HiTech Insights ol 1 - Tata Consultancy Services...Within the next year, we expect blockchain technology to transcend the hype stage and become deployable across a host of real-world

Vol 1

HiTech Insights

TMBlockchain in the Business 4.0 World

TM

Intelligent, Agile, Automated, and on the Cloud

Foreword

Riding the Blockchain Wave for High Tech

Digital Advertising, Blockchain(ed)

Rekindle Loyalty Programs using Blockchain

Harness Abundance the Blockchain Way

Contents


Dear Readers,

TMIn this digital era, as our customers advance in their Business 4.0 journeys, blockchain has emerged to be a strong transformation enabler. Today, blockchain is single handedly disrupting the high tech industry. Given its potential to redefine business, a growing number of high tech companies are now adopting it across areas, such as supply chain management, loyalty and reward programs, digital rights management, audit trail compliance, digital identity management, and HR background checks.

Many companies are already developing and deploying blockchain based business solutions. A leading software firm plans to leverage it to develop a digital ID platform to safeguard sensitive information. Another conglomerate plans to use blockchain to build a suite of educational services to secure student records. Yet another global corporation seeks to create a blockchain-based records system that securely revises electronic documents and then, there is an industrial electronics company that wants to address the threat of spare parts counterfeiting by increasing transparency and visibility into its supply chain, using blockchain.

We understand that every emerging technology has the potential to open up new revenue generation streams for an enterprise, reduce the probability of risk, enhance the end users’ experience, and in doing all of this, strengthen its brand image.This means, now, is the best time to invest in blockchain-based training across different development layers, partner platforms, and integrations with enterprise systems.

This edition of ‘HiTech Insights' will introduce you to the possibilities we see at TCS in using blockchain for enterprise risk management, supply chain management, marketing, HR, payroll and security.

I hope you find this journal interesting. We are excited about the opportunities that blockchain has to offer and look forward to exploring it further along with you.

Warm regards,Nagaraj Ijari


Abstract

Given the disruptive power of blockchain, a growing number of high tech

companies are deploying proofs of concept across different enterprise scenarios.

If your enterprise is looking to cash in on this technology, it is important to first

determine the merits of each use case and understand the key challenges and

solutions available. As the blockchain revolution gains momentum, we discuss

the possibilities for the high tech industry through six use cases.

Riding the BlockchainWave for High Tech

Deployment of Blockchain: Non-financial Applications are Gaining Traction

1According to the World Economic Forum, 10% of the world’s GDP might be stored on blockchain by 2027. Although the digital currency bitcoin was developed to disrupt the financial sector, its underlying blockchain technology is now being adopted for a number of non-financial scenarios. The distributed ledger technology ensures accountability, immutability, auditability, and integrity of data, making it ideal for developing such use cases.

In the high tech industry, blockchain is relevant for many applications, like supply chain, loyalty and reward programs, digital rights management, audit trail compliance, digital identity, and HR background checks. However, enterprise blockchain is still maturing, and there have been no largescale production level deployments so far. To succeed with enterprise blockchain, organizations require a holistic, well thought out approach. The path to selecting the right architectures and technologies is likely to involve a series of trials, errors, and innovations.

Assessing the Applicability of Enterprise Blockchain

Before embarking on blockchain initiatives, organizations must first establish whether their use cases merit the use of blockchain. But what criteria should high tech companies use to decide this?

Organizations can use blockchain in cases where trust is difficult to establish between parties in a transaction value chain. Transaction value chains involving multiple parties across different regions and varied systems of reconciliation, or those that require immutability and transparency into each change of state are ripe for blockchain disruption. Blockchain is also ideal if organizations need to significantly reduce the settlement time between involved parties, as it helps eliminate intermediate checks.

To meet enterprise requirements, blockchain solutions must address high-level concerns related to architectural and implementation challenges, and ensure scalability, security, and interoperability. Some of the key factors to be considered for a successful implementation include:

1) Only private or permissioned blockchain may work in an enterprise setting2) Open source technologies might be preferable3) Blockchain solutions should ideally:

a. Have no native currency such as bitcoin or etherb. Support public key infrastructure-based identity management and selective disclosures for auditc. Ensure privacy and confidentiality through digital certificates and encryptiond. Ensure smart contracts are pluggable to enable easy deployment on other blockchain platformse. Deploy an efficient and secure, role-based consensus algorithm that is adaptable to evolving business rules


Compelling Use Cases for the High Tech Industry

Let’s look at some blockchain use cases across high tech industry segments such as computer platforms, technology services providers, electronics, and professional services providers.

