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Software & Systems

Distributed Ledger for Big-Project Management

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November 03, 2017

New blockchain concept hooks its wagon to SAP ERP to help MNCs manage projects.

Distributed ledgerSAP’s widely used enterprise resource planning (ERP) system is getting new capabilities in distributed ledger; specifically a public blockchain ecosystem that is aimed at corporate projects and scheduling. The new system, SophiaTX from Swiss firm Equidato Technologies, will allow corporates to immutably record the transfer of information generated by their ERP systems and related modules such as treasury management.

Equidato is only a few months old, but its principals did extensive research for the previous 10 months to construct its business plan. In pursuing that research, they discovered that most blockchain solutions tend to be aimed at very defined functions, especially in the financial realm, such as payments and capital markets.

The non-fintech space, instead, appeared to be wide open in terms of business use-cases that simply were not being pursued. And to do that required connecting to the core systems companies use to communicate information and data.

“We realized that if we wanted to bring the benefits of blockchain technology to companies, we would have to connect to their systems. Since SAP is the dominant player, we decided to start there,” said Jaroslav Kacina, CEO of Equidato.

The goal of, SophiaTX, an open-source platform project is to be an ecosystem for solutions that bring to companies’ existing systems and communications the security and accessibility of blockchain technology. Blockchain or distributed ledger, of course is the continuous list of transactions recorded in blocks that are linked and secured using cryptography. The blockchain ledger is then distributed to the relevant parties. But unlike solutions offering companies a private blockchain, in which the nodes validating the transaction blocks remain in the organization’s firewalls, SophiaTX will be an open-source solution.

“The approach by SophiaTX offers [a] true open public blockchain, which is significantly more advantageous to address the entire value chain, allowing businesses of all sizes to participate and collaborate,” notes a whitepaper that Equidato released October 30, 2017.

Providing a use-case example, Mr. Kacina, who headed up French multinational Alstom’s global SAP transformation, which involved 40 countries and impacting more than 200 legal entities, said that companies pursuing large projects typically work with dozens if not hundreds of vendors.

“A core problem is synchronizing schedules. Today, every company and vendor typically has their own systems, and they don’t talk to each other,” Mr. Kacina explained.

There may be an email effort set up by the “so-called project office,” he added, but it’s a laborious effort that is prone to errors that ultimately delay projects and increase costs. But with SophiaTX, the company and its vendors can record their progress in a blockchain that’s both immutable and accessible to all participants with the correct electronic keys, instantly revealing when documents are missing or other errors or infractions. Mr. Kacina noted that such use cases involve no regulatory or legal issues because they are simply the exchange of information, and yet that exchange is essentially for the project to proceed efficiently.

“It can also be an effective tool should there be misunderstandings or conflicts between parties … or to manage contracts,” Mr. Kacina said.

In such large, international projects, corporate treasury would likely be responsible for hedging FX and other risks, another endeavor often involving multiple parties, depending on the hedging strategies pursued. Those transactions, too, could benefit from being recorded on the blockchain. In fact, ERP systems such as SAP’s have multiple modules, including treasury management systems (TMSs) and sub-modules for functions such as cash management and hedging, that could interface with SophiaTX to record their activity on a blockchain ledger that would be available for future audits or other inquiries.

Mr. Kacina said that Equidato’s team has developed several application program interface (API) prototypes that can enable a company’s ERP and other systems to be connected to SophiaTX. A company’s IT team can also develop such APIs on its own or work with Equidato’s team to address specific use cases the company has identified.

“We would have to distill it down to find what transactions make sense for a peer-to-peer exchange of information, whether internally or externally,” Mr. Kacina said.

He added that Equidato is currently onboarding “a number of clients” in an “early adoption program” to develop solutions. He added that companies will need to take time to develop APIs and test them against and adjust their systems and processes. “We’re going to need a sort of evolution phase over the next seven or eight months to build [SophiaTX] so it is suitable for businesses,” Mr. Kacina said.

Equidato also is anticipating independent software developers creating solutions for specific corporate needs that can be sold over the SophiaTX eco system. Mr. Kacina noted that SAP has thousands of independent “partners” that develop APIs for its system that could also work with SophiaTX.

“That’s why we chose a platform approach. We built a blockchain that’s suitable for business from a legal, risk and compliance perspective, and then we’re giving it to the entire SAP community to plug in their systems,” Mr. Kacina said. “In the initial stages we’re focusing on SAP [becasuse] it is a major player in the segment, and most important we wouldn’t consider being successful until integration with SAP is in place.”

In the case of treasury and other corporate functions where proprietary information is exchanged that companies would not want to appear in a public blockchain, even if it is encrypted, SophiaTX will enable companies to create a private blockchain to store it.

Mr. Kacina said his firm has already received inquiries about how non-SAP applications can be linked to SophiaTX. One client, who is also on Equidato’s advisory board, services energy projects. It uses the JD Edwards ERP, now a part of Oracle, but most of its clients use SAP.

“That’s why he’s very interested in this project,” Mr. Kacina said. “The company will suddenly be able to exchange [with clients] maintenance, project and other information within the blockchain, and today all that is done manually.”

Existing blockchains such as bitcoin’s and ethereum’s use the proof-of-work methodology, in which nodes must engage in resource intensive mathematical proofs, to “mine” new coins. That in part supports those digital currencies’ values, but becomes ever more time consuming and resource intensive as the blockchain grows.

Equidato, instead, uses the more modern delegated-proof-of-state (DPS) methodology, which provides a consensus mechanism based on validating participants’ signatures to create an immutable chain.

“DPS is much faster, and appears to be less vulnerable to certain types of blockchain attacks,” Mr. Kacina said. “Our intention is not to ‘coin’ as a currency … our intention is to create an effective peer-to-peer exchange of information that allows for synergies and collaborations in business.”

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