Published on: January 25, 2022
By now, you’ve probably heard the term blockchain in the news or read about it in a business journal. Blockchain is a permanent, immutable record of transactions. It can be used for anything that can benefit from being permanently recorded. For example, real estate transactions are being recorded on blockchain to ensure permanent title transfer records that cannot be forged or lost.
But will enterprise resource planning ever move to blockchain? Why or why not? Will this be the year when ERP joins forces with blockchain to create a unique new niche for record keeping?
The Intersection of ERP and Blockchain
Although at first glance the two may seem to be apples and oranges, ERP actually does have a lot in common with blockchain. Both systems purport to provide a common source of data, one that anyone can view at any time for the authoritative answer to a question. In this example, both blockchain and ERP provide a single source of information.
Another area in which ERP and blockchain intersect is in the question of security. ERP security is of the utmost important to many businesses. Their financial records, customer records, and other important data is often stored within the files of an ERP system. Blockchain’s “superpower” is its unique difficulty for anyone to hack into a chain to steal the data.
Blockchains work by forming blocks of data, then connecting them (chaining). Hackers would have to break into each unique block of data in order to crack the chain, something that is virtually impossible. Storing records on blockchain offers some of the best security technology available.
Is the Business World Ready for Widespread Blockchain ERP Adoption?
The drawbacks right now to widespread blockchain adoption are twofold. First, blockchain transactions cost money to pay for software and computer usage to complete and confirm each transaction. These costs can quickly add up, making regular, routine use of blockchain technology to record all transactions on a permanent ledger impractical.
Second, adding transactions to an existing ledger might make it easier, but can also make it a slow process. Ask anyone who does cryptocurrency trading about speed; some days, the system moves rapidly, and other days, it’s extremely slow. Businesses rely on consistent results, and blockchain transactions may not be as consistently fast as businesses need.
So, we’re probably not quite ready yet for widespread blockchain ERP adoption throughout the business world, but with each day, new advances are made in technology that move us closer to that goal.
One new way in which blockchain technology could potentially be used with enterprise resource planning is in the realm of smart contracts. Smart contracts are sequences of computer codes that routinely and reliably carry out transactions. The rules governing smart contracts are created when the contract is made, and automatically carry out anytime a transaction is made through the smart contract rules.
Companies are already tapping into smart contracts in several ways.
- Trade finance: Companies are using smart contracts to handle trade finance transactions. Automatic approvals and calculations can save considerable manpower and time.
- Record keeping: Healthcare industry experts are watching this area closely, because smart contracts offer a unique way of keeping patient records secure.
- Mortgages: Smart contracts can be used for mortgage approval contracts, financing, and more.
- Insurance: Smart contracts are being explored to enact policies and initiate policy terms and renewals.
It’s important to keep up to date on technology since advances in the realm of ERP and blockchain and smart contracts may offer competitive advantages. Who would have thought that in just a few years we would be talking about moving things like mortgages and insurance into computer-based code? Maybe someday soon, your industry will be completing transactions in a peer-to-peer network.