Blockchain Unleashed: Navigating Financial Frontiers and IT Strategy

Amit: Hello all, welcome to yet another insightful episode of our digital dialogue podcast brought to you by Cigniti Technologies, where we talk about digital transformation and other latest trends with IT leaders. We, at Cigniti believe in driving thought leadership and collectively learning from everyone’s experiences and insights and have been working on a series of thought leadership initiatives to help global enterprises win the digital landscape. I, Amit Kapoor, help drive the thought leadership initiatives at Cigniti and I am your host for today’s episode. With great pleasure, I welcome Bhairav Patel on the podcast. Bhairav is the Managing Director of Atom CTO, a company that provides strategic and operational tech advice to startups, scale-ups, SMEs, and investors. He has over 23 years of experience in the tech industry and has been the CTO for multiple award-winning startups across the globe. Welcome to the digital dialogue Bhairav!.

Bhairav: Hello, thanks for having me.

Amit: Glad to have you! So Bhairav, with your deep experience in strategic and operational tech, we would like to hear your views in this session for today around topics such as decentralized finance or De Fi, business digital analysis, maybe some IT strategies, blockchain technologies, and more that actually intersect businesses and technology. We would also like to understand your perspective on how businesses can leverage digital and technological innovations to improve their operations, transactions, and decision-making processes. So, are you good to go to take a shot at my first question?

Bhairav: Yes, go for it.

Amit: OK! So with everyone trying to achieve a state of digital done right, what are some of the common challenges you feel are faced by the IT managers in driving digital transformation initiatives?

Bhairav: Thanks for having me on the podcast. For us, what I would say is that when you’re looking for IT leaders, there’s quite a big IT landscape, right? There’s a lot of hype, I wouldn’t say necessarily misinformation, but there’s kind of over-hyping of certain technologies that are out there that may be very good and very promising, but aren’t necessarily ready or fit for purpose at the moment. So, there’s from a technology point of view, people kind of come out. What we see a lot is companies coming to us to say that we would like to leverage X, Y, and Z technology for the business. And then when I asked them, why do you want to do that? There is, well, it’s because our competitors are doing it, but it’s not necessarily an answer to a business question, right? Is that how can this new technology impacts your business, and help you open up new markets, and new territories? So, I kind of come at it from a little different perspective. I don’t look at it as we’ve got a problem within our company at the moment and we need to figure out how to transform it. It’s okay, what does your business trying to achieve? Where are you trying to go? Of course, there is, and that does incorporate some of the challenges that a business may have. It may be that you’ve got high costs and a high digital footprint, or that you may be looking to enter into new territories and markets and trying to exploit those. And I think one of the key things that I always find is that what’s the motivation for making this change? So, we’ve worked with some, at Atom generally we work with smaller businesses, but we do come across larger companies that want to, again, like do things like to reduce their costs, modernize their technology, move into more, what we call the cloud, but, we call, we talk about cloud transformation, but, it’s quite interesting that a number of companies are moving away from cloud transformation because they’re finding that the costs are actually very high when you hit a certain scale, and they’re looking to go back to hybrid, right? So, from my point of view, what I’m seeing is that, or what I’m saying to businesses is that what is your real motivation for this change? And then let’s fix that problem with tech. And rather than trying to do a very big top-down approach, try and look at it from a bottom-up in a sense that if there are lots of small problems, it’s very rare that you’re going to find a one size fits all solution to all those small problems, right? You may need to tackle those small problems independently and look at a way of making sure that you can orchestrate those in a way that doesn’t really upset. So you’re not looking to try and implement lots and lots of different diverse technologies, but what you’re trying to do is, we’re going to implement the right technology at the right time and make sure you’ve got a way of maintaining that going forward.

Amit: Very interesting. Yeah. I mean, it does make sense to first identify and understand the actual need and then go after it rather than, just go after it because all the other companies are doing it. So in your experience, like, what are the kinds of strategies that have worked for a few organizations that you might have helped and worked with, to align their digital and business goals?

