SAP and Microsoft announced a blockchain technology partnership at SAP TechEd 2019 in Las Vegas. Joint customers of the two companies will benefit from increased flexibility to construct and implement blockchain solutions leveraging SAP Cloud Platform Blockchain service on Microsoft Azure’s cloud infrastructure and linked with the Azure Blockchain Service.
Here, we share some of our thoughts on how the Microsoft-SAP blockchain collaboration will affect SAP customers.
At its simplest, blockchain provides a distributed ledger system that takes note of who owns what at a given time in a virtually unalterable record across a peer-to-peer network of synchronized computers. That means that multiple businesses, organizations, regulators, or individuals can track transactions such as product shipments, land titles, loans, and logistics manifests in a trustworthy system where they all see the same accurate, up-to-date information at the same time. Having such a trustworthy system empowers stakeholders to distinguish between genuine legitimate assets vs. counterfeits.
Blockchain networks can run in four primary ways: as a consortium, semi-privately, privately, or publicly. Public blockchains, such as Bitcoin or Ethereum, operate on a “permissionless” basis, whereby users can remain anonymous, but anyone can read every transaction. In private blockchains, a single organization controls the network and determines who can read it and submit transactions. Organizations often use private blockchains for PoCs but not for actual operations. In semi-private blockchains, a single company grants access to users that meet pre-determined criteria. Governments and some larger corporations with negotiating power often prefer semi-private networks. SAP and Microsoft prefer consortium networks, which let a pre-selected group of companies read and submit transactions. Consortiums are well suited to support supply chains and B2B networks.
Combining Microsoft and SAP’s blockchain consortium solutions empowers customers to form consortiums with companies running either Microsoft Azure Blockchain Service or SAP Cloud Platform Blockchain Solution.
Of course, Microsoft and SAP’s partnership runs much deeper than simply blockchain. Microsoft Azure remains the most popular hyperscale environment in which to run SAP systems. Moving to a hyperscale cloud means that the company no longer controls the data center but moves an entire SAP instance into a multi-tenant cloud data center operated by the hyperscale provider. This moves liability for its availability to that provider, who will usually guarantee an SLA of 99.99% availability, thereby removing much of the risk of unplanned downtime.
The two companies also announced an integration between Azure IoT Hub and SAP Leonardo IoT back in February of 2019 at Mobile World Congress. This integration empowered joint customers to essentially merge data lakes of SAP data with those on Azure. At this point, joint customers could pull data from their Microsoft Intelligent Edge and Azure IoT Hub and provide business context within SAP Leonardo IoT and deploy SAP S4/HANA and SAP C/4HANA business requests and data governance rules to the edge in Microsoft Azure IoT Edge.
By combining the blockchain solutions with capabilities in IoT platforms, ERP systems, Transportation Management Systems (TMS), or Product Lifecycle Management (PLM), SAP customers could automate large portions of their operations to improve trust.
What Does This Mean for SAPinsiders?
Based on the news from Microsoft and SAP, the following will help SAP customers get more value out of their blockchain solutions:
- If your organization already participates in a blockchain consortium on either Azure or SAP Cloud Platform, investigate newly available partnership opportunities. You might find potential partners that the previous lack of interoperability originally excluded from your consortium.
- Re-evaluate the business case for blockchain and SAP ERP in the hyperscale. As SAP continues to deepen its partnerships with Microsoft and the other hyperscale providers, the benefits of running more systems and solutions in hyperscale environments only rise.
- Consult with a managed services provider that has experience maintaining SAP solutions in hyperscale environments. In one sense, deploying in the hyperscale provides the best of both worlds in fast deployment and retaining a certain level of customization for customers; however, it takes a specific skillset to manage ERP, blockchain, IoT, and other intelligent technologies in the hyperscale environment.
- Companies that operate supply chains should evaluate and pilot blockchain solutions now. “Smart contracts” based on blockchain have started to gain attention. Smart contracts trigger sales orders, payments, or other actions once the blockchain network confirms that conditions have met pre-determined values or ranges. For instance, when GPS data signals that a shipment has entered a specific warehouse, official ownership transfers and funds exchange hands. Or, when inventory drops below a certain level, the network searches for a supplier that can fulfill the predefined agreements and sends a sales order. Forming a consortium with suppliers with a combination of both SAP Cloud Platform Blockchain Service and Microsoft Azure Blockchain Service could simplify the processes of previously complex multichannel supply chains and lower operations costs tremendously.
- Insurance industry professionals should consider the opportunity for improving security and automation around claims. The insurance industry has a great opportunity to leverage blockchain technology. Highly sensitive insurance data could benefit from the increased security the blockchain technology affords. Further, it would help reduce fraudulent claims as it can utilize the smart contract feature of blockchain to help validate incoming data from clients.
Following this strategic guidance should help SAP customers get the most out of blockchain services in a way that improves performance and accelerates growth. For additional insights and lessons learned, look for the upcoming SAPinsider benchmark report “Blockchain Applications for the Supply Chain,” coming in January 2020.
Additionally, SAPinsider will host its Intelligent Customer-Driven Supply Chain conference in Orlando, Fla., November 6-8, 2019. SAP customers can register for the event here: https://www.sapinsiderevent.com/events/intelligent-customer-driven-supply-chain-orlando-2019/event-summary-5d17cbe9db3c4e09912db634c4b12279.aspx
Pierce Owen, VP, Research, SAPinsider, can be reached at Pierce.Owen@wispubs.com.