Exclusive interview: SAP Ariba's Paul Devlin on the growing importance of blockchain
As the late Stephen R. Covey, business and leadership expert and keynote speaker, once remarked: “Trust is the highest form of human motivation. It brings out the very best in people.”
In a business relationship, trust is one of the most, if not the most, vital components.
No self-respecting organisation is going to continue to do business with another if trust has been grossly breached in any way.
And although most business-minded people can usually trust their gut as to whether they should begin to trade with someone, a strong bond of trust between organisations is something that takes quite a while to build up.
With blockchain technology, there is a guarantee of who you’re doing business with and an authenticity surrounding the transaction. That’s why Paul Devlin, SAP Ariba’s General Manager for EMEA and MEE, believes we are about to see a wave of transformation – not just in the procurement industry and across the supply chain, but in terms of global trade itself.
Devlin is clearly a big believer in the technology and recognises how disruptive it is. He also reckons it won’t be long until everyone is embracing it.
“Blockchain is enabling trust in technology almost like nothing else that exists today,” he says.
“It will really be at the root of all global asset movement and that will be regardless of which particular market or commodity we are talking about. In the way that we’ve just taken for granted the fact that we do 90% of our work today on a smartphone, we will think about blockchain in that way in a three-to-five-year window.
“It’s just going to be the way we do things because of the provenance, trust and guarantee that it offers.
“It will then be about how companies want to imagine and innovate the usage of that.”
But, for the uninitiated, what is blockchain? How does it work? And how does it engender the trust, provenance and guarantee that Devlin talks about?
“At its core, it’s a digital ledger of transactions, agreements, contracts, anything which really needs to be independently recorded and verified as to actually having happened,” he explains.
“The ledger is not stored in one place, it’s distributed throughout several-hundred systems globally so, today, it’s virtually impenetrable.
“If you think about some of the biggest issues that companies face, it is around provenance. It is around track and trace, it’s around recall of goods. Think of yourself as the buyer: ‘I know that I bought something, but how can I actually testify to the provenance of the thing that I bought actually being the thing that arrives in my warehouse or on my doorstep?’
“If I then take that a stage further, with track and trace today we can be very clear that something which was ordered has actually arrived in the warehouse. What you can never be clear about, is ‘was the thing that arrived in the warehouse the thing that actually shipped?’.
“’Or was I the victim of fraud?’ So, something legitimate actually arrived but the thing that was actually shipped wasn’t what arrived in the warehouse.
“This whole thing about provenance, actually being able to guarantee that the thing that you bought was what went into the warehouse and was the same thing that actually arrived, is where trust comes from.”
The technology is built upon the global cryptocurrency Bitcoin. Devlin points to the $330mn real estate business launched recently by British tycoon Michelle Mone in Dubai, where property can only be paid for by using Bitcoin, as an example of how the market is really beginning to embrace the security offered by the blockchain.
But that’s just one example of how the technology is currently being used, and he believes that there is potential for far more creative innovation pertaining to the supply chain.
Devlin says: “The transaction is instantaneous, you own that property the second you buy it. And the company that’s sold the property knows that they’ve got the money, they know who it has come from and that it was paid.
“Then, taking that more generally, companies can then ask themselves: by having that guarantee, provenance and trust, can I offer a better service to my customers or the market?
“If the answer to that is ‘yes’, then companies have to start to think about how they develop and move from the analog way of doing business to the digital way of doing business, with blockchain at its heart.
“Then it goes a step further to: ‘What is my purpose as a business and how do I guarantee the purpose, and ensure that it’s actually finding its way into supply chains?’
“An example would be how to guarantee that items being bought in a supply chain are free from parts of the supply chain which use slave labour or child labour. Or, guaranteeing to customers that this supply chain utilises diversity, minority-owned business or comes from supporting emerging countries.
“How do I take that purpose of the company and guarantee to the market that when you buy into it, it actually has a supply chain which guarantees that efficacy? That is what blockchain also brings.
“So, when you buy something, you know the money is safe. You know who the seller is, you can guarantee the thing that you know you were buying is indeed what arrives, and you can guarantee it was made ethically and comes from an ethical supply chain.
“If you start to apply that thinking to the marketplace, then the scope of potential is huge.”
