After you finish this blog, check out a video from Richard Gendal Brown to hear more on decentralised centralisation here.
How do you gain the benefits of the cloud without giving up control and power? Enterprise Blockchains like Corda are the key.
The Faustian Bargain
There is a wicked tradeoff at the heart of the IT industry: the cloud can transform your company’s economics but, by giving so much power and control to a small number of huge firms, are you handing over the keys to your future? And is this risk preventing even bigger market-level transformations from taking place?
Whilst an individual firm may be willing to move their workloads to the cloud, opportunities to remake markets for the twenty-first century stall because the idea of an entire industry handing over its commanding heights to the West-Coast giants seems unthinkable.
Unthinkable until now.
The marriage of centralised clouds with decentralised enterprise blockchains such as Corda could provide the answer. In this piece I explain how and why.
The power of five
IBM’s Thomas J Watson was widely ridiculed for his 1943 statement:
“There is a world market for maybe five computers.”
As we now know, he wasn’t wrong. He was just early. Very early.
When you look at the growth of Amazon Web Services, Microsoft Azure, Salesforce and others, it’s clear that there may indeed be a world market for just five or so computers: it’s just that they’re a little bit bigger than Watson perhaps anticipated.
The five world computers are the global platforms of AWS and Microsoft Azure for your own unique applications, and the “killer business application platforms” of a few others, such as Salesforce, on which your company’s workload is being ruthlessly optimised.
The future is one where public cloud utterly dominates and, in the long run, every business application in the world will run on one of these platforms. The days of corporate data centres and firms thinking they can run their IT infrastructure better than the big tech firms can on their behalf are coming to an end.
So far, so uncontroversial. But there’s an obvious implication that few people talk about…
Scary centralisation or new networks of trust?
Let’s take a really simple example: management of customer relationships.
Imagine all your client-facing activities are managed on a global CRM ‘computer’. You finally have the elusive single view of your customers. All the complexity and duplication of your old IT estate has been blown away. At last.
As a consequence, the CRM vendor controls your business logic and data. Such power!
This can seem scary but it’s usually not… these firms have a strong incentive to behave. They have reputations to protect and they do a really good job as a result.
After all, if you didn’t believe this, why would you trust them with so much valuable data?
And yet… there is an unspoken invisible line. And that line is at the boundary of the firm and the market in which it operates.
Consider the CRM example again. Given the cloud CRM vendors do such a good job with your data, why not go further?
Imagine your sales rep has just uploaded a customer’s business card. It’s likely that that very same company also runs the same CRM software and has uploaded a perfectly clean employee database. The correct data might even be processed on the same multi-tenant machine!
If that customer had given approval, why couldn’t their information just flow directly into your opportunity tracking system? After all, when that employee’s details change, don’t you and they have an interest in getting everything updated? Aren’t these data walls between firms just getting in the way?
And once you’ve made that sale, wouldn’t you like to know if your record of the contract matched that of the customer? Even better, wouldn’t you want these two versions to be reconciled and corrected?
You trust the cloud vendors, right? So why not do this?
But something strange happens at this point. People begin to get a little squeamish… The opportunity to run a single application to manage everything that happens in the entire market is so huge — and yet… it doesn’t happen.
It’s as if everybody is thinking:
“OK… yes… we do trust the major cloud vendors to look after our data. And it does seem a bit silly that multiple firms in the same industry all use the same vendor to manage the deals they’re executing between themselves… But we just can’t bring ourselves to go the extra step and reap the benefits of eliminating the duplication and potential for inconsistency and error by letting the cloud vendors bring all this data together on our behalf.”
The balance of power
And this squeamishness is entirely rational. Yes — you’re willing to delegate a lot of power and control to a third party. But the thing that gives you the confidence to do it is the knowledge that you could rescind that delegation.
You could move to a different provider or take the work back in house. You have the power of exit. But if you tied yourself into a model whereby a single firm was controlling the activity of a whole industry or market, their power would be so much greater. Your power of exit would simply be gone. It would be a subtle but decisive tilt in the balance of power.
