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Digital transformation

Decentralized Futures

A clean break from the past

Business leaders who are fed up with the disappointing results from traditional approaches to IT will welcome decentralization and its alternative way of working.

Decentralization is an opportunity to take advantage of the collective power of disruption and to create new business models across the industrial value chain.

At the simplest level, decentralization is a clean break from the traditional mode of technological development, where power resides with a central authority. In a decentralized architecture, it is difficult – if not impossible – to discern a central authority that governs the technology.

The most well-known example of decentralization is blockchain, where records are stored in a distributed ledger, with no central authority. Many business leaders are wary of the hysteria of blockchain, yet decentralization is much more than a one-time technology hype.

Rather than being viewed as a standalone technology, the decentralized future should be treated as a combined and powerful evolution of distributed technology that will manifest through cloud, applications, security and open-source practices.

Decentralization matters to decision makers because it offers an alternative development platform from which new business models can be created, honed and perfected without the need for trusted intermediaries to validate transactions.

Splitting up with old partners

The end goal of decentralization is the creation of a Portable Enterprise. Rather than a traditional business, that is often confined in its operational areas, the Portable Enterprise has the agility to interoperate in a range of business and technology ecosystems, leading to new marketplaces and revenue streams.

That freedom to shape-shift is crucial at a time of constant change, where businesses are fighting to keep a tight reign over cashflow and costs. IT stacks are still way too complex. Among Fortune 100 companies, enterprise spending on IT operations is at about 85%, of which 90% is dedicated to reducing IT complexity.

Vendor lock-in is a big issue, too. While the cloud promises a new way of managing IT spend, it has also created a new series of dependencies on Big Tech. At the same time, the legacy systems that enterprises rely upon are non-scalable – if organizations are going to be able to shape-shift and grow, then they need agile technology solutions.

Decentralization is an opportunity for businesses to achieve their growth objectives. This platform-based and ecosystem-driven approach is a break from traditional Big Tech IT and a way to reduce costs, minimize security risks and avoid vendor lock-in.

Building new relationships

This decentralized way of operating is not a pipedream – the end goal of a Portable Enterprise is moving closer. The trust-enabling technologies that enable decentralized technology – known as the consensus mechanism – have been subject to intense computer science research over the past few years.

This research has improved the performance, scalability and power consumption of decentralized technology. Developments in a number of key technological areas will be crucial to decentralization becoming manifest, including:

  • DApps: Developing consensus for decentralized applications (DApps) and smart contracts
  • Data and Security: New approaches to organizing, securing and controlling data, and moving towards data-centricity through D-Web, where users keep control of their own data
  • Decentralized Cloud: Solving data and complexity concerns through new protocols that help to break the reliance on legacy IT
  • Open-Source Enterprise: Adopting open-source culture and best practices; collaborating with open-source communities.

The very nature of this technological evolution – bottom-up, decentralized and a move away from the traditional mode of development – means many organizations and their executives might have been slow to notice that a change is happening. Yet the change is real, and every sector can expect to transform itself towards a decentralized future.

Falling in love with decentralization

There are already real-world examples of decentralization having an impact: insurance firms are automating claim and underwriting processes with smart contracts; life-science firms are sharing medical records to speed up clinical testing and drug detection; utilities firms are partaking in real-time energy trading, especially for renewable electricity; and open banking is allowing new firms to enter and disrupt traditional finance markets.

Your industry could be next. We believe that the collective maturity of distributed ledger technology, cloud, data and security mean no business leader can ignore both the threat and the opportunities that decentralization affords. Now is the time to act.

First, look outward – aim to develop new business models that cross sector boundaries. Second, leverage open-architecture models to orchestrate new services that link to decentralized networks and protocols. Third, continue to explore distributed-ledger opportunities at scale. Fourth, look to capitalize on disruptions around open source and connectivity. Finally, set up and operationalize a dedicated business squad to explore new ideas.

Embracing decentralization will not be straightforward. Long-established habits are tough to break. However, business leaders must look to break the cycle of legacy modernization, embrace a broader ecosystem of partners and transform their workplaces, so employees can develop niche skillsets and use open-source technologies.

For enterprises that embrace decentralization, the business benefits are great. Decentralization – with its platform-based and ecosystem-driven approach – offers a route to technology-enabled business transformation.

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Sudhir Pai

CTIO, Financial Services
Sudhir is the EVP and Chief Technology & Innovation Officer (CTIO) for the Global Financial Services business at Capgemini. He is also a thought leader, speaker, blogger and business advisor for the CXO’s in the finance industry.