As enterprises look to deploy distributed ledgers, the industry's largest IT providers have launched blockchain-as-a-service (BaaS), offering a way to test the nascent technology without the cost or risk of deploying it in-house.
The BaaS offerings could help companies who don't want to build out new infrastructure or try to find in-house developers, which are in hot demand.
"The thing to be thinking about is that we're still in the early innings of this blockchain wave," said Bill Fearnley Jr., IDC's research director for Worldwide Blockchain Strategies. "There are very few people with multiple years of deep, hands-on experience."
While heavily hyped, blockchain technology – which gained its initial notoriety from bitcoin cryptocurrency – has the potential to offer a new paradigm for the way information is shared; tech vendors and companies are rushing to figure out how they can use the distributed ledger technology to save time and admin costs.
BaaS offerings are particularly attractive because many enterprises can look to their current cloud providers to offer them use of the nascent technology.
"As with any new technology, there is a learning curve as enterprise customers put it into production," Fearnley said. "One advantage of partnering with a BaaS provider is users can leverage the lessons learned by the provider to help make their systems more secure."
BaaS providers are also acting as consultants on the technology, Fearnley said.
In 2015, Microsoft became one of the first software vendors to offer BaaS on its Azure cloud platform. The Azure cloud service is open to a variety of blockchain protocols, supporting simple, Unspent Transaction Output-based protocols (UTXO) like Hyperledger; more sophisticated Smart Contract-based protocols like Ethereum; and others as they are developed, Microsoft said via email.
Currently, Azure supports distributed ledgers such as Ethereum, Hyperledger Fabric, R3 Corda, Quorum, Chain Core and BlockApps.
Last week, Hewlett-Packard Enterprise (HPE) joined a growing number of tech vendors who this year began offering BaaS, most of which are aimed at financial services firms.
HPE plans to offer a flexible charging model, similar to other BaaS offerings, with prices based on the server node, CPU or core.
HPE's new blockchain SaaS offering is based on Corda, a blockchain platform developed by New-York-based banking consortium R3. R3's Corda is the biggest commercial consortium among banks, insurers and others in a blockchain environment, according to Martha Bennet, a principal analyst with Forrester Research.
FinTech firms have been among the first to embrace blockchain.
Corda became an open-source distributed ledger when R3 gave the code over to the Linux Foundation's Hyperledger development project.
Earlier this year, the Hyperledger Project released Fabric 1.0, a collaboration tool for building out blockchain-based business networks.
SAP also launched its BaaS offering earlier this year on its Leonardo digital software platform.
Paul Brody, Ernst & Young's (EY) Global Innovation Leader for Blockchain Technology, said the BaaS platforms will make it easier for companies to both test and deploy distributed ledgers.
"We're testing out all the development and deployment offerings of these different clouds and we've just launched our OpsChain [operations and supply chain] offering on SAP's cloud platform and SAP Leonardo," Brody said via email. "Our hypothesis is that while the BaaS/SaaS...deployment platforms are very useful and make management and deployment easy, it's integration to ERP that will make it possible for enterprises to take full advantage of the value created by blockchains."
Because companies run their businesses off the processes in ERP, asking them to move key processes off those system can make a blockchain deployment less appealing, Brody added.
For example, a company attempting to deploy a blockchain-based procurement system will already have carefully tailored ERP systems from vendors such as SAP to ensure they only buy from approved vendors and that only authorized users can approve purchases and payments.
"EY's OpsChain system allows companies to manage complex multi-party procurement arrangements through a blockchain and do things like capture every available volume discount and track materials as they come through the supply chain," Brody said. "However, the solution value would be somewhat diminished if the company had to go and re-build all their procurement rules in our blockchain system."
By integrating its OpsChain system into SAP's BaaS, Brody said, EY's buyers can see, approve and pay for procurement activities within their existing business rules and systems, but get all the benefits of blockchain, such as its innate security and distributed nature.
As secure as blockchain is purported to be, it is not without its problems. That's because it's built atop software that serves specific purposes, such as mobile payments, healthcare record exchanges, or even as an electronic bill of lading for cargo shipments. As a result, blockchain depends on application software and cryptography.
The problem: There are hundreds of start-ups developing blockchain technology that don't necessarily use tried-and-tested algorithms.
Last week, for example, hundreds of millions of dollars in Ethereum cryptocurrency, called Ether, was frozen through a coding vulnerability that allowed one user to lockdown up to $300 million in other people's money.
"As recent headlines would suggest, this makes testing especially important to try to see what happens when you put real data and real connections together," Fearnley said.
For most enterprises, blockchain will not likely be a do-it-yourself enterprise," Fearnley said. While there are some "interesting and powerful innovations" that come with the distributed ledger, "the challenge will be developing a staff to build out and maintain the network."