Bhairav: This is one of the big things I preach, is aligning your business and tech and that’s not just in, from a pure technology play, it’s also operational plays, maintenance, all of those things that people tend to overlook, right? And, I guess, what have they done? Some good examples are where a business, let’s say, for example, this was a security business that came to us that said, okay, we’ve got a number of large organizations that provide, that take security services from us. How do we get value added? How do we add value to those clients, right? And try to bring more revenue from those businesses by offering them new services. And so, they looked at their system and said, okay, what we can do is we can attach IoT devices to various items that they have that they’re securing to provide another level of information. So, for example, this company was securing large freezers for supermarkets. They put a lot of their goods into frozen storage. So not just alarms of getting into the building and the warehouses where these things were stored, but you can start using IoT devices to say, when a fridge door is open, what is the temperature of the refrigerator? So, this then allows that business to then provide them, their customer with information on, your doors open, you need to go and shut it. But their electricity expenditure decreased by the fact that they just put these simple devices on, and you could monitor it through the same system that they had, which was monitoring their alarm system. So those are the kind of synergies I like where you’re really looking to say, technology can be used in a really positive value-added way for the business rather than trying to kind of say, I need to do something a little bit more wild and wild and innovative, right? Because a lot of times businesses aren’t built for innovation. Businesses think they are, but they’re not necessarily able to encompass it. So, because innovation takes time and takes, it takes time and effort and resources to sit there that you need to dedicate yourself to understanding how this technology can really be used.

Amit: Interesting you touched upon the part of the monetary aspect of things. These last, sometimes, we are looking at the rise of decentralized finance, popularly, I think, known as DeFi. So how do you think is it impacting the traditional BFSI sector, if I can, discuss that. And, how is it catalyzing the digital transformation efforts specific to the BFSI industry?

Bhairav: We’re quite heavily involved; Atom is quite heavily involved in the DeFi space at the moment. We recently partnered with a couple of other companies to launch a new business called DeFacto and DeFacto Labs. And we raised some money off the back of that. And that essentially is for us, which we’ve done already is to build a bridge between traditional finance and decentralized finance. What you’re seeing in the space now, is there was a lot of hype, obviously, before the FTX and all of the different scandals that have occurred. But that hype aside, there’s a lot of good work going on in the decentralized finance space. I think it’s not new to say that there was a little bit of gung ho in the early days of the 2016-17 ICOs, there were a lot of, I would say, very suspect projects around. And that continued on to just recent times as well. But there are a lot of very good projects that are working to bring some more efficiency into the traditional finance system. So if you take the area that we work quite heavily in, which is supply chain trade finance, one of the big issues that you have there is that the banks have reduced their lending over the last 10 or 15 years to SMEs to provide them with funding. So, working capital is all of the things that a business needs to grow. And DeFi can fill that space. Now, obviously, since the scandals have hit DeFi, the amount of total value locked in DeFi has decreased considerably, but the rails are being built. So, companies like ourselves, DeFactor and Centrifuge, and MakerDAO, we’re all building the rails that allow for more efficient use and movement of capital and more transparent movement of capital. And also, I mean, I hate to use the word democratizing, I think there was an article I read in the FT that said, to stop using the word democratizing. But, we’re making available products to people that wouldn’t normally have access to those products. We can provide high-yield regulated products to not only institutional investors but further down the line at some point to retail investors. And that would allow ordinary people like yourself and myself to invest in things that, normal asset managers and head funds could invest in. If you look at just that kind of supply chain trade finance space, there are a lot of ways that we can get money more quickly to businesses as and when they need it. Because you still see the banks take a long time to make decisions, their funding lines are reduced, and the amount of credit they provide to businesses doesn’t cover their full needs. So that’s a big one. But then if you also look at insurance, there are a few things going on insurance. In parametric testing, we did a proof of concept, for example, where sort of parametric insurance, we did proof of concept a while back. And I know that there are a couple of blockchain businesses out there that can provide real-time insurance payments for things that go wrong. Again, in the supply chain finance space, if you’re transporting goods from China to the US, and let’s say it’s refrigerated cargo, again, I know I talk about refrigeration a bit. But if you find that one of the one of the containers drops below a certain temperature, and then the goods are spoiled, you can immediately send out a notification to then trigger an insurance payment. So insurance payment happens as you go through, and it’s powered by blockchain technology. That’s all very interesting. Another thing that we’re doing is also working. The larger banks are getting involved. I think Sockchain is looking at releasing their stablecoin, which is, had a bit of a, it’s had some reviews, and it’s not necessarily as fit for purpose as they think it is. But you can see more and more larger banks getting involved in this sector because they can see the efficiencies within it. Ripple, no matter what problems they’re having with the SEC, their initial idea is fantastic, to make cross-border payments seamless, rather than having to go through intermediary banks. And again, you’ve got people tokenizing real estate, you’ve got tokenizing loans, people giving personalized loans based on credit history built up through the use of blockchain. I think there’s a lot of good things going on. I think the unfortunate news that’s come through recently has tarnished a lot and has made people very skeptical. When I talk to people in traditional finance, they are very, very skeptical of crypto. And I can understand that. But they shouldn’t be too skeptical about blockchain technology in itself, because the technology is different from obviously the usage.

