The times are changing – also for IBM: Blockchain as a proof point

The days are over when IT heavyweights could wait and see what new technology might be most promising and then put resources behind the new concept to end up dominating it. The PC industry was one of the last good examples for IBM. Many PC-like concepts existed before IBM entered the market, set the rules and standards, and made good money from it over many years (before it was finally sold to Lenovo in a smart move). Today, the simple rule seems to be: The winner takes it all.

And the winner is, in many cases, the first one to act. The speed and agility of Internet-dominated business concepts no longer allow to adopt a comfortable “wait and see" position and eventually enter the emerging market late but with enough resources. Once a new technology has gained critical mass, the second player is very often already a loser, not to mention the rest. Examples are Apple’s iPhone, Facebook, Netflix, Twitter and others. Dedication, focus and the absolute will to reach critical mass even without making money are the new business fundamentals. Better management, more resources and well established enterprise customer relationships no longer do the trick in times when new technologies are mostly consumer-driven to start with.

IBM read the signs of the times early on when making huge commitments to the open source movement more than a decade ago. IBM has reconfirmed this strategy since, trying to join open source initiatives early on and become a member of the standards defining bodies. There are many examples of this approach, such as Linux, OpenStack or Docker.

One of IBM’s more recent steps under this strategy is its massive engagement with the blockchain technology, a major project of the Linux Foundation, which became known through the crypto currency Bitcoin. Currently, most blockchain initiatives are related to payments and a distributed ledger approach. However, IBM envisions using the technology not only in the financial industry – where it currently scares all financial institutions – but in other industries as well, such as retail, logistics, government, healthcare, to name but a few. IBM:

  • Offers a toolbox for the blockchain technology on its development and deployment platform Bluemix;
  • Proposes a combination with its Watson and Internet of Things initiative to follow locations of RFID tags;
  • Offers Blockchain as a Service (BaaS) on the IBM Cloud;
  • Is a founding member of the Linux Foundation Hyperledger Project;
  • Contributed 44,000 lines of code to the Hyperledger Project and has dedicated more than 35 researchers in IBM’s labs to the Linux Foundation projects;
  • Has assigned more than 100 architects with making blockchain robust end enterprise-ready;
  • Is building IBM Garages in London, New York, Singapore and Tokyo to drive the adoption of blockchain within and outside its customer base;
  • Offers services around blockchain through its services arm GBS and IBM iX (IBM’s Interactive Experience agencies)

This engagement is no doubt massive, even for IBM. But time is running out. Although IBM is focusing on the infrastructure and standards side – e.g., by trying to link different blockchain approaches (e.g., Hyperledger and Blognet), it intends to become a hub and, eventually, exchange for linking different blockchain implementations. This would also support its strategy of growing more and more in the software applications business and BPO. This may become a replacement for its long-standing, successful EDI exchange offerings. And it is at the heart of IBM's most loyal customer base, the financial industry; a series of partnerships (e.g., Japan Exchange Group) have been announced already .

However, time is running out fast. Just recently, Microsoft announced a major deal with the world’s leading banks, the R3 consortium, a consortium of 43 financial institutions. Although it may take another year to make blockchain “bank-ready” and another three to five years for significant commercial adoption to take place, IBM needs to speed up, or it may only be the second best. Microsoft wants every blockchain to run on its Azure cloud offering. “The race is on”, “the more agile will win over the stronger one”, and “the winner will take it all”. IBM, it is time to roll up the sleeves again for a good start into the next 100 years. Maybe we’ll see an “International Blockchain Machines” soon.