Blockchain offers a strategic opportunity for small and medium businesses, but even the most flexible SMEs are in no hurry to adopt this new data transaction tool. Moreover, the current high cost of сustomized solutions for enterprises is compounded by significant legal, technical, and financial issues preventing widespread blockchain adoption.
SMEs account for more than 50% of the world economy’s GNP, in addition to over 99% of all enterprises, according to recent ATKearney research. For example, 62% of China’s GDP (6.9 tln US dollars) is produced by SMEs; small and medium-sized businesses produce about half of Germany’s and the United States’ GDP (57% and 52% respectively). Financial barriers, difficulties in reviewing counterparties and chaotic document workflow limit an enterprise’s growth potential and complicate business processes. In sum, SMEs are forced to use the available resources inefficiently.
Solutions available on the market do not create an environment for seamless interaction among independent businesses within a single ecosystem. For example, data/document flow and circulation between counterparties in a single system does not take place due to a lack of trust. Existing marketplaces are both a great help yet also a costly partnership because of their various commissions and fees.
It is possible, however, to provide tools that can solve all of the most recurring problems, and it is up for integrators to customize them to reflect the reality of their country of residence. R&D company Gravity Solutions designed its Business Framework for use in off-the-shelf software and next-generation blockchain applications which automate and optimize business processes for SMEs. The framework will consist of legal, financial and technical pillars which will be turned into tools or templates that can be easily integrated in existing products while also extending to existing SaaS solutions.
CEO and Founder of Gravity Solutions, Yury Parsamov, said:
The tech-savviness of the average SME is now vital to its future. However, few of today’s SaaS solutions can be used as turnkey products to serve the wide-ranging needs of small and medium-sized enterprises. In fact, the SaaS industry has yet to fully capitalize on the emergence of blockchain and to open the technology to all types of businesses, beyond the tech giants, enthusiasts, and early adopters. It’s evident that SMEs lack blockchain-related expertise, cannot afford custom-tailored solutions, and have no time to handle the legal aspects of blockchain-based systems and smart contracts use. The Gravity Business Framework will address these issues and allow for hassle-free experience.”
The technical architecture of the framework is a set of components and modules based on the Gravity Protocol. Typical smart contracts (and later, turning complete smart contracts) are based on these components and modules. Gravity’s legal architecture provides for the “Extended Соntract” based on the Ricardian contracts. Furthermore, its financial architecture is a system of stable coins and gateways that allow businesses to avoid the huge expense of financial middlemen (banks and payment systems).
Gravity Solutions aims to create an ecosystem of partners, specializing in the implementation of SaaS solutions and legal services for SMEs, and to build a community of developers, lawyers, business developers, and entrepreneurs.
An overview of SME problems
Financial problems – companies have difficulties attracting private investments and accessing banking and financial services due to the strict processes of proving a company’s reliability. Services such as factoring and loans are usually used to cover the cash-flow deficiency, but obtaining them is complicated. Even if loans are obtained, the rates are usually higher than expected which makes the idea of traditional financial services for SMEs inefficient.
There are also difficulties that arise when trying to verify new counterparties who do not have the requisite documentation. These difficulties lead to an increase in the human resources needed to audit and validate their activities. Searching, structuring and verifying documents is a significant time-thief for SMEs. This problem has been encountered for quite some time by both traditional and digital means. According to financial cryptographer Ian Grigg, the cost of KYC can reach up to 30 percent of the transaction volume.
Today, small businesses use SaaS solutions, marketplaces, and B2B e-commerce platforms to expand their opportunities for growth. The applications available allow companies to rapidly and easily adapt to changing business environments. Some of the most popular products include ERP and ERM systems, Digital Signatures, electronic document flow services, accounting and transport management systems (TMS), and various other tools for managing and monitoring a company’s activities. These solutions have created a real breakthrough in optimizing and synchronizing organizational workflow.
However, the solutions available on the market do not create an environment for seamless interaction among independent businesses within a single ecosystem. For example, data/document flow and circulation between counterparties in a single system does not take place due to a lack of trust.
SAP and Microsoft are creating solutions on the SaaS and ERP, while traditional banks try to design products respectively towards SMEs. Fintech startups such as Revolut and Srite are bringing financial ideas into the market.
Existing marketplaces are both a great help yet also a costly partnership because of their various commissions and fees.
For example, Alibaba’s membership fee is $1,500 per year, on top of the obligation to pay commissions totaling five to eight percent of the value of each transaction. The subscription fee for the Ariba Network is $2,250, with a limited number of transactions (499 per year). There is also an additional commission fee if turnover exceeds $50,000.
Still, solutions based on internet server architecture (http/https) do not offer the opportunity to create fundamentally new processes with legal validity. This includes the guarantee of data integrity and authenticity, verification of the transacting parties’ ID, and lower risks of a data breach. These solutions, commonly described as the Internet of Agreements, can be created using Blockchain protocols.
Although many in the community strive for massive blockchain adoption, there are still a small number of solutions for SMEs. Bringing technical as well as user-friendly functionality along with financial and legal solutions seems to be an ambitious goal for the community. Prudential (Singapore), one of the largest insurance companies in the world, along with StarHub announced a blockchain-based digital trade platform to support their growth aspirations of SMEs in late 2017 with a public launch in early 2018 but there has been no word about it since.
The public ledgers that are traditionally used to create solutions for just about anyone, (SME’s included) are Ethereum and EOS. It is also possible that Codius by Ripple smart contracts implementation might work. The Chinese Nervos Network is developing a system which will allow businesses to connect a public Blockchain and private application chains, but that won’t be introduced for another year.
We still have to keep in mind that because many SMEs lack blockchain expertise (or even not familiar with the tech), there is demand for products, not technologies. This critical moment defines most of the existing and upcoming solutions as being disjointed or unfocused and is not truly getting businesses out of the wheel of Samsara.
About Gravity Solutions
Gravity Solutions is a blockchain research and development firm that aims to create a new, flexible, and efficient blockchain-based framework for all types of SMEs. The framework will be powered by the firm’s visionary protocol, Gravity. The protocol is based on the Delegated Proof-of-Importance (DPoI) consensus algorithm, and a network activity index, which ensures fair-minded distribution of incentives for the community around the Gravity Business Framework. To date, the R&D firm has attracted thousands of participants during its public testnet phase and is now working toward introducing new components and improving the technology behind all its products.
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