Ti Insight’s Technology Advisor Ken Lyon discusses the failure of TradeLens and warns that Blockchains have not failed, just the ability to use them.
In late November it was announced that Maersk would close its TradeLens joint venture with IBM. This initiative, launched in 2018, attracted considerable interest given its significant significance to the shipping industry and the nascent technology underpinning the platform. Despite initial misgivings from some in the industry and various commentators (including this one), the venture was successful in signing up trading partners, ports and facilities around the world. Indeed, as of time of writing, the platform has tracked almost 4 billion events, published over 36 million documents and processed over 70 million containers. Clearly, this level of engagement is not trivial and is quite impressive.
However, the key necessity for any commercial project is to make money, especially if the founding companies are large publicly traded enterprises. But, as can be seen from the announcement declaring the platform was being shut down, they have been unable to make it pay.
Tradelens had a “vision centered on the ability to enable true information sharing and collaboration across a highly fragmented industry globally. Unfortunately, such a level of cooperation and support has not been possible to achieve at this point in time and A.P. Moller – Maersk (Maersk) and IBM have announced the discontinuation of the TradeLens platform.”
Statement – A.P. Møller – Maersk and IBM
Many companies have tried to address the challenges of lack of visibility across supply chains and networks, as well as streamlining and simplifying documentation flows. But for this to happen, the people who want data and information have to be able to get it and the parties that have it, must want to share it. Crucially, the mechanisms to do this must be easy to adopt by every party in the network, irrespective of size, and also operate at very low cost.
It would seem that it was a challenge to get enough parties interested and those that were prepared to sign up, may not have been paying enough for the service to be viable.
There is an obvious conclusion that the reluctance of parties to sign up may have been due to the nervousness of using a service operated by either a direct or potential competitor. But several major shipping lines and port and terminal operators did sign up and were prepared to share this publicly, which challenges this view. Of course we will never know on what terms these ‘partnerships’ were agreed.
Developing a platform that has the capability to support global trade is not a trivial exercise and requires a unique design. In this case, Tradelens decided to use a Blockchain as the underlying infrastructure. Blockchain technology has been subject to a lot of comment in the media, often by parties that have only a passing acquaintance with technology and much of this commentary is ill informed.
Blockchains are a nascent technology and from a distance, appear to have the necessary attributes that make them a perfect basis for what Tradelens was trying to achieve. But in the blockchain universe, there are many choices to be made and the choices in 2022 are very different from those available in 2018 or before.
Without wishing to reopen the debates from 2018/19 as to the Tradelens technical choices, it is apparent from commentary on various bulletin boards, that issues with transactional throughput and integration with other systems were problematic. Resolving these takes time and can be very expensive. This is why the business model underlying this effort needed to start hitting whatever financial targets were in place.
Unlike some industry sectors, the shipping business is highly fragmented and there are very few universally accepted platforms that have large user communities (maybe SITA is the closest?). The inherited lack of trust and unwillingness to share data has also been a problem when trying to encourage collaboration. Neutrality is a key attribute for seeking to address this problem, as is a general lack of standardisation. Therefore for any solution to be successfully adopted at scale it must address these points.
The failure of Tradelens should not mean that these initiatives are pointless. Companies and entrepreneurs should continue to try and come up with innovative solutions. It does not mean that Blockchains as a technology have failed, they have not, but the ability to use them and their use cases need to be articulated in a clear and simple manner.
Finally, and most significantly, the pricing needs to be set at a very low level, perhaps similar to that of streaming services and not subject to volume tiers. This should encourage participation from the smallest operators at the edge of any networks and help build critical mass. Unfortunately, the level of investment required to support such largess is of the same magnitude as the huge venture investments that originally funded the technology titans and probably beyond the scope of publicly traded industry giants.
Author: Ken Lyon
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