By Thor Olavsrud
Sept. 6, 2016
"This is not an area where you can just offload to technology," Champion de Crespigny says. "You need to understand conceptually what this is and what impact it could have on your business. You need to challenge your current business models and processes. Are you doing this this way because you've always done it this way, or are there better ways to do it?"
The next step in consumption-based pricing
The cloud has already led many companies to start migrating from unit-based pricing models to consumption-based models, and IoT looks to be building on that trend. The addition of blockchain technologies to the mix may further accelerate the migration, according to Greg Cudahy, Global Leader for Telecommunications, Media and Technology at Ernst & Young.
"Consumption-based pricing will clearly be a business process disruptor," Cudahy says. "Eventually, maybe even semiconductor companies won't be paid on the basis of the cost of a chip, but will bill customers differently based on how often and how much the customer uses that capacity."
At the same time, the technology has the potential to completely upend the way companies approach accounting and regulatory compliance, reducing the cost of tax compliance, reducing or eliminating tax evasion and exposing corporate information to more public scrutiny.
"Today, the processes of validating that the revenue was earned and then paying the appropriate tax on that revenue are done retroactively," says Channing Flynn, Ernst & Young Global Technology Sector Leader, Tax Services. "But blockchain technology may be able to do it in real time, openly and transparently."
Other potential scenarios identified by Ernst & Young include the following:
- Embedded health. An entire healthcare information ecosystem could exist as a blockchain that connects insurers, providers and patients.
- New credit markets for low-cost assets. Ernst & Young notes that transaction costs put a practical lower limit on the use of assets as collateral to secure a loan. By taking much of the cost out of transactions, blockchain could make lending based on new classes of lower-value assets practical.
- Pay-for-performance. Leveraging smart contracts, blockchain can automatically enforce pay-for-performance agreements. The days of getting a pizza in 30 minutes or less or it's free may be long gone, but blockchain could enable its return. It could even enable a sliding scale.
- Government tax enforcement. In a world of digital transactions recorded in real time, illegal transactions become extremely difficult to conceal.
- Industrial mash-ups. Blockchain could enable a whole new world of fluid partnerships between businesses. Ernst & Young calls it an "industrial mash-up," by which it means alliances in which one or more parties make use of assets or capabilities of another party to create new business value, without affecting the other party's ongoing use of the assets or capabilities for their original business purpose.
- Industrial IoT. Bringing together industrial mash-ups and IoT, Ernst & Young believes blockchain technology could help companies better utilize their high-value industrial assets by connecting everything from shipping containers to MRI machines to construction equipment into real-time digital marketplaces that would allow businesses to sell and buy idle time.