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How To Choose the Right EDI Solution for Your Business

It's a given that you need EDI to communicate an invisible, electronic flow of formatted data with your trading partners.  The next step is deciding which data movement solution - cloud, hosted, or on-premise - is the best fit for your business.  There is no magical, simple answer.  There are many factors to consider when making this important business decision. 

Substantial up-front savings and increased efficiency, productivity, and accessibility are driving explosive cloud-based growth.  But you may still find value in a traditional on-premise delivery model or a hosted approach.  It's not a mutually exclusive decision either - you can create a hybrid configuration that combines the best of multiple data movement solutions. 

Ultimately, your business and technical goals, budget, IT expertise, resources, infrastructure, compliance issues, desire for control, and integration with existing ERP systems will guide your selection. This whitepaper will help you ask the right questions and choose the right EDI data movement solution for your organization. 


Cloud EDI Explained

Cloud EDI is becoming today's most popular EDI solution. It allows you to fully outsource your entire EDI operation.  Your EDI provider will create, send, receive, and manage all EDI traffic with your customers and vendors.  All you need is Internet access.  Free from IT headaches, you can spend more time focusing on other IT priorities and on your overall business growth.

Technically, a cloud solution is an off-premise, pay-per-use model that is accessed via the Internet.  You don't need to buy, install, run, or maintain a server, hardware, or software, which substantially reduces your initial investment versus on-premise solutions.  An application provider will manage the software and provide Sofware as a Service (SaaS), hosting, and managing the infrastructure needed to support the solution. 

Cloud-based EDI solutions are affordable, accessible, and flexible.  They eliminate upfront costs on hardware and software, and they give you scalability that lets you change your solution as your needs change.  Established cloud EDI providers heavily invest in their security and backup infrastructure, offering more data protection than many companies could provide on their own.

The National Institute of Standards and Technology (NIST) has defined four cloud deployment models.  To maintain the highest level of security at Effective Data, we host our cloud solution on our private network that customers access like a public cloud.  Thus, it is a hybrid, private SaaS solution. 

  1. Private cloud - Used exclusively by a single organization comprising multiple users.

  2. Community cloud - The cloud infrastructure is provisioned for exclusive use by a specific community of consumers from organizations that have shared concerns.  It may be owned, managed, or operated by one or more of the organizations in the community, a third party, or some combination of them, and may exist on- or off-premise. 

  3. Public cloud - The cloud infrastructure is provisioned for open use by the general public.  It may be owned, managed, or operated by a business, academic or government operation, or some combination of them.  It exists on the premises of the cloud provider. 

  4. Hybrid cloud - The cloud infrastructure is a composition of two or more distinct cloud infrastructures (private, community, or public) that remain unique entities, but are bound together by standardized or proprietary technology that enables data and application portability. 


Cloud EDI solutions eliminate upfront costs on hardware and software and give you scalability that lets you change your solution as your needs change. 



On-Premise EDI Explained

The on-premise solution, also called "on-prem" or "in-house", is the traditional EDI model, with the most significant upfront investment for software licensing fees, hardware, installation, data migration, employee training, storage, data backups, disaster recovery, and ongoing maintenance.  You buy and own your servers and software licenses, install operating systems and hardware, and maintain everything yourself.  This solution allows you to exchange as many inbound and outbound documents as you want without incurring additional per-transaction fees. 

Everything physically living in your four walls or in your data center is your responsibility.  EDI software is integrated with your ERP software, allowing data to move between systems without any manual interfacing.  In most cases, on-premise applications will be configured for remote access, which will allow for outside support.  

If you choose an on-premise solution, you will need to hire or outsource an expert IT staff to manage, maintain, scale, secure, monitor, troubleshoot, and address equipment issues.  However, if you already have an established infrastructure and seasoned IT team, you may want to receive specific EDI training to properly support your solution. 


On-Premise EDI solutions provide maximum oversight with no per-transaction fees but require significant up-front costs and ongoing maintenance. 

Hosted EDI Explained

With a hosted EDI solution, you own your EDI software, and it is hosted by a provider on their equipment at a datacenter or other location.  It's a middle-ground position where you retain control by owning your own software while leveraging the expertise of an established datacenter for the hardware and physical space. 

The hosting firm provides the hardware and security.  You are responsible for all the other activities of an on-premise system, including software, software licensing fees, IT resources for upgrades and security patches, backup plans, etc. 

Hosted solutions are usually contracted for a specific time period and customized for your business. 

Hosted EDI solutions offer the benefits of owning your EDI software while leveraging the expertise of an established datacenter for hardware and physical space. 

Hybrid EDI Explained 

While the EDI cloud architecture is gaining lots of attention, some organizations use a combined cloud / on-premise approach.  

Here, some of your resources are on-premise and some are in the cloud.  This allows for a high level of customization.  Plus, you can use the cloud when it makes sense and use a different model when necessary.  Hybrid deployment can also save you money through a gradual transition to the cloud.

A hybrid EDI solution may be ideal for established enterprises that may not be able to shift to the cloud all at once.

Additional Guidance

Every business is different and has its own priorities.  At this point, you may already know what is most important to you in an EDI solution - cost, convenience, or control. 

Cloud EDI Reduces Initial Costs and May Be Best For: 

  • Small and mid-size businesses (SMBs) that want enterprise-level solutions on tight budgets
  • Companies that want to focus on core competencies 

On-Premise EDI Provides Maximum Oversight and May Be Best For:

  • Companies that value direct hardware and software control 
  • Companies with a well-established IT infrastructure
  • Companies able to make a large, up-front, long-term investment

Hosted EDI Offers Convenience and May Be Best For: 

  • Companies that already own their own EDI software
  • Companies that value direct software control
  • Companies that want to save on hardware and maintenance expenditures
  • Companies that seek the ease of using outsourced hardware and security


Ongoing Support

Once you've chosen a cloud, on-premise, or hosted EDI model, you'll need someone to run it, continually manage it, train new users, optimize it as issues arise, and add new trading partners.  You can do it all yourself, or outsource day-to-day operations to an expert third party, known as a managed services provider.

A managed services provider acts like an extension of your IT department, offsetting the resources needed to manage, monitor, and run your system.  Look for a partner that offers continuous optimization, training, new trading partner onboarding, day-to-day management and support, disaster recovery and backups, giving you the ultimate peace of mind that your EDI data will flow smoothly. 

Choosing managed services will free your in-house IT department from the strain of managing daily EDI operations and llow them to focus on strategic IT initiatives. 

ERP Integration

Lack of integration with business systems is one of the main reasons EDI implementation fails.  ERP integration requires specialized skills and expertise.

Look for a partner with experienced EDI consultants who have in-depth knowledge of your EDI platform. 


Your answer to whether a cloud, hosted, or on-premise EDI solution is right for your needs depends on business priorities, budget, IT expertise, acceptance of risk, existing infrastructure, desire for flexibility and control, and more. 

Just remember that on-premise solutions require larger capital expenditure, but cloud-based solutions may present long-term subscription contracts.  Some say that hosted, cloud, and on-premise solutions tend to cost the same over time, with the comparative long-term cost for each varying by the vendor.

Contact us today to discuss which EDI solution is right for you. 

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