SAP Ariba is already working with a number of companies looking at how the technology is going to improve their business and improve their supply chains. As well as that, the company hopes to launch sourcing intelligence and contract intelligence solutions in the not-too-distant future.
Devlin is passionate about technology, and it certainly ties in with the company’s philosophy of “enabling procurement with a purpose”, but does the Scotsman think that it will make money?
“My gut feeling tells me yes,” he says, after pondering the question for a moment.
“I think anything that engenders better trust and gives guarantees in a supply chain between businesses and between customers and businesses opens up borders.
“There are a lot of companies today who are maybe hesitant to do business in certain territories because they’re unsure of the regulation or the reputation that certain markets or certain places have.
“Anything you do that engenders trust can only open those markets up and that creates choice, which tends to improve competition, drive down pricing, bring more people into the market and improve innovation so that you’re then in that continuous cycle.
“In my mind, there is absolutely no doubt that it will impact companies’ bottom lines, and their top lines as well, with new markets that they will be able to go after, new opportunities that they will be able to pursue and, frankly, new customers that will come into their market because trust exists.”
And just how far does Devlin believe that this technology can be taken?
“I think companies will be limited by their own imagination,” he answers.
“More and more companies are realising if they’re going to do business in the digital age, then they’ve got to think about their company as a software company. They’re taking things that were once analog and figuring out how to digitise that thing or that process.
“If you think about blockchain in the middle of that, then it’s going to have a massive, massive impact.”
Japan Seeks to Revive Stalled Semiconductor Industry
Post-pandemic, Japan has seen the consequences of relying solely on foreign imports for its semiconductors. Over 64.2% of its chips are usually imported from South Korea and Taiwan, leaving the country dependent on its neighbours. Industries from auto manufacturers to consumer electronics firms wait for chips, to no avail. But now, the Japanese government looks likely to put real funding behind its semiconductor industry, with top officials emphasising their support.
Domestic supply chains have never been more important. Rather than remain tied to international shipping routes during shortages and delays, governments are doing everything in their power to develop local lines of supply. But the question remains: can Japan pull it off?
How Will Japan Pay For It?
Herein lies our first issue. Japan’s debt has rapidly increased over the past few years, and the semiconductor industry will need roughly a trillion yen—US$9bn—in this fiscal year alone. This cost, however, pales in comparison to what Japan could lose if it fails to keep up with Europe and the US. Both nations have launched aggressive funding measures to revive their local semiconductor industries. And if Japan refuses to invest due to its debt, it could slow down progress in fields ranging from artificial intelligence to autonomous driving.
According to Tetsuro Higashi, the former president of Tokyo Electron and Japan’s top government advisor in semiconductor strategy, ‘If we miss this opportunity now, there may not be another one’. Yet one advanced wafer fabrication factory can cost more than US$10bn, and any money poured into the industry will go fast. That’s why Japan, rather than invest trillions and trillions in failing domestic firms, is considering a second option.
What Do They Plan To Do?
Japan now intends to look abroad and convince overseas chip foundries to come to its shores. Its past failures mostly centred on trying to merge domestic firms that were already going through tough times. ‘This sort of made-in-Japan self-reliance approach hasn’t worked out well’, said Kazumi Nishikawa, a director at the Ministry of Economy, Trade, and Industry’s IT division. ‘This time the goal is to offer a strong incentive for an overseas logic foundry to come to Japan’.
As follows, Japan will now reach out to industry partners and leaders in other countries, including the industry heavyweight Taiwan Semiconductor Manufacturing Co. (TSMC), to build Japanese bases. According to the South China Morning Post, the heart of Japan’s mission is a US$337.2mn research and development project in Tsukuba that will involve TSMC and more than 20 Japanese firms. ‘I think we need to cooperate with our overseas counterparts’, said Akira Amari, a senior member of the ruling Liberal Democratic Party. ‘[And] TSMC is the world’s top logic chipmaker’.
Indeed, if that’s Japan’s strategy, the future looks bright. TSMC recently set up a venture near Tokyo to research energy-efficient 3D chips with several Japanese partners. And in the future, the multinational chipmaker may consider expanding its Japanese operations—that is, if government incentives pave the path forward.