Supply chain: Blockchain when coupled with IoT can dramatically transform today’s supply chain programs. It introduces provenance to the supply chain while increasing the levels of transparency and visibility. OEMs can use blockchain to detect spare parts counterfeiting, as well as eliminate or reduce reconciliation step. It can also allow customers to trace products from source to outlet for environmental or fair-trade concerns.

Audit trails: If enterprises standardize certain aspects of accounting on a private blockchain, auditors canautomatically verify the important data behind the financial transaction. A consensus algorithm can streamline the manual and time-consuming processes of financial statement reconciliation and attestation. Blockchain opens up the possibility of real-time auditing to save effort and time, helping to move away from the traditional sampling and interviewing process used for data verification. This can helpbuild trust with shareholders, regulators, and customers.

Customer loyalty and employee rewards: With blockchain, businesses can reimagine the technology underpinning loyalty programs to increase efficiency and engagement. Loyalty providers can control how and with whom customers use rewards, while providing customers a frictionless experience in accessing and managing benefits across program partners and vendors. Similarly, blockchain can also be leveraged to build an effective employee reward platform.

Digital rights management (DRM): Blockchain can help content creators establish information such as who the creator is, while sharing it immutably. It establishes ownership and makes the rights to a particular piece of content clear to everyone in the network. With a blockchainbased DRM solution, users will be required to establish their digital identity before they can open a piece of digital content on any device. For digital assets, the revenue can be directly credited to owners, based on asset usage policy.

KYC and AML: Professional services firms together with financial institutions can use digital ledgers to ensure that the clients they work with are not supporting money-laundering activities. However, it is also essential that in designing such a solution, the participating entities have access to only thedata that they require.

Human resources: To authenticate employment and education records, recruiters, educational institutes, and government agencies can use blockchain solutions. This will in turn increase hiring efficiency and result in the recruitment of candidates with genuine credentials.


Overcoming the Challenges in Blockchain Implementation

Since blockchain was primarily developed for crypto currencies, its adaptation for other industries is emerging slowly. Following are some of the issues that will need to be addressed for successful deployments:

a. Scalability: Bitcoin processes seven transactions per second as its protocol restricts the block size to1MB. However, the storage and computing power requirements for a centralized blockchain with fullnodes operationalized in a network can be very high. Organizations can therefore use pruning and efficientconsensus protocols or they can limit the data stored on the blockchain to just the essential data sets. For private blockchains, scalability might not be a major challenge as only a limited set of nodes run the transactions.

b. Smart contracts: In case of an erroneous text entry, the negative impact can be more damaging than atraditional contract as smart contracts only interpret the literal meaning in the code, not the underlyingintent. Enterprises entering into smart contracts should therefore ensure that the code is optimized at the input stage. They also need to be looked at from a regulatory and legal standpoint.

c. ERP systems integration: An enterprise scenario will require good integration with ERP, CRM, and othersystems. Standard, two-way data exchange between blockchain and existing enterprise systems will helpexpedite industry adoption.

d. Proven reference architectures: Reference architectures need to be created for blockchainintegration with the latest technologies across the business and front-end layers, since the underlyingtechnology is still bare metal. As integrations are built with Big Data, IoT, and machine learning systems,reference architectures will mature. Domain specific designs, leveraging Ethereum or Hyperledger stacks,are expected to be adopted (for instance R3 Corda for financial services).

e. Lack of pre-defined governance: In the absence of established rules or legal frameworks today, resolution of blockchain centric disputes is a challenge. With regulators working closely with the industry, universally accepted regulations are expected to be introduced for blockchain soon.

f. Absence of tools and knowledge repositories: There are limited tools and knowledge repositories forblockchain implementation. Given its high potential and the growing number of investments in blockchaintechnology, faster evolution is expected with respect to integrated development environments. There are more than 70 platforms and another dozen expected shortly. ² Smart contract languages such as Go and Solidity are quickly evolving.

g. Privacy: Existing blockchains are designed to be anonymous. However, in business, controls andpermissions are required, and organizations cannot deal with anonymous partners. Zero Knowledge Proof (ZKP), cryptographic, and segmentation based encryptions will have to be used to enhance privacy.


h. Lack of standards and interoperability:

Blockchain lacks globally approved standards and the path to ISO standardization is long. Open process standards on the other hand, might lack credibility. Interoperability is another issue. Leaders of various blockchain and distributed ledger projects have only recently started working collectively on what could become an interoperable network of services.