Amit: Definitely, I mean, this potential that blockchain technology brings, it can really revolutionize, the industries. But like, would you like to talk a bit more about, the challenges that the digital transformation journey of an organization would face while trying to implement this whole blockchain related processes, then eventually you did talk about a few benefits, maybe you can add on a few more challenges and benefits.

Bhairav: Yeah, definitely, so I think people have to remember blockchain is, there are different flavors, right? you’ve got the private blockchain and public blockchain. And if you look at Maersk and IBM a while back, which is unfortunately shut down now, but they did a, they had essentially a platform that allowed Maersk to track all their shipments across the globe. And the idea is that their suppliers and buyers will be able to use this as a way to understand when goods hit the dock, when they go through customers’ checks, once the tariffs have been paid, etc., etc. And that, that was out a very long time ago, I think that was back out in 2018, 17, 18. And unfortunately, it kind of died a death. I think they said that there was a low pickup utilization of the suppliers. But this is something that is very interesting because you have the Marco Polo network, which does something very similar. And it’s a closed network of put C to 50 businesses or Fortune 500 businesses plus a bunch of banks. And that allows businesses to get there’s credit across to when they’re making purchases of goods, allows the financing of goods to happen when they are on board a ship or when they’re when they’re actually, arrived at a dock. There are a lot of these efficiencies that can occur. I think when businesses are looking to implement these types of solutions, it’s again, it’s about understanding the underlying technology, right? It may well be that you don’t need a public blockchain, or you don’t want to make your data available publicly on the blockchain. You’re looking for more of a private solution. And therefore that you may be using that more as a kind of a data store or a trusted network internally, within a group of companies that you work with, which allows you to make things much more efficient movement of documents or approval of whatever it is that you need to approve. But then that’s not in the purists’ form for the blockchain guys, that if you talk to the purists, that’s not really what they can visit to be. But I think you can have multiple flavors of it. And I think so one aspect is understanding what type of blockchain you want to release on. And then if you’re looking at more of the public-facing pieces, you’ve got to understand, it’s a little bit of trying like trying to find a cloud provider at the moment, right? There are so many cloud providers, which ones do you trust? Which ones do you and you have to do the same due diligence on those as you would do with anybody else? But you also have to understand what it is you’re trying to achieve, right? And, and I think, again, go back to my earlier point is that something like, if you’re trying to implement blockchain, you’ve got to have a business case for it, right? And that business case is not the same as if you’re trying to implement a small web application, because there are a number of constraints with blockchain technology, right? Speed is one, it should be there for decentralization, you can’t store large amounts of data, especially, well, it’s changing. But at the moment, that’s not, it’s not practical, because of the amount of fees you would have to pay. So, you’ve got to look at it and think, okay, well, why do I need public versus private? And then when you’re looking at the public chains, what are all the different types of public chains that you are that are available out there, and a number of them are built for various reasons, Algorand, Solana are green and faster, though they’ve, so Solana has had its own problems around security. So again, it isn’t like any other kind of digital transformation piece, if you’re trying to buy something off the shelf, you would do due diligence, and beauty parade, you do the same thing. But I think people need to understand, it’s just another piece of technology that you can put in to enable you to do things quicker, faster, and in a more decentralized manner. So, it should, it’s not scary, let’s put it that way. And when it comes to finance, I think there’s just a lot of great innovations happening. And we’re working with a lot of very interesting projects out there that are trying to try to make it, like I said, more accessible to everybody, but also make it more transparent. Because I think what’s one of the other issues that we had, if you look at a lot of the major issues that you’ve seen in the banking sector, it’s due to a lack of transparency, right? In what people are buying. I mean, mortgage CDS is, that was a classic example of no one knowing what they were buying. And if you can increase that transparency with blockchain technology, then that’s a great way of doing it.

