EDI Software Basics
Are you looking to do business with a large retailer, manufacturer, or distributor? If so, you'll inevitably receive a requirement to set up electronic data interchange (EDI) from one or more of your partners. This process requires selecting an EDI solution, which will likely involve EDI software.
Let's start with the basics. What is EDI?
EDI is the computer-to-computer exchange of standard electronic business documents between business partners over a secure, standardized connection. EDI helps partners speed up transactions, eliminate manual errors by automating B2B communications, and reduce costs.
We have a full breakdown on EDI 101 here.
In this article, we give you a crash course on EDI software and some things to keep in mind as you select your EDI solution.
What is EDI Software?
EDI software and EDI solutions are tools specifically built to handle all the key functions of EDI, which include standardizing documents into and out of EDI formats, sending & receiving documents, and integrating EDI directly with your back-end systems and processes.
EDI Mapping & Translation
EDI mapping & translation go hand-in-hand.
EDI mapping is the process of mapping standard EDI documents into other formats, such as flat-file, XML, CSV, and others. EDI mapping is used to turn received EDI messages into files that you can use in your IT systems, such as your ERP, logistics system, or CRM.
EDI translation is the flipside, as it turns non-EDI business files into standard EDI documents - e.g. translating a NetSuite or ERP purchase order into a standard EDI X12 or EDIFACT formatted document with EDI document segments and data elements.
Both the mapping & translation processes can be automated with EDI software.
File Transmission - MFT
A file transmission solution is simply the mechanism used to send and receive EDI documents to and from your trading partners. For EDI, you'll need a solution that enables transmission via secure protocols, such as AS2 and SFTP.
Historically, many organizations used to only share files via a set organizational protocol, and it was quite challenging to set up file transmission via multiple protocols to connect directly with multiple partners.
Many organizations turned to intermediary value-added networks, or VANs, that could transmit files via multiple protocols.
Today, modern EDI software makes it much easier to connect directly with multiple partners. Specifically, EDI solutions that incorporate managed file transfer (MFT) capabilities are equipped to simplify this process, ensure secure file transfer, and guarantee non-repudiation, which is a legally valid confirmation that the recipient actually got the EDI file.
Back-End Integration
For many organizations, connecting EDI workflows with back-end systems, such as databases, CRMs, and ERPs, is the most challenging and costly area of EDI, but it can also be the most valuable.
The ideal EDI setup for many organizations involves automated workflows that directly link EDI into existing business processes.
Back-End integration involves mapping & translating EDI files to and from specific systems and then integrating EDI with those systems using ports and APIs. This is an area where legacy and traditional EDI systems fall far short. These legacy and traditional systems' problems are why you'll want to consider an EDI software solution that uses a modern, API-first architecture.
Types of EDI Solutions
You can find one or more of these EDI functions in a variety of products. These include:
VAN & Web EDI vs. Direct EDI
An EDI VAN, or value added network, is a secure, outsourced network that enables you to exchange EDI documents with your business partners. You can think of a VAN as a provider of EDI-as-a-Service, not as EDI software.
The biggest challenge of EDI integration is mapping & translating. Many VAN solutions, though not all, handle mapping for you, so you won't need EDI experts on staff. Typically, with a VAN, you connect through a web portal and manually enter the data into a web form, and then the VAN takes care of the heavy lifting for you. Note, these web EDI portals don't directly link to your back-end systems, so there is ongoing, manual work you'll have to do there.
There are also significant costs to working with VANs:
- Fixed costs to access their network
- Fees to transmit each document
- Costs for exceeding certain file sizes - e.g. if you transmit a large product catalog or purchase order
- Switching costs - there's often a significant cost in time & money to leaving a VAN
Once you reach a certain EDI transaction volume, you'll inevitably want to switch to an EDI software solution. For many companies, there's quickly a point when they need to switch to an EDI solution in order to save money and reduce errors from manual data entry. For example, if you supply products to Walmart, you can initially communicate with the retail behemoth manually by using a web portal, but, as your sales volume with them grows, that becomes impossible to maintain, and you'll be forced to use an EDI solution.
When you use EDI software, you'll need to set up your EDI mappings, which can be tricky because EDI knowledge is detailed and specific. Accordingly, many organizations employ an EDI specialist with EDI mapping expertise or work with a consultant to set up EDI integrations.
That said, while initial integrations may be time consuming and challenging, the right tool can vastly simplify the process. Additionally, subsequent integrations can be far less complex because you can reuse much of your initial work for the new flows.
Single Purpose vs. End-to-End
Single-purpose solutions can handle some aspects of the EDI process, such as mapping & translation, file transfer, or back-end integrations. Unified, end-to-end solutions will handle all three and provide everything you need in order to get started in one package.
Unified solutions deliver cost and time savings while reducing maintenance work and errors. However, if you're already tied to certain EDI solutions, as many organizations are, you may find it useful to supplement your setup with software that more efficiently handles certain aspects of EDI, such as AS2 transfer.
Integration-Specific Integration Software
Some solutions provide deep integration capabilities for a particular software solution, such as Microsoft Dynamics 365. If your workflows heavily rely on a certain tool, you may consider a solution that focuses first on the back-end system and second on EDI. However, the majority of business users will be well served by an EDI tool that connects to systems like Dynamics as well as to the broader technology ecosystem.