Join the Blockchain Revolution

Blockchain technologies offer a radical departure from the current transaction and recordkeeping mechanisms and can serve as a foundation of disruptive digital businesses for both established enterprises

3and startups. However, it will take some time for the technology to fully mature for largescaleenterprise level deployments. Within the next year, we expect blockchain technology to transcend the hype stage and become deployable across a host of real-world scenarios.

Many high tech and professional services companies have embarked on the journey to exploring distributed ledger technologies. While there is a lot of excitement around blockchain, its success hinges on the formation of consortiums or interactive networks that can help build new standards for its application and management. The role of system integrators in establishing interoperability, customizing platforms, and accelerating use case development cannot be over-emphasized. For companies looking to maintain an edge, now is the best time to invest in and leverage the disruptive power of blockchain.

About The AuthorSukriti Jalali

Sukriti Jalali heads the Blockchain and IoT initiatives within the HiTech business unit at Tata ConsultancyServices (TCS). She is responsible for developing IoT and blockchain solutions and services, supportingdigital and enterprise transformations. With over 22 years of experience, Jalali has played several key rolesacross consulting, technology solutions, delivery, program management, and pre-sales in the engineering and high tech domains.

She has presented papers at various industry forums including the Embedded World Conference and the Institute of Electrical and Electronics Engineers (IEEE). She holds a Bachelor’s degree in Technology from the National Institute of Technology, Kurukshetra, India.

References

[1] World Economic Forum, Deep Shift: Technology Tipping Points and Societal Impact, September 2015, accessed 30 June 2017, http://www3.weforum.org/docs/WEF_GAC15_Technological_Tipping_Points_report_2015.pdf[2] Gartner, The Evolving Landscape of Blockchain Technology Platforms, Ray Valdes, David Furlonger and Rajesh Kandaswamy, March 2017, accessed 30 June 2017, https://www. gartner.com/doc/3626317/evolving-landscape-blockchain-technology-platforms[3] Gartner, Practical Blockchain: A Gartner Trend Insight Report, David Furlonger and Ray Valdes, March 2017, accessed 30 June 2017, https://www.gartner.com/doc/3628617/ practical-blockchain-gartner-trend-insight


Advertising, Blockchain(ed)

Abstract

Digital ad spend has been steadily rising the world over, with the last decade

buzzing with activity on this front. However, the digital advertising landscape

is riddled with fraud and populated by intermediaries. For publishers,advertisers, and consumers, the current model of digital advertising is

inefficient and fraud prevention measures are also not cost-effective.

Blockchain can disrupt the digital advertising ecosystem to introduce trust

and transparency in the system. In addition, advertisers and publishers can

create mutually beneficial revenue models by eliminating intermediaries. In

this paper, we explore the possibilities blockchain technology offers in the

digital advertising space.

Advertising, Blockchain(ed)

The Limitations of the Current Digital Advertising Model

IAB’s recent Advertising Revenue Report reveals that the first quarter of 2017 saw the highest ever Q1 earnings for digital advertising in the US. At $19.6 billion, the spend was a whopping 23% more than what it

1was an year ago during the same period. However, despite the surge in spend, the existingdigital advertising model is inefficient for the advertiser, publisher, and the consumer. Why is this so?

Digital advertising uses incentive models such as pay-per-click or pay-per-action, and involves several intermediaries between the brand owner or advertiser and consumers (see Figure 1). Now, this value chain works well when there are genuine users or consumers at the end of the chain. It also offers scope forquick wins in terms of positioning ad content using real-time bidding of available ad space on publisher websites. However, this model has serious shortcomings.

There are no controls or regulatory bodies to oversee digital advertising. There is a lack of transparency into how the digital assets of an advertiser make their way through the chain. In addition, fraudulent activities to deceptively earn revenue by using bots, ghost sites, and inappropriate placements are becoming increasingly common. Typically, advertisers try to mitigate this problem by introducing auditors into theecosystem. Although this helps reduce the issue of fraud to an extent, it impacts the bottom line of the advertiser. Advertising fraud also significantly impacts customer experience. This is because advertisers are unable to accurately measure the effectiveness of an ad due to the false feedback in the system. And, this could lead to a diametrically opposite result to what is intended.