So it doesn’t happen.
And so we find ourselves in this curious situation where power is delicately balanced… firms willingly give up their data and the associated control… but in order for this threat to switch away from a badly behaving firm to be credible you can’t go too far. You can’t cede too much control.
And this creates a massive inefficiency: you can continue along the IT industry’s relentless march to optimise the affairs of individual firms. But it’s hard to see how you could gain market-level optimisations without also ceding unpalatable levels of control and power.
So, even when an opportunity to reap huge savings or pursue amazing new opportunities through pooling the operations of an entire market into a centralised shared service arises, it’s extremely hard to justify taking the plunge: it’s hard enough changing supplier as a single firm. How much harder it would be to change supplier if it required all participants in the market to change at once!
Enterprise Blockchain can unlock the opportunity
But what if there was a way to achieve the benefits of standardising and optimising an entire industry but without giving up that power over the vendors who run the infrastructure and applications for you?
Now, it so happens that there is an entirely parallel phenomenon underway, intended to do just this: the emergence of Enterprise Blockchains.
Here’s the idea:
Imagine you could write and deploy applications that operated at the level of an entire industry — and hence enabled you to capture those savings and opportunities, and to serve your customers better — but where each participant in the resulting network retained control over their data, their business processes and decisions over where their business logic actually ran — on-premises or in the cloud.
This would seem to be the key, right?
We would have transformed the power-and-control problem back from a market-level question — where cloud is just too scary — to the firm-level — where cloud works perfectly!
This would mean we could write an application once for an entire industry — think of the simplification and reduction in errors and cost — just like the old days of centralised market utilities or monopoly service providers. But without the outsized control and power that comes from being that centralised operator.
And this is the opportunity that enterprise blockchains unlock, across multiple industries.
As I wrote last year when we launched Corda Enterprise, Markets are decentralised and the software that runs them should be too
Corda enables this through a seemingly small, but utterly transformational, innovation: “WYSIWIS”. Corda enables trading partners to know, for sure, that What You See Is What I See….
WYSIWIS allows us to know for sure that my business application, that I trust and control, is in sync with your business application, that you trust and control.
The same application but each of us in control of our own copy and hence in control of our own destiny. We each have the ability to deploy it how and where we like. We each retain the power to decide where our data lives and who controls it. And yet we still get the benefit of a standardised industry-wide application and business process.
And this is precisely what is happening today in multiple markets, with Corda.
For example, the syndicated lending market is deploying a common application and business process for information dispersal with Finastra Fusion LenderComm.
But each participant in that market, at their own timescale, at their own choice and with no risk of network-effect-driven lock-in, can now deploy their ‘node’ to the cloud provider of their choice. And that is precisely what is happening.
Some LenderComm participants run their Corda node on-premises, enabled by features like the Corda Firewall. Some participants run in their own Microsoft Azure and AWS instances, and others could even be hosted by Finastra themselves.
Each firm has that power to choose — and the power of exit that comes with it… whilst reaping the benefits of an optimised market-level application.
And notice something extraordinary: this reclaiming of power works, even if everybody deploys to the same cloud! Since each of them still has the ability to switch to another one if they, alone, decide to. The power of exit is retained.
That’s the power of building the application on the inherently decentralised and distributed technology of Corda.
So, we finally gain the benefits of a single big computer for the world. Watson’s vision can be realised. We can safely move our workloads — even our market-level workloads — to the cloud. And do so with complete freedom and without tipping over the power-and-control balance.
And we achieve this because each user of that service has complete freedom to move elsewhere, independent of their peers, but without compromising any of the benefits of participation in their market.
This is the world that Corda is enabling. It’s happening in syndicated lending. And reinsurance. And digital asset trading. And trade finance. And it is the key to supercharging the benefits of public cloud whilst retaining control where it should be: with you.
This is Corda: powering markets that put users in control.
Decentralised Centralisation: Enterprise Blockchains in the Era of Cloud was originally published in Corda on Medium, where people are continuing the conversation by highlighting and responding to this story.