IBM and Maersk’s TradeLens Platform Discontinuation Points toward a Need for Greater Industry Buy-in If Enterprise Blockchain Ventures Are to Succeed

At the end of November 2022, IBM and Maersk announced that they would be discontinuing their TradeLens platform, with both the platform and its offerings to be fully offline by the end of 1Q 2023. TradeLens is a joint blockchain venture between the two companies launched in 2018, using IBM’s Hyperledger Fabric blockchain technology aimed at digitizing global shipping operations through a neutral, secure platform that allows stakeholders to track shipments and manage container movements.

Initially, the platform gained good traction and, by mid-2019, five out of six of the largest ocean carriers were using the platform, covering over half the world’s shipping container volume. By connecting shippers, shipping lines, freight forwarders, port and terminal operators, transportation, and customs authorities through a decentralized network, the system helped to reduce costs and transit times by digitizing the vast exchange of information and documents present in the shipping industry.

While IBM and Maersk did succeed in creating a viable, effective blockchain application, the platform failed to meet its commercial goals and function as a sustainable business. In Maersk’s press release, the platform’s downfall was attributed to the lack of global industry collaboration, preventing the platform from meeting financial expectations to work as an independent business.

Blockchain technology has received its fair share of debate, but industry professionals are seeing its use beyond cryptocurrencies and exploring the different ways it can be used to create a more open and secure method of recording transactions and tracking assets. With a big push across supply chains to achieve more granular traceability through Internet of Things (IoT) and management systems, blockchains offer the final piece to the puzzle by allowing secure collaboration and data transfer without divulging sensitive information. Other blockchain projects currently underway across different industries include IBM’s Food Trust network (for food traceability), GrainChain (for agriculture transactions), Tradewind ORIGINS (for precious metals), and the MediLedger Network (for pharmaceuticals).

TradeLens’ discontinuation is significant for a few reasons:

1. Maersk Is Unwilling to Fund a Promising Trade Solution: Record high freight rates and global shipping disruptions have yielded record years for Maersk, placing the market cap of the company at US$37.46 billion as of December. By pulling away from a promising and operationally viable solution, Maersk has shown that it is not prepared to drive an open network solution without wider industry buy-in and support, showing that even the biggest companies in an industry can’t always muscle through new solutions.
2. It Is Not the Only IBM Blockchain Project to Be Discontinued: Also announced in November, the Australian Securities Exchange (ASX) scrapped plans to replace its aging settlement system with a blockchain-powered alternative, citing “technology, governance and delivery challenges that must be addressed.” While enterprise blockchain is still very much in a trial-and-error stage, failings within two major industries does not bode well for IBM’s blockchain prowess (see ABI Research’s Industrial Blockchain Competitive Ranking).
3. Fragmentation Is a Key Barrier to Digital Transformations: By companies operating as siloed entities, new solutions aimed at digitizing manual processes and creating more resilient networks between stakeholders are unable to permeate effectively, limiting the industry’s ability to take on technological changes.

TradeLens’ attempt to digitize the global shipping industry was a tall order given the expansive network of stakeholders, margin volatility, and transaction frequency in the industry. In addition, blockchain is still wrestling with some key limitations, including lack of scalability, interoperability, standardization, and trust. All of these are common teething issues for a new technology, but very much standing in the way of widespread migration to blockchain networks that is ultimately causing projects to fail.

Successful deployment of blockchain solutions at any scale will require a change both in the way blockchain is perceived by end users and how vendors develop and market its capabilities. Immediate fixes are to develop blockchain’s inherent capabilities and develop industry awareness, helping to build a Proof of Concept (POC), but vendors should also consider ways to smooth adoption, such as offering Blockchain-as-a-Service (BaaS). This can help keep initial investment cost down, remove the need for specialized knowledge, and allow companies to see the benefits without taking on complete liability.

Organizations and governing bodies also play a key role in blockchain solution success. A number of regulators have started to see the benefit to encouraging blockchain adoption, using it as a way to shore up supply resiliency and to streamline compliance. To encourage new solutions, the Food & Drug Administration (FDA) has run a “New Era of Smarter Food Safety Low- or No-Cost Tech-Enabled Traceability Challenge,” intended to both spur interest and reward solution providers that simplify the adoption process.

In Europe, a project called PharmaLedger that began in early 2020 sponsored by the Innovative Medicines Initiative (IMI) and the European Federation of Pharmaceutical Industries and Associations (EFPIA) has brought together 12 global pharmaceutical companies and 17 public and private entities from technical, legal, regulatory, and academic backgrounds. A key part to this is that each stage is being conducted under an established legal and ethical framework, guiding companies through the onboarding process and reducing the risk of the project hitting any regulatory barriers.

While these involvements do not guarantee success, they do help raise awareness and create an environment that is much more conducive to innovation, helping blockchain providers gain traction and funding to remedy current limitations.