Using Blockchain to Transform Digital Advertising

Blockchain presents an opportunity to increase transparency in the digital advertising ecosystem by introducing smart contracts among advertisers and intermediaries (see Figure 2). How does the system work? First, the advertiser, intermediaries, and publishers form a blockchain consortium network. Thereafter, directly connected consortium members can create smart contracts among each other.


Let’s look at two ways in which blockchain can transform digital advertising.

Eliminating online ad fraud

Each member of the consortium has a minimum of one node in the blockchain network. Each transaction connected to the advertiser’s digital asset is verified at each of the nodes through smart contracts. The relevant transaction is stored on the blockchain and replicated on all the nodes - only if members form a consensus on the validity of the transaction across all the nodes. The validated block of transactions arethen added to the blockchain in a linear, chronological order, and in a cryptographically protected block. New blocks of validated transactions are connected to older blocks, making a chain of blocks that show every transaction in that blockchain’s history. The entire chain is continually synchronized so thatevery ledger in the network is the same, giving each member the ability to prove who owns what type of transaction, at any given time.

A distributed blockchain ledger for digital advertising can hold the following details of the transactions for each digital ad or asset:


Type of transaction, for example, online bids, approved bids, or type of action performed on the ad (click action or impression)Budget spent along the chainThe location the ad is being directed toDemographic details of the eventProof of human activity (e.g. IP address, speed of navigation between mouse clicks, Captcha, and so on)Conversion rate

Using machine learning algorithms for advanced detection mechanisms such as detection by signature patterns, DNS traffic monitoring, or behavioral analysis, patterns of fraudulent transactions can be detected on a blockchain. Each digital asset is allocated an identification tag and advertisers can audit andproactively search each transaction by intermediaries, to avoid fraud.

Establishing a direct link between advertiser and ad publisher

In the current digital advertising setup, intermediaries acquire relevance due to better marketing reach, market intelligence of publishers’ network, and channelizing capabilities. However, the transparency provided by intermediaries is limited to their version of truth. Blockchain provides unprecedented levels oftransparency as well as direct visibility into the marketing reach of ad exchanges and publishers. This presents an opportunity to optimize the number of intermediaries and evaluate ways to establish direct partnerships between advertisers and publishers (see Figure 3). By having the right set of platform capabilities based on blockchain and artificial intelligence, publishers can evaluate the possibility ofestablishing a direct link with advertisers. This leads to a simplified digital advertising ecosystem, newer revenue and operating models, and cost savings for both the parties, while providing advertisers faster feedback for course corrections.


New revenue models can be visualized based on this model. For example, advertisers can provide incentives to publishers based on outcomes or customer actions, leading to definite revenue for the advertiser. Due to the presence of fewer intermediaries, parties can work out a mutually beneficialrevenue sharing model to replace the current models. Here are some revenue models that can be explored:

Qualified prospect generation: Incentive is paid for anonymous leads with proof of human activityCommission: A percentage of revenue is attributable to a publisherHybrid revenue: Mix of cost-per-click and commission model

Publishers that provide such platform capabilities can act as disruptors, creating new business models and attracting the attention of major advertisers through their early-mover advantage.


Creating Ad Exchanges: Enhancing Transparency in the Digital Advertising Ecosystem

Ad exchanges that provide a programmatic interface for online bidding of advertising content between demand and supply side platforms can popularize the use of blockchain. Using blockchain, they can act as change agents to create a transparent digital advertising ecosystem. A case in point is theblockchain-based ad exchange platform created by Nasdaq. Built on Nasdaq technology, the New York Interactive Advertising Exchange (NYIAX) provides a blockchain-powered electronic marketplace for publishers, advertisers, and media buyers to buy and sell future advertising inventory as guaranteed

2contracts. NYIAX provides media buyers the advantage of a transparent and trusted market to buy and resell future advertising inventory. It provides publishers the capability to target higher revenue by holding higher CPMs and lowering fees. Advertisers benefit from a new way of discovering and purchasing inventory, and the ability to secure premium inventory in advance as a result of the higher transparency and forecasting capabilities enabled by blockchain.

Smart Self-regulation is the Name of the Game

The interoperability between blockchain networks is one area that is yet to be explored and understood in entirety. If advertisers, ad exchanges, and publishers each have their own private blockchain network, it should support interoperability to avoid redundancy. However, integration might not be easy andprotocols for recording shared transactions on blockchains that have their own cryptographic algorithms are yet to evolve. The important point for early movers to remember is the advantages of blockchain adoption overwhelm thesechallenges. In addition, with rapid advances in blockchain research, a solution for interoperability is likely to evolve sooner than later.

