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Maersk IBM TradeLens shut down after ASX cancellation; Ending an Era of Costly Enterprise Blockchain

By Avivah Litan | December 02, 2022 | 0 Comments

Maersk just announced that Tradelens will wind down by early 2023.  Tradelens’ shutdown comes on the heels of the cancellation of the much-delayed Australian Security Exchange blockchain replacement project. ASX incurred a $168M charge. See Australian Securities Exchange Cancels Blockchain-Based Clearing System at $168M Cost

Launched by Maersk with IBM in 2018, Tradelens was one of the first consortia-led enterprise blockchain projects that could claim ‘success’. The global supply chain platform attracted 94 participants, including more than 20 port and terminal operators, and many high-profile users (including Mediterranean Shipping Co. (MSC) and CMA CGM). See Maersk & IBM Announcement on Tradelens

Sadly it failed. According to Head of Business Platforms at A.P.Moller-Maersk:

“TradeLens was founded on the bold vision to make a leap in global supply chain digitization as an open and neutral industry platform.

Unfortunately, while we successfully developed a viable platform, the need for full global industry collaboration has not been achieved.

As a result, TradeLens has not reached the level of commercial viability necessary to continue work and meet the financial expectations as an independent business.”


ROI just wasn’t there

ROI just wasn’t there for Tradelens participants. They likely spent much more than they got back in financial value. Apparently, IBM, a key sponsor, is unwilling to take losses on enterprise blockchain projects and has been gradually exiting the enterprise blockchain business since early 2021.

Despite having a solid if not overly ambitious use case — digital supply chain asset tracking, logistics, and management –  Tradelens consortium participants (current and prospects) must have remained unconvinced they should pay up to support project objectives.  See Maersk’s TradeLens demise likely a death knell for blockchain consortiums

Lessons learned from Enterprise Blockchain Failures

Costly complex customized enterprise blockchain projects managed by consortium are largely doomed and have been for a long time. They only succeed when all parties are on the same win-win page, and there is clear demonstrable ROI. ROI is hard to achieve when the bills are high.

The first generation of these projects simply cost too much money and many were too broad in scope. Large system integration and consulting firms were hired to help set up a consortium, install a private copy of a blockchain network, and implement custom complex applications that satisfied the needs of every participant in the consortium.

That’s a little like creating your own copy of the Internet when you want to participate in a new B-to-B application with your supply chain partners.

Emerging Blockchain Use Case Successes 

The good news is that the costs of enterprise blockchain projects are starting to come down and the scope of the applications are generally narrower and less ambitious.

“Enhanced Blockchain as a Service” providers such as KaleidoSettlemint, Shelterzoom, and Vendia  typically sell simpler (narrower-scope) applications based on largely reusable code sets, application templates, and technologies that support easier legacy system integration.  Price tags are commensurately coming down as well.

For example, Settlemint implemented supply chain projects with the Jharkhand state of India to track and trace seed distribution to almost 900 thousand farmers across the state, and with Europe’s AB InBev working with farmers to bring supply chain transparency to beer drinkers.

ShelterZoom successfully implemented tokenization and controls for the Vatican’s Pontifical Orientale Institute Library archived documents, allowing researchers worldwide access to documents online rather than have to travel to the Vatican in Rome. They are also tokenizing patient records for Argentina hospital Policlinico Model de Cipolletti  which will allow patients to control their own records after the hospital establishes them.

Vendia worked with BMW to deploy a solution that tracks and reconciles defects in multiple parts of their supply chain, so that BMW can better assign costs associated with damages along the line. Vendia also worked with Atos to create a single immutable system of record across a complex chain of reinsurance participants.

We also previously documented success in financial services use cases here Legacy Financial Processes Morph into Web3 using Blockchain Innovations

We are seeing pockets of success with  newer generation enterprise blockchain projects. ROI is achieved through faster implementations than we saw in first generation of expensive customized blockchain applications. Some are even able to effectively leverage public blockchains while supporting privacy and scalability, significantly cutting down infrastructure and maintenance costs while benefiting from improved public chain security.

Don’t Throw the Baby out with the Bathwater

Enterprise projects are indeed complex, but in early enterprise blockchain days, that meant plenty of customized code, expensive consulting, and unhappy consortium participants that failed to see their needs met.

These days enterprise projects often means simpler applications, more modern data interchange and programming techniques, reusable code, and friendlier interfaces. These applications combine Web 2 with unique Web3 innovations – smart contracts, tokens and a shared immutable system of record – innovations that are not available in Web 2.

Tradelens proved the potential value of enterprise blockchain.  It just was too hard and costly to get everyone’s buy in.  Hopefully it will be easier and simpler next time as next generation service providers and technologies gain traction.

Similarly FTX proved that age-old corruption and greed rule when bad actors are left to their own devices.  Their corruption has nothing to do with the code – it has everything to do with the fact that rules and regulations have not caught up with them yet, and even when they do, many bad actors will still be ahead of the cops.

But these failures don’t mean the technology is no good. It just means that it’s still early days and we have a ways to go before guardrails are established and Web3 technology gets easier.

 

 

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