Business at the Speed of Trust. Can Blockchain enhance SaaS?
“Business happens at the speed of trust.”
Parker Harris, Co-Founder & CTO, Salesforce.com
Up to now Blockchain has really been solving inter-company problems between entities that don’t fully ‘trust’ each other. SaaS or Software as a Service has solved mostly intra-company issues - going wall to wall at the front end covering sales, marketing, service and HR for instance, and now increasing at the back-end too with systems like ERP (Enterprise Resource Planning). SaaS is a well established, mature model for licensing and delivering software. It’s a subscription based model, and even though some these days would argue that SaaS is now just about the rental payment aspect, most of us still think of true SaaS as being centrally hosted in the cloud. SaaS requires speed and scalability. In its early days trust was a big barrier for companies adopting SaaS, so much so that Salesforce, in its early days, created a website that still gives customers live updates on global systems status and data security.
Blockchain is all about trust. However, as of yet, it cannot supply the speed and scalability most B2B use cases demand. In enterprise software terms blockchain is heavily focused on the infrastructure and platform layers, but there’s not much happening in the applications layer.
“Within the 200 ICOs I analysed, there are tens of next-generation infrastructure players and a twenty or more platforms-as-a-service.”
Tomasz Tunguz, Managing Director at Redpoint
Blockchain has a huge opportunity to disrupt most industries including supply chain management, healthcare, real estate, government and anything connected with IoT.
I sense a high degree of caution around blockchain when talking with major entrepreneurs and technologists privately. Yet at large tech events I hear an awful lot of ‘we’re going to utterly change the world tomorrow’ startup positivity around blockchain. Euro signs in their pupils. The truth has a habit of residing somewhere between 2 extremes. Technologists and engineers are likely to praise blockchain and build communities around it for a quite some time before it has the scalability, speed and proven value delivery in B2B. If decentralised software apps evolve into a heavy presence in the B2B SaaS space, their sweet-spot will be where there’s a need for a secure, shared, trusted, database.
I recently introduced a talk on the SaaS Monster stage at RISE in Hong Kong called ‘Is SaaS the new kid on the Blockchain?’. It was a conversation between Ray Valdes, Chief Transformation Officer from ConsenSys (building blockchain enabled infrastructure, applications, and practices solutions) and Initialized Capital’s Kim-Mai Cutler, partner at Initialized Capital. The moderator was Holly Stephens, CMO of Beam.
Valdes states that about 99% of blockchain POCs (Proof of Concepts) never leave the innovation lab and that 90% of Blockchain projects are really centralised projects dressed in decentralised clothing. He feels that the immutable trusted record of valuable data from supply chain shipping record or bill of materials or medical records or identity records will be hugely valuable. He says large records like medical records will not be 100% on the blockchain in the near future because they are too large, but there will be a cryptographic hash associated to this for trust.
“Blockchain is for value exchange where there are many participants who don’t know each other, don’t trust each other, don’t even know of each other, but they need to do business transactions with each other.”
Ray Valdes, Chief Tranformation Officer, ConsenSys
Valdes believes genuine disruption will happen outside of traditional business models by bringing entities together that would not come together normally and with new business models and new types of value exchanges. He feels that labyrinthine supply chains exchanging a lot of value between a lot of participants (some competitors) in industries like pharma, food and auto-parts will be areas where blockchain can be extremely disruptive.
Cutler advised startups not to jump into Blockchain without an idea that they can bring 5x or 10x improvement in some key measure of performance. This is in the context of the challenges Blockchain has as an immature technology regarding scale and speed. In most cases where Initialized Capital sees portfolio companies considering using Blockchain, it’s not enterprise companies, rather consumer facing companies looking to re-engage a large user base in a novel way. Although she alluded to the advantages of transparency and accountability built into blockchain, one does not sense a huge appetite for mixing Blockchain and B2B SaaS at this current time from Cutler.
Right now Blockchain and SaaS are largely very separate communities. They don’t even use the same tools in their startups/scale-ups and in SaaS’s case mature companies. LinkedIn and Twitter are big parts of the B2B SaaS world, but especially the former for business development, account based selling etc. In the blockchain world, Facebook is more important. A huge percentage of B2B SaaS companies use Slack for team collaboration, while many blockchain startups are using different services for this, like Discord. I also discovered when I MC’d the Crypto stage at Money Conf in Dublin that everyone in crypto uses Telegram. I suspect they initially chose Telegram for speed and security and then it became a standard in that domain. Having said that Telegram is designated a leader in the G2 Crowd quadrant for Team Collaboration Software (as is Slack in fairness).
These separations are not a barrier of any real significance to Blockchain disrupting or enhancing B2B SaaS, but they clearly indicate that these 2 worlds operate separately for the most part at the moment. I suspect it is only a matter of time before the twain become more deeply entwined.
One of the SaaS verticals that blockchain is predicted to heavily disrupt is government. Auditing, compliance, distributing benefits, tax collection and government borrowing could all be revolutionised by blockchain.
“The basic idea behind blockchain is that one can trust the system as a whole without necessarily trusting any of the participants.”
Kevin Werbach, Professor of Legal Studies & Business Ethics, Wharton
The leader in this may turn out to be one of the smallest countries in the world, Estonia. In reference to Valdes’s allusion to blockchain and health at RISE, this technology is indeed just about to impact one national service. Anyone that has visited a doctor in Estonia will have an online, trackable e-health record. KSI Blockchain technology is close to being rolled out to enhance this system in the near future, with the goal to ensure data integrity and protect against internal threats to the data. I know this because I’m a digital resident of that country and track everything happening in the digital domain there. It holds a lot of attraction for non-EU citizens as it enables them to remotely start and manage an international business in a trusted EU environment. I don’t need the residency as I’m an Irish citizen, but I joined because I find the project interesting. Estonia, which has a population of just 1.3 million, was targeting a long-term goal of 10 Million e-residents. It has since pulled that goal back to the a curious target number of 989,000 e-residents (I notice this is almost precisely 75% of the population).
On the e-Estonia website it describes e-Residency as “a new digital nation for global citizens, powered by the Republic of Estonia.” The irony is that recent EU research reveals Estonia to be one of the least welcoming countries in the EU to immigrants. Or maybe it’s not ironic at all. Perhaps this is part of the attraction to building a large population of remote residents. In this current climate of isolationism, I hope humans will evolve a more distributed, decentralised and open mentality. But maybe this current climate of distrust in Estonia helps drive its pioneering foray into blockchain, cloud and digital identity. A silver lined cloud.
Blockchain is here. It’s not going to disappear. It solves that huge business challenge. Trust. Right now the technology is too slow, cumbersome and environmentally unfriendly. And unsolved problems with perfectly predictable timelines can never exist. But there’s an inevitability about the rise of blockchain in the B2B SaaS world.
“Cause you can’t unring a bell.”
Tom Waits
If you want to see the full conversation from RISE Hong Kong, please check this out Is SaaS the new kid on the Blockchain? RISE is part of the family of amazing events from the Web Summit people. There’s a SaaS Monster stage at Web Summit in Lisbon, Collision in Toronto and RISE in Honk Kong.
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Other References:
How the Blockchain can Transform Government by Kevin Werbach
10 Things to Expect When Moving from a Traditional Startup to a Blockchain Company by Jon Hearty
The impact of Blockchain on SaaS by Tom Tunguz
Welcome to the Blockchain Nation by Kaspar Korjus