Blockchain can transform the digital advertising industry by infusing trust, security, and transparency into the entire value chain, to eliminate the inefficiencies in the current digital advertising model and drive higher value for publishers and advertisers. Even if governments or other global bodies are slow to regulate the digital advertising industry, blockchain can bring clarity with regard to regulations by enabling smart self regulation in the ecosystem.

About The AuthorSohan Prabhu

Sohan Prabhu is a Senior Consultant with TCS’ HiTech business unit. With over 18 years of IT and consultingexperience in customer relationship management, he has led large CRM programs and consulting engagements, and has extensively supported pre-sales teams. In addition, he brings vast domainknowledge in sales, marketing, and customer service. Prabhu holds a Bachelor of Technology degree in Computer Science from the Manipal Institute of Technology, Karnataka, India.

References

1. IAB, Press Release: Revenues Mark the Highest Q1 Earnings on Record (June 2017), Accessed June 30, 2017, https://www.iab.com/news/ad-revenues-hit-19-6b/2. NYIAX, The world’s first exchange to trade advertising contracts, Accessed June 30, 2017, http://www.nyiax.com


Rekindle Loyalty Programs using BlockchainAbstract

While certain organizations are still evaluating the potential impact of the blockchain technology, it is

quickly emerging as a disruptive force, especially in the context of loyalty and rewards programs. High tech

firms may have already leapfrogged into the pilot phase, testing this technology across various non-

financial functions. These firms could also consider creating a blockchain-powered loyalty network to

disrupt the traditional loyalty program practices—eliminating the limitations and inefficiencies, and

heightening customer experience with secure and immediate redemption options across vendors. This

paper brings forth the pain points associated with traditional loyalty programs, and highlights how

blockchain can help plug these gaps.

Loyalty and Rewards Program: As it Stands Today

In today’s hypercompetitive landscape, most enterprises are adopting customer-centric business models to gain market leadership. Customer engagement and retention being the core focus areas, loyalty programs are becoming increasingly effective as strategic investments. Unsurprisingly, consumers are highly appreciative of businesses who give them preferential treatment, rewarding them for their purchasing

1decisions—evident from the 2017 Colloquy Census. The report reveals that 3.8 billion customers hold memberships in customer loyalty programs in the US alone.

2While the loyalty management market will be valued at USD 2 4.59 billion by 2021 , many organizations are still not able to meaningfully engage with their customers. The high tech industry comprises product and service companies, and both these segments are very big on reward programs. For product companies, these programs focus on broadening the brand relationship through cross-selling of services, peripherals, or companion devices. For services on the other hand, reward programs aim to increase customers’ usage of the services offered.

Customer sentiments across various industry reports, however, paint a slightly grim picture. Some 57% members don’t know their reward points balance, only 25% members are satisfied with the level of effort

3needed to earn a reward , 33% highlight difficulties in using the rewards because of various terms and4conditions, and 36% say their points or rewards expire before they can use them.

One possible solution could be to integrate different programs (across brands) into a consolidated loyalty network—enabling customers to earn points from multiple schemes under one wallet that can be used at multiple outlets. But, this addresses only part of the problem. Moreover, businesses are often hesitant to share existing customers’ data. On the other hand, there are significant monetary implications as well, not tomention the challenges pertaining to the integration of siloed systems and databases, data security, and coordination of multiple intermediaries.


Blockchain to the Rescue

More commonly known as the technology behind the cryptocurrency Bitcoin, blockchain can be leveraged to enable a ledger of transactions across participant networks. However, leveraging its full potential will require real-time integration or synchronization with related applications, which in our case willinclude CRM, ERP, databases, e-wallets, and other loyalty program platforms.

With a blockchain-based loyalty program solution in place, enterprises stand to gain in terms of:

An integrated system: A common digital wallet can be used by participating loyalty providers to credit rewards. This provides complete control to providers and consumers alike—the former being able to set the rules that will govern how customers can use the rewards, and the latter having full controlto access and use these points as they deem fit. More importantly, this can also allow customers to transfer unused points to a friend or family member registered on the same loyalty network. This solution makes it easier for new partners and vendors to join the program, in turn, giving consumers more options to choose from.