Industry-Specific Platforms
You can find specialized integration platforms designed for specific industries, such as healthcare integration solutions that incorporate elements of EDI. Working with these types of platforms is often a balancing act.
Most companies need to support a range of standards and workflows and need a broader EDI solution that has the *flexibility *to cover many use cases. Typically, broader EDI solutions provide a reliable answer to most EDI connection requirements, with some exceptions for specialized cases.
One popular option for many organizations in specialized industries is to select a primary, unified EDI solution and supplement it with specialized, industry-specific platforms.
What are Modern EDI Software Capabilities?
EDI technology is 50+ years old, and many tools have sat, largely stagnant, on the market for decades.
While some solutions continue to offer complex legacy user interfaces and outdated approaches, modern EDI solutions have evolved leaps and bounds in recent years by leveraging superior technologies. Here's just some of what differentiates modern EDI from legacy solutions.
API-Based Architecture & Microservices
A solution with an API allows you to build microservices that trigger integration workflows, access data, and publish data without writing code. Through workflows triggered by microservices, these solutions enable users to build an infrastructure that's easy to develop, test, and maintain.
An End-to-End Solution
Historically, you would need individual solutions for individual tasks, such as mapping documents to X12, EDIFACT, TRADACOMS, file transfer via AS2 or SFTP, or back-end integration. Now, you can obtain a single solution that handles all of these processes, making it easier to build an end-to-end EDI workflow.
Containerization
Containerization is a lightweight form of virtualization that encapsulates an application in a container with its own operating system. This new technology allows you to easily spin up new test environments, QA processes, or dynamically scale up and down to handle changes in data volumes.
Connectors
Solutions that offer a wide range of data connectors make it easy to connect many systems and easily switch technologies. Through built-in connectors, modern EDI software solutions facilitate seamless integrations to a wide variety of back-end systems.
EDI Deployment Options
Just as you have a choice of on-premise, cloud, and infrastructure/platform-as-a-service (iPaas) options for your software applications, you have these same options for your EDI solution.
Cloud
Cloud-based EDI offers all the benefits of any other cloud solution. It's subscription based. There's no need to purchase hardware, software licenses, or maintenance agreements. IT resources for installation, configuration, system management, and upgrades are included. Cloud solutions are scalable, and security can be more comprehensive than a smaller company could otherwise afford. However, some organizations steer away from cloud implementations due to privacy concerns.
On-Premise
Typically, on-premise solutions are more capital intensive because you need to purchase and manage all the hardware, software, maintenance, upgrades, IT resources, and so on. On the other hand, these solutions offer you more control and (potentially) more data privacy.
IaaS/PaaS/iPaaS
If your organization runs part of your IT stack on AWS or Azure, and it takes advantage of AWS or Azure services, you will also want to run EDI there to integrate with the software you run on those platforms.
Hybrid
In truth, many organizations run hybrid deployment models, and the ideal solution is one that isn't limited to a certain platform. You may be best served by a flexible EDI software solution that supports cross-platform deployment.
EDI Costs
For most organizations, the choice of EDI solution is driven most by risk and efficiency. EDI is a critical function, so it just has to work, and it must be supported. The value of an efficient EDI setup (being able to do business with critical partners) will typically far outweigh its costs. That said, cost is always a consideration, and there are some key elements to keep in mind.
Transparency
What's the cost of a good EDI solution? Sometimes, it's a difficult question to answer, as many solutions simply don't list their pricing. Instead, these same solutions may price based on your use case, company size, or geographic location.
Our advice is to ignore these solutions.
Pricing should be transparently posted right on the solution provider's website. There are too many quality options out there now that transparently list pricing to let yourself be pushed around on pricing.
Setup Costs
If you select an owned EDI software solution, there will be a setup cost. With most tools, it will take you time to get your mappings in place and get your workflows up and running. Your other option is to hire a consultant or select a VAN, but VANs will charge you extensive fees. The more you rely on them, the more fees you'll pay. If you're communicating with a partner like Amazon, Walmart, or Target, and the VAN has created that connection before, the process may be fairly inexpensive. However, if you're establishing a connection with a partner the VAN hasn't worked with, costs will be more substantial.
Transaction Costs
Most VANs/managed services charge on a per transaction basis. If you receive a transaction, you're billed based on the number of line items in the purchase order. So, while costs may be low in the beginning, VANs can quickly become expensive as you add partners and transactions. In contrast, once you've purchased an EDI solution, the tool is set up, and you're connected to your partners. You won't be charged per transaction, so ongoing costs are much lower than they are for a VAN/managed service.
For a more complete breakdown, see our article on EDI costs.
ArcESB: Unified EDI Solution
If you choose an end-to-end solution, consider ArcESB.
ArcESB does it all: translation, transmission, mapping, and data integration. It supports every major EDI standard and protocol while enabling you to connect 80+ popular applications, databases, and SaaS platforms to your EDI processes. Unlike many pieces of EDI software, ArcESB is a modern solution that simplifies EDI with a self-service, visual, drag & drop interface, so you can easily connect EDI with your systems quickly and affordably with no transactions fees ever.