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EDI Continues to Reinvent Itself

In the age of the IOT and AWS, folks often wonder if EDI is a concept whose time has gone. Not so as it continues to remain not just relevant but an integral part of an enterprise.  Rumors of the death of electronic data interchange (EDI) have been greatly exaggerated, said a recent report from IT analyst Forrester Research. In spite of numerous supplier predictions that the emergence of competing web-based standards, and in particular extensible mark-up language (XML), would herald a mass migration of users away from the older, proprietary technology, EDI has survived.  Not only that, but it continues to grow. "EDI standards remain the dominant protocols in the B2B world and EDI-related network traffic volumes increased between 5% and 10% during the past year," said Ken Vollmer, analyst at Forrester Research. That trend, he added, is set to continue for at least the next five years.

The reason for the continued popularity of EDI is clear, said Chris Hayes, solutions manager at Sterling Commerce, a supplier of EDI products and services. "The short answer is that EDI works. Companies have invested in it over many years. It may well have been moderately painful to get it up and running, but now it works.  That is not to say, however, that there are not barriers to EDI usage - nor that there are not compelling reasons for some companies to embrace an XML approach to swapping vital business documents such as purchase orders, delivery notes and invoices.  For many companies, traditional EDI is an expensive way to conduct business - prohibitively expensive in some cases. Because of EDI's rigid message structure, companies wishing to perform EDI transactions must agree upon a common standard to ensure continuity and avoid translation problems.  But in almost three decades as the preferred standard for batch format transactions, EDI has spawned numerous, incompatible offshoots. EDI users have frequently customized standards to better suit their needs and developed a vocabulary that fits their specific industry. For example, although Edifact is the primary standard in the UK, retail companies tend to use a different standard, Tradanet. Other standards exist in other industries and geographies.  Most of the commonly used standards are routinely updated, forcing companies not only to regularly update their own EDI environments but also to insist their trading partners do so.

EDI requires a company to deploy a communications gateway, mailbox and software for managing the exchange of business documents and to pay transaction charges to a value-added network (Van) provider to ensure transactions are routed to the right recipient and are secure during transport.

It is hardly surprising that the emergence of XML in the late 1990s created great interest among companies that were not inclined to pay transaction charges to the Vans. Instead, they could use a free medium - the internet - to transport messages.

But XML is not without its challenges. First, XML standards are still relatively immature and unstable. "Some of the newer XML formats do not have a lot of thinking behind them, and certainly do not have a lot of industry expertise behind them.  In addition, XML has a larger footprint than EDI, which means it requires more bandwidth. For companies that handle large volumes of transactions a day, that extra bandwidth can quickly become expensive. Finally, many small and medium-sized companies find themselves under pressure to deploy the same EDI system as a major customer. "For many, it is a basic cost of doing business with the market leaders.  Customers want to leverage XML with their existing EDI systems, making interaction between the two technologies seamless.  

With companies now experimenting with more flexible forms of EDI, the technology's future in the medium term at least seems secure.  Some estimates have EDI transaction volume in the range of 12 million to 15 million transactions a day on a worldwide basis. Its ongoing growth means it will continue to be the dominant document exchange alternative for many years to come.

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