Reduced OPEX: By making upfront investments on blockchain and saving costs in the long run, companies can drive down costs considerably. This technology will require an implementation plan centered on:

System management: Using smart contracts, businesses can minimize systemic errors and fraud to ensure secure and transparent transactions.

Transaction ease: More trust in the transactions will permit program providers to bring down minimum points’ requirements for redemption, in turn allowing customers to use points more frequently.

Lowered acquisition costs: When integrated with social media platforms, such a solution can help participating companies gain better access to customer sentiments, likes, and dislikes. Using this information, companies can customize their offerings to suit customer preferences, thereby serving as acustomer acquisition and retention mechanism. This way, the solution can help in bringing down the cost of acquiring and retaining customers.

Streamlined and transparent process: Near real-time credit of rewards points allows them to be readily redeemable, if the program provider allows. In addition, by maintaining a timestamped distribution database for every transaction, blockchain ensures each record is traceable and every entry is irreversible.

Such a platform of interlinked loyalty programs opens up new business opportunities, both for large and small operators. Large operators with already established programs can adopt new service models and offer value-added services to other businesses, while small operators can connect with other playersin the industry, and scale up their business. Figure 1 highlights the journey for partners on the loyalty network—opening up different avenues across touch points, for analytics, segmentation, personalization, sales prediction, cross-selling, up-selling, and so on.


Making a Case for a Blockchain-powered Loyalty Program in the High Tech Industry

As an early adopter of the blockchain technology for nonfinancial functions, high tech firms can benefit immensely by applying it to their loyalty programs.

Imagine a loyalty consortium comprising:

Company A: An imaging and printing products makerCompany B: A consumer electronics brandCompany C: An online electronic accessory retailer

Within this blockchain-powered network, Joe, a registered loyalty program customer of Company A, has bought a home computer. He earns some loyalty points on purchase. Later, he buys a gaming console from Company B and avails a concession using his existing wallet points. Here, he not just earns loyalty points, but also gets an online discount voucher for buying gaming accessories. He uses this voucher toupgrade his gaming controller from Company C’s ecommerce site and earns instant points. He then goes on to place an order for a Bluetooth speaker. This entire cycle reveals how Joe is able to use his points interchangeably and in real-time when interacting with different merchants.

Such a multi-channel network will enhance overall customer satisfaction through easy redemption services and improved loyalty experience. These companies can accordingly capture and analyze customer data for segmentation and profiling, and deliver personalized offers to customers. In the longer run, companies can launch bundled offerings and joint campaigns based on the segments identified. Not only does this extendthe reach to a larger customer base, it also helps cut down advertising and branding expenses, increase sales, and improve brand recall and customer stickiness.


No wonder, one of the world’s largest high tech conglomerates, Hitachi is already exploring blockchain for 5 its 150 million member rewards program. By testing this technology, the enterprise is keen to determine

whether it can meet highvolume transaction system demands and be used as an effective rewards distribution mechanism.

It is clear that the blockchain technology, through its smart contract feature, is poised to rewrite the rules of interaction between parties. For consumers, this becomes a one-stop shop for all their loyalty program needs. And for merchants and vendors, such a platform provides limitless possibilities through shared customer data, co-branding, and joint marketing campaigns.

A New Frontier for Brand Engagement

Blockchain is not going to replace existing loyalty systems, but will act as a facilitator that will interact with legacy systems through smart contracts, and drive improvements in the existing processes. To embark on this blockchain journey, organizations will need to make some strategic choices such as cost-versus-benefit analysis. Given the disruptive power of this technology, we recommend high tech companies to make aforay right away. Organizations can start small by building a proof-of-concept that focuses on an internal scenario, and then extrapolate to external use cases, finally broadening the scope. While this may spell huge investment in terms of money and effort, but eventually, all of it will be worthwhile.

About The AuthorIshu Bhatnagar

Ishu Bhatnagar is a Business Analyst with the Digital and Enterprise Transformation group of TCS’ HiTechbusiness unit. With over 6 years of experience, he is responsible for marketing, presales, and business analysis in the high tech domain. Bhatnagar is also responsible for driving IoT and Blockchain initiatives, supporting digital and enterprise transformations for TCS’ clients the world over. He has a Master’s degree inBusiness Management from the Great Lakes Institute of Management, Chennai, India.

