Blockchain And ERP

Interest in the technology known as Blockchain has risen exponentially and is quickly passing from being a “geeky” topic to becoming a reasonably mainstream discussion. Companies are innovating to find newer applications of this technology. Simply put, Blockchain is an electronic ledger which is shareable either among public or private users and create an immutable record of transactions, where each transaction is linked to the previous one. Each transaction or a digital record is called a ‘Block’ where each block belongs to a specific participant, hence the name Blockchain.

One of the first uses of Blockchains has been made by crypto currencies such as Bitcoin (over 900 crypto currencies exist!!). The landscape of Blockchain has changed and the technology no more revolves only around crypto currencies. It is capturing the interest of people from other segments as well. For instance, ERP vendors are examining the use of Blockchain as a trackable and immutable record for everything, including shipping, supply chains, equipment maintenance etc., which will be of significant business use.

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.

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.

The notion that Blockchain will replace ERP is something we need to overcome, and then only our focus will divert towards their novel integration, which is very much feasible and holds a lot of promise. We shouldn’t get too far ahead of ourselves and should keep an eye on all major and small developments that are currently going on within the construct of ERP and Blockchain integration.

About the Author

Mr. Sanjay Agarwala is the Co-Founder and Managing Director of Eastern Software Systems Pvt. Ltd. Among other things, he is considered an authority on “Doing Business in Africa” and has spoken extensively on the subject at various industry seminars over the years. He is on the Executive Committee of India’s Software Export Promotion Council. Prior to founding ESS, he worked in technology as well other industry domains. He is an alumnus of the Indian Institute of Management, Ahmedabad. In his leisure time, Mr. Agarwala loves reading and is also an avid gardener.