Cloud Vendors, The Great Disruptors, Face Disruption From Blockchain

By Joe McKendrick  for Forbes

Over the past seven years or so, an emerging generation of cloud companies turned the tech industry on its head. Now, these cloud companies face their own disruption — courtesy of blockchain technology. Unless these providers develop offerings that leverage blockchain, they may see a new generation of blockchain-savvy vendors take their place. 

That’s the word from EY, which just published an analysis that details how blockchain threatens existing vertical tech vendors, noting that companies “that responded too slowly to the mobile or cloud disruptions paid a high price.” The same could hold true with blockchain technology, which eliminates the middleman in managing transactions, contracts and exchanging data between organizations. Blockchain “records transactions in a way that enables it to automate trusted activity among digitally networked peers,” the report adds. “Blockchain technology has the potential to streamline and accelerate business processes, increase cybersecurity and reduce or eliminate the roles of trusted intermediaries (or centralized authorities) in industry after industry.”

That’s because blockchains serve as “public or private distributed databases containing records of every transaction ever made among participants in a given network, encrypted into time-stamped blocks via a cryptographic hash function.” The technology supports a feature called “smart contracts” that validate whether terms are met by each party.

There are many obstacles to blockchain, in terms of perceptions and practical technical issues. The blockchain revolution is still unfolding, and the scope of its impact on the tech sector has yet to be determined.

Vertical software/SaaS and services are among the most vulnerable, the EY analysis states. “Perhaps most obvious is the disruptive threat to companies providing technologies to specific industries, whether financial services, energy, health care or agriculture.” Cloud infrastructure providers also face disruption. “Blockchains are a particularly good mechanism for distributing a computing workload,” the EY report states. “Already, a blockchain start-up offers ‘distributed cloud storage.’”

The report’s authors covered several possible blockchain scenarios:

“Embedded” finance: While blockchain creates greater speed and efficiency in financial transactions, “the long-term blockchain vision is of markets that run by themselves, with finance embedded directly into the natural activities occurring within those markets,” the report’s authors suggest.

Automotive: EY suggests that blockchain could host “all-inclusive records of an automotive ecosystem” — ownership, financing, registration, insurance and service transactions. “Such a blockchain would make it possible for a manufacturer of driverless cars, for example, to place its cars in a ride-hailing company’s fleet. Every time the car is paid for a ride, a blockchain smart contract with embedded financing delivers a revenue share to the manufacturer.”

Healthcare: Blockchain records payments “among the insurer, patient and provider,” the report observes. “Even though no one party owns or controls all the information, smart contracts could define circumstances in which private information is shared, such as releasing medical information to emergency responders treating accident victims.”

Digital rights: Blockchain could dampen digital piracy all over the world, the EY report suggests. “If anytime anybody uses a music file anywhere in the world, that action is automatically recorded by a public blockchain, and the transaction can be validated, you will no longer have digital rights theft.”

New credit markets: Most loan applications are inhibited by transaction costs, EY states. “By taking so much cost out of transactions, blockchain could open up lending to whole new classes of lower-value assets.”

“Industrial mashups:” Blockchains could form the foundation of the emerging Industrial Internet of Things, EY states. “Blockchain-powered industrial IoT networks will allow us to connect industrial assets — everything from shipping containers to MRI machines to construction equipment — into real-time digital marketplaces where we can make better use of them.”

First appeared at Forbes