For B2B Is Baas the Next Big Thing?

by Steve Murphy 0

digital transformation

One could actually just substitute ‘cloud’ for this Forbes article’s many references to blockchain and providing platform services, and then drop back to about 2009, where pretty much similar drivers were in place for the subsequent cloud uptake in this decade (2017 AWS revenue was $17.5 billion versus $500 million in 2010).  As readers who are members of Mercator will recognize, blockchain knowledge has evolved fairly quickly in fin services due to the implications across supply chain services and payments, but more broadly distributed sector knowledge is lagging, while we await industrial strength product implementations. So speculation around potential rapid growth of blockchain platform and development services is quite valid.

“In late July, Google announced a partnership that would allow the multinational technology company to offer a cloud-based platform where they can develop and run blockchain-based applications…..Blockchain is a relatively new distributed ledger technology that allows for secure transactions. It’s the technology behind popular cryptocurrency bitcoin, but blockchain has a number of applications.”

One of the interesting dilemmas in the blockchain superhype buildup of 2015-16 and subsequent enthusiastic (but more sober) investments across this nascent tech space is that not a lot of folks know how to build stuff using it. So this ‘coder shortage’ in blockchain app development creates limitations for normal companies to actually do anything.  This is where the Googles, IBMs, MS and so forth are stepping in.

“The cost of hiring a coder to build a platform from the ground up can also be substantially prohibitive. As for 2017, the average annual income of a competent blockchain developer was $150,000-$200,000…..And hourly rates can fall between $40 to $200 or more.For B2B companies whose core functions have little to do with technology, a blockchain platform may never be important enough to implement in-house. But with BaaS, these companies can see the same benefits as those companies building their own platforms from the ground up.”

The article migrates into other justifications, including the cross border payment use case, where blockchain-based networks speed up the process and reduce correspondent intermediaries (although not necessarily using cryptos as of yet due to FI regulatory sensitivities).

“Making cross-border payments can often be an onerous and lengthy process even for corporations. But blockchain technology simplifies the process. Even though companies offering BaaS essentially serve as middlemen between B2B companies and blockchain technology, the hallmark of this technology is that it cuts out the middlemen in financial transactions by automating them. For this reason, transactions made on blockchain have the potential for faster than usual speeds. Companies like Visa are developing blockchain-based systems to execute near real-time transactions. And the amounts and destinations of these transactions aren’t a barrier. With BaaS B2B companies can exchange high-value international payments.”

A quick read…worthwhile.

Overview by Steve Murphy, Director, Commercial and Enterprise Advisory Service at Mercator Advisory Group

Featured Content