References

[1] Colloquy, U.S. Customer Loyalty Program Memberships Reach Double Digit Growth at 3.8 Billion, 2017 Colloquy Loyalty Census Reports (June 2017), accessed September 26, 2017, https://www.colloquy.com/latest-news/u-s-customer-loyalty-programmemberships- reach-double-digit-growth-at-3-8-billion-2017-colloquy-loyalty-censusreports/

[2] MarketsandMarkets Research, Press Release, Loyalty Management Market worth 4.59 Billion USD by 2021, accessed September 26, 2017, http://www.marketsandmarkets.com/PressReleases/loyalty-management.asp

[3] The Loyalty Report 2017, Get Intimate with your Customers, accessed September 26, 2017 http://info.bondbrandloyalty.com/2017-loyalty-report

[4] Vantiv LLC, Who’s cashing in on rewards programs, accessed September 26, 2017, https://www.vantiv.com/vantage-point/smarter-payments/shoptalk-rewards-programsinfographic

[5] Hitachi, Hitachi tests Blockchain technology with 150 million PointInfinitymembers, March 2017, accessed September 26, 2017, https://community.hds.com/community/innovation-center/husplace/blog/2017/03/29/hitachi-tests-blockchain-technology-with-150-millionpointinfinity-members


Abstract

Much like the financial industry, which has been at the vanguard of

blockchain adoption, supply chains across industries have traits that makethem especially suited to benefit from the technology. All of them feature a

globally spread, multi-layered network of transacting parties; involve transfer

of material, money, and data driven by complex commercial contracts; andexperience a market-led push for greater transparency and flexibility across

inherently opaque value chains. Add to this the 'trust' that blockchain

promises across organizational borders, and the case for the technology

becomes even stronger.

To recognize this potential, however, each business has to contextualize blockchain technology to the supply chain challenges in its industry. One such business is the cloud services business, whose supply chain involves multiple tiers of manufacturers, distributors, and cloud service providers (CSPs), with each customer WHITE PAPER organization contracting multiple CSPs simultaneously to meet its needs across business units and geographies. This forms a high-stakes, low-visibility ecosystem, where the quality,security, availability, and compliance of delivered products and services needs to be constantlyvalidated to ensure the highest end-customer experience.

This paper presents a look into how blockchain can address some of the most difficult challengesin supply chain management; introduces the CSP ecosystem; and dissects it further to detail outthe technology's ability to add greater visibility, trust, and control across stakeholder relationships.

Introduction

Today’s supply chain is a complex network of product configurations and geographical markets. Over the years, complexities on the supply and demand side have gone up, introducing lags in the flow of information and values. While the lack of transparency impacts quality control across the value chain, effectively lowering customer satisfaction, long and tenuous reconciliations among parties delay flow of funds, locking valuable working capital, and increasing the overall cost of the end product.

Blockchain is a consensus-driven, peer-to-peer network of secure and decentralized nodes forming a distributed ledger, with each node having simultaneous access to transactions updated in the ledger (Figure 1). Immutable transactions,


updated simultaneously across all nodes, are the central feature enabling the trust principles that are ingrained in Blockchain technology. Transactions are added as blocks to the blockchain, and are governed by smart contracts. A smart contract is a computer algorithm that facilitates, executes, and enforces the negotiation or performance of an agreement without intermediaries.

Some of the early adoption use cases being explored in supply chain management across industries include:

1Streamlining of logistics by integrating tracking, customs, and payments information by postal companiesCurtailment of drug counterfeiting in pharmaceutical supply chains by using blockchain to track raw

2materials and finished drugs among all stakeholders

Cut to the Chase: Achieving Security and Compliance in the Cloud Services Supply Chain through Smart Contracts

The ecosystem of a Cloud Service Provider's (CSP) supply chain involves multiple stakeholders with mutual obligations to deliver products/services in time (Figure 2). Achieving security and compliance in such an ecosystem is a matter of contract management.


It is important for service providers to abide by the contractual clauses in a cloud service, such as ensuring data security and regulatory compliance, meeting service-level agreements (SLAs), and preventing inappropriate access. Despite established regulatory and security policies, however, challenges around ensuring 'trustless' contract compliance still exist. As the number and type of cloud services increase, theretends to be greater misalignment between CSPs, their vendors, and end customers, especially with respect to ensuring visibility, reliability, security, ownership, and regulatory compliance. While the intermediaries provide oversight and management services, the complexities and high overheads of such oversight persist.

Blockchain comes to the rescue to mitigate these challenges. A CSP supply chain blockchain would provide a decentralized, borderless, industry-standard, secure, and interoperable services management platform for cloud providers as well as customer organizations. Some of the key areas of application would be as follows.