Amit: Just curious, do you have any thoughts on how blockchain fits into the whole digital engineering services domain that a lot of companies are trying to move ahead in?

Bhairav: What do you mean exactly by digital engineering services?

Amit: When we talk about digital engineering services like you mentioned cloud, we have also talked about a lot of other emerging technologies also. So, do you think blockchain is able to add a lot of value to the whole arena of digital engineering? Just like digital assurance?

Bhairav: Definitely. I think, one of the great things, let’s go back to something like de facto, right? The way that we’re doing this, you can, all transactions are transparent, and you can see the transactions that have gone through on the chain. This makes reconciliation a lot easier, and makes reporting a lot easier, right? It’s not hidden in lots of different silos, it’s in one place that you can see, that place is going to persist, and you can build off the back of that. So I think again, I kind of go back to the, What is it needed for? I think it’s like anything, right? When we’re looking at technologies, when we’re looking at buying an ERP system, or you’re looking buying an accounting package, or you’re looking to buy a, move to the cloud provider, what are you going to use it for? And how are you going to use it? And do you have the skills internally to maintain it? Right? The one thing I would say about blockchain, more than any other kind of technology that’s out there at the moment, save apart from let’s say quantum, is that it’s moving very, very quickly, right? Having three years of experience in blockchain is like having 40 years of experience in blockchain. If you see like 40 years’ experience, obviously, maybe not 40, but at least 10 years’ experience equivalence a, in a normal language, right? Because things move quickly. There are innovations constantly happening. And the biggest problem that you’ve got really in that space is that if things haven’t settled yet, so you can go to AWS, you can go to Azure, and you’re pretty certain that these guys have figured it out now, right? You occasionally get outages, which impact you globally, but it’s very rare. And you may have certain outages that happen within certain data centers, but they’re pretty resilient in the way things are going on. Whereas in the blockchain space, it’s not there yet. It’s getting there. But it’s not fully yet that fully there yet. You have to be a little bit wary, especially in the public space, let’s say, for example, in private space, it’s a different matter. But in public space, you’ve got to be a little bit wary before you dip your toe and try and get used to it. And again, I think one of the things that people are scared about, especially in the finance sector is regulatory issues, right? But the regulators are looking at this now. And again, we’re part of an initiative called two tokens, which is based in the Netherlands, which is looking at regulatory issues around carbon credits, carbon, and it’s our energy credits, as well as carbon credits, as well as, things like invoice financing and tokenization of invoices and stuff. It’s getting there, but it’s just going to take some time.

Amit: IT leaders, Bhairav, they must develop and implement effective strategies that align with business goals, right? However, it is a commonly understood thing that they do face challenges when driving digital transformation initiatives in their organizations. Which emerging technologies do you think, can help achieve success, in these digital businesses, and in their insights, digital insights, digital engineering, and achieve, the winning of the digital landscape, per se.

