufacturers may be small mom and pop shops and they don't have the technology capability to consume. That's too complicated. So, you have to simplify the way how other partners are onboarded into the blockchain ecosystem. In some cases, if they are evolved and they are able to handle the adapt to [the] change of blockchain, then we expose it to them. But there are also places where it's completely, listen, if you are doing just sending spreadsheets and email[s], we are going to make it easy for you. We are going to give you a app and you load it into the app, and everything works.

Blockchain is just another technology, and other parties can actively participate to the level of their maturity as well. So it's important to remember that as you are building a network, because what we have found in the last six years is that we started out with this conscious, "Oh, everyone needs to be aware of what blockchain is. Everyone needs to know what's happening inside it." And we realized a lot of times that's not really leading to the outcome that they want. They just want to participate in it and be contributing data or consuming data or having access to the ledger. Those things don't need complicated knowledge in order to engage.

Berlind: Okay. Well, Shyam Nagarajan, IBM, I hope you have a great world economic forum here in Davos. I hope you have a great rest of the show. Thank you very much for joining us.

Nagarajan: Well, thank you, David. Thanks for having me.