Visibility and Quality Control across the Supply Chain: Cloud supply chain players at various levels hide/inflate figures such as revenue or demand-supply forecasts to project success and stability in this highly competitive business. This increases CSPs' effort and cost of inspecting the materials (servers,chips, etc.) shipped by the manufacturer due to inadequate access to process control charts. With blockchain, CSPs can have direct access to all process-related data at the manufacturer's end. Blockchain will also allow CSPs to know their suppliers beyond tier 1 manufacturers, giving them greater control over the quality of services delivered to customer organizations.


Availability and SLA Compliance of Services: Cloud services determine the end customer experience oforganizations, making their reliability and availability crucial. A typical cloud storage SLA specifies precise levels of service – say, 98% uptime – and the recourse or compensation that the user is entitled to, should the provider fail to provide the services as described. However, in some cases, the fine print insuch agreements may discount outages of less than ten minutes, which may be too long for some businesses. Validating such contract compliances on an ongoing basis can be resource-intensive, and can instead be automated through smart contracts on blockchains.

Interoperable Services Management: Blockchain will allow customer organizations to consolidate their oversight and control over all their cloud contracts, automating contract management, and significantly enhancing governance and security. Identity and access management on the cloud, another area of concern for companies, is also strengthened with superior levels of security and validation throughblockchain-enabled digital identity using public key infrastructure.

Security: Today, security is one of the mandates when it comes to cloud services. One of blockchain's defining characteristics is its use of cryptographic protection, acknowledged as being superior to other technologies. Also, transactions once validated by the consensus mechanism are virtually tamper-proof, and cannot be modified without leaving evidence of the same. These features go a long way in enablingstakeholders to collaborate in a trusted environment.

Blockchain can thus help establish a connected CSP supply chain, an ideal business ecosystem where transactions happen only with consensus, and contracts are executed without intermediaries. It will foster straight-through processing without any bias/prejudice, thereby significantly reducing operational spend and helping commoditize the industry. Finally, it will incentivize the stakeholders in the blockchain byautomating trust and ensuring peer-to-peer connect. This ability to leverage the business ecosystems for mutual benefit makes enterprises no longer think in silos. It also eliminates scarcity of information, allowing enterprises to embrace risk and hence harness the abundance of the ecosystem, and thereby

TMstrengthening their sustenance in the current paradigm of Business 4.0 . Such a connected ecosysteminherently delivers exponential value to consumers.


Conclusion

The bulk of the spadework in adopting blockchain today lies in internalizing it to industries and parsing it to specific business functions. While there are enough technology-focused start-ups working to develop industry and function protocols, the real effectiveness lies in bringing in-depth domain knowledge to thetask.

Businesses are likely to find themselves propelled into adoption by allied and competitive forces, and a deeper understanding of blockchain and its underlying distributed ledgers will help them make more rewarding choices. It is clearly time to adopt blockchain in one’s own supply chains, preferably throughstrategic (technology) partners who can help identify and implement business cases with greater value addition and network impact.

About The AuthorsSandeep Saxena

Sandeep Saxena is Program Head and Principal Innovation Evangelist, TCS Research and Innovation. His current focus is on developing a data marketplace platform and a cross-domain blockchain platform using existing open frameworks. Sandeep is a TOGAF-certified architect and holds M.Sc. (Hons) and B.E.(Hons) degrees from BITS Pilani.

Suhas J

Suhas J is a business consultant with the Enterprise Transformation group at TCS. He works on next-gen digital transformation engagements in the HiTech business unit, and has been part of severalstrategic solution consulting and implementation projects for leading clients. He holds a BE degree (Computer Science) from BMSCE, Bengaluru, and a PGDM (Strategy and Information Systems) fromCatólica Lisbon School of Business and Economics, Europe, and has completed Executive Education in Supply Chain Management from the Indian Institute of Management, Ahmedabad.

References

[1] Blockchain Technology: Possibilities for the U.S. Postal Service; United States Postal Service Office of Inspector General;https://www.uspsoig.gov/document/blockchain-technology-possibilities-us-postalservice;May 23, 2016; Accessed December 1, 2017.

[2] Blockchain Use Cases in Healthcare; Anca Petre;https://www.intelligenthq.com/innovation-management/blockchain-use-cases-inhealthcare;January 30, 2017; Accessed December 1, 2017.


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