Bhairav: So that’s a really broad and wide question, right? I think, when you take it into a few chunks, right, if you look at the, there are issues in digital transformation, when implementing digital transformation within an organization, especially large organizations. And when I was working, at the likes of PwC, IBM, you could see the challenges that were faced. Now, I personally think, and this is, it could be as controversial as I like, I guess, I think it’s a people problem. Generally, a lot of the times I saw issues with digital transformation was because a manager would then end up losing certain amounts of staff, right? And they wouldn’t have a, their number wouldn’t be as big as their friend over there. Other times, it was a situation where it was an ego-driven project, where you had actual digital transformation needs, but the people behind that project wanted to be bigger and better than their competitors, and they wanted to blow their horns. And they were trying to do things in a way which was much more difficult to do, than actually a sensible way of doing it, which would have got you there quicker and cheaper. I think a lot of these digital transformation issues are personal, personally led, really, and a lot of blockers that you get on in large organization and large projects, comes out to politics, right? I think that’s the key reason that most of these things fail. I think a lot of people work very hard on these projects to try and push them forward, and then they fail because people are making poor decisions. But apart from that, when you’re looking at technology, I kind of go back to what I was saying previously, if you look at the tradition, right, and I’ve been in this what 20 odd years, what you see is you try and get people putting in large systems to fix all problems. And that has never made sense to me, because all you end up doing is you end up putting in, let’s say, for example, an SAP or a Microsoft Dynamics, and you end up customizing it like crazy. I mean, this is great for the systems integrators, those businesses, right? But it’s not necessarily great for your company, because essentially, you’re then hooked into a vendor and to a systems integrator and very expensive consultants, right? For a long time, and I know we’re kind of killing our own businesses here, but it’s not necessarily the best way forward. And I think, going back to what I’ve said previously, is that it’s looking at breaking things down into smaller problems and tackling those. So, for example, if you’re on Microsoft, the power apps are amazing things you can do, they’re quite strong, people still do SharePoint, but you can still do a lot of interesting things with the power apps that are coming through. I know Microsoft is spending more money, the partnership with OpenAI should make things a lot more interesting in that space as well. I think if you’re looking at other areas if you’re manufacturing, then you’ve got Edge computing, you’ve got IoT, you’ve got all those things. And you could throw around a lot of the buzzwords. But again, I kind of go back to the need, what are you trying to solve? And rather than trying to solve a one size fits all, try to make this so that you’re working from the ground up. And we work with some companies now who are helping people, let’s say, on the manufacturing floor, solve a specific issue that they have. And that specific issue is not going, if you’re a large international conglomerate, right, that manufacturing problem is not just going to be in one place, you’re going to have that same problem in many different places. And if you can take a small solution and push that out, effectively handles that, that issue is better than trying to put something from the top down, where you are customizing something big and not necessarily there. Now, of course, most CTOs might kind of bulk at this simply because you’re trying to then manage multiple, different small solutions. But in a way, managing one vendor managing small solutions, I would say that the small solutions are probably easier because they are targeted. And you don’t make a change in one place, you’re not affecting somewhere else, right? If you make a change in the ERP system, you have to regression test everything that goes on, right, even if you’re not touching that area in itself. So personally, I’d like to see more of that happening. I’d like to see more people looking at technology-specific technology uses, right? And like I said, a lot of the businesses we work with, are trying to address that in the construction space, again, we’re doing a lot of work to digitize a lot of the paperwork that goes on there. And people spend a lot of time writing, foremen on sites spend a lot of time writing, paper documents, which are never to be seen again. And you can’t then glean out the data from them. There’s nothing you can do, you can’t have if you’ve got like 100 paper documents, you’re not able then to just to, to easily extract that information, right? And digitizing is something that saves time and money but doesn’t necessarily. It doesn’t mean that you lose, you have to get you can get rid of jobs, it means that your foreman is spending more time doing quality work rather than, firing lots of foremen.

Amit: Very interesting, a lot of, some very interesting thoughts. The way I see it, if I can kind of try to summarize, your thoughts, is that if organizations need to achieve a state of digital done right, while they need to take a lot of actions and continuously, it did not be, think of, just trying to do what their competitors are doing. And so we should also try to do but, while innovating while using the latest technologies and trends, we should still try to move along in the direction where we are aligned with our business goals, and what we want to achieve, and then, go ahead and do the right things that will help us.

Bhairav: Yes, I think one key point to I guess I want to stress is that a lot of businesses look externally for solutions when they should be looking internally for solutions, right? And what I mean by that is they look for external solutions that they can fit into what they perceive as their challenge, rather than going internally and speaking to the people with the challenge and asking them how they would solve the problem that they have. And I think that’s, it’s a big difference. And I don’t, when I was again, back in the large projects, you hardly talk to the people in customer service, or, who are facing the problems themselves, you would just implement something and expect them to work around it, which never made sense to me.

Amit: I think this fits in so well with the whole theme and the need of, trying to achieve customer satisfaction to provide customer satisfaction and to, help them, get the best experience. I think customers can be in any domain, any vertical for that matter. And, if we are able to understand their needs, and then plan, creating the solutions according to their needs, that definitely will help. I think that is what you are trying to stress on. Great to, have this little chat with you. Bhairav, it has been fun listening to you. And to all my listeners here, if you have enjoyed this whole experience and knowledge shared today in our podcast, do visit www.Cigniti.com and explore multiple other forms of thought leadership collaterals. Do write to us with all your suggestions and feedback. And thank you, Bhairav, so much for your time and insights shared today once again.

Bhairav: Thanks a lot for having me. It’s been a pleasure.

Amit: Thank you.

And dear listeners, once again, thank you for spending time with us on our podcast. See you next time.