As an integration provider, we get a lot of requests around EDI (electronic data interchange). It’s only natural. Not just because the word ‘EDI’ is also included in Youredi’s name, but because EDI has been perhaps the most vital tool in the history of B2B integration.
Nevertheless, the word API is used more at Youredi than one could imagine. Also, APIs are something that we use daily when we are dealing with EDI integrations. You may wonder how an EDI solution provider gets involved with APIs.
The answer is simple: EDI is a rather old solution, it is cumbersome to implement and maintain. Yet, it is not going anywhere anytime soon. If a company already uses EDI and it’s working, why would they change it? (Especially since we talk about a multi-million dollars project that could take years).
At the same time, new entrants are relying on API connections. APIs can be implemented quickly, and these interfaces are a lot more cost-efficient than EDI solutions. Besides, APIs enable synchronous integrations, meaning that they facilitate real-time data sharing.
As an iPaaS provider, Youredi bridges the “old” and the “new” world of B2B communication. It’s crucial that companies would be able to communicate with each other electronically – whether they use an EDI VAN for EDI transactions or an API. Putting it simply, we help to create connections between EDI solutions (whether it’s on-premise, web-EDI, or managed services) and APIs.
In this blog, we will write shortly about EDI and API, as well as how they compare and how you need to be able to support both so you’ll be able to enhance the way you share business-critical information with all your stakeholders.
EDI (Electronic Data Interchange)
We’re not going to go deep into the topic of EDI. The reason for that is that we assume you’re familiar with it, or if you wouldn’t be, we’ve written an extensive article on the topic earlier (check out the post, What is Electronic Data Interchange?). Still, just for the sake of this topic, we must shortly write about EDI to emphasize the differences between this B2B integration tool and APIs.
EDI was developed decades ago to simplify B2B communication to allow trading partners to quickly and securely exchange information with each other and reduce or completely remove paper-based communication and manual labor. EDI is widespread across the logistics industry. It is used in the supply chain, distribution, manufacturing, retail, banking, or utilities to share information, typically in batches.
While EDI was meant to standardize B2B communication, the story is not that simple. In Europe, firms use EDIFACT, while in the US and Asia, ANSI X12 is the most commonly used standard.
When an organization is using EDI (especially on-premise software), they only provide access and connection to stakeholders they have an agreement with. This ensures security and ensures that companies have audit trails and archives. But still, EDI connections between two partners are often cumbersome to set up, and even though the EDI message structures are standardized, different parties can utilize them differently, meaning that EDI systems are talking different “dialects” which need to be aligned as part of the setup. (If you are interested in learning more in this regard, we suggest one of our blogs on the EDI Translation and validation subject)
Still, some companies are looking for alternatives for EDI, and they are wondering whether API is a better choice.
If you want to read more in-depth about APIs, check out our article on API integration. Here, we just give you a quick overview of APIs to clarify the difference between APIs and electronic data interchange.
An API serves as an interface between two endpoints to enable information sharing in real time between them. Companies have been creating API strategies to define how they allow the partner network to access information through APIs.
Developing APIs is cheap and straightforward. They can be used for orchestrating similar transactions to EDI, but APIs are synchronous (work on a request/response basis) and have smaller payloads.
Still, considering an API strategy, it’s important to decide how one is going to handle communication with external partners that can have access to the company’s data through API. While APIs make data more accessible and empower new business models and innovative companies, security should be a concern.
So should you switch to API from EDI? If you are confused, keep on reading.
EDI vs. API – Which One Do You Need?
Gartner forecasted that APIs would replace 25% of EDI connections by 2020, but the rest of the B2B communication would still be handled via legacy applications and technologies. We are a bit less enthusiastic and think that 25% won’t be achieved by next year.
The truth is that enterprises that have working EDI connections in place are not going to change their systems – partly because it’s working well, partly because it would be an overwhelming project due to the fact that often EDI connections are tightly coupled with the core business systems. While in the long run, cost-savings could be significant, the risk of the project failing is big, and in that case, it could result in a loss of millions of dollars. Therefore, it’s implausible that there will be a significant shift from EDI to API in the near future.
While APIs are great and essential in the digital economy, if an API is poorly designed, sending a single EDI purchase order through API could require more than 50 operations.
For now, EDI will remain a significant tool for B2B communication, but as APIs are becoming more commonly used in the digital economy. There are almost no new startups that wouldn’t use some sort of APIs. While EDI cannot match the timeliness of data sharing through APIs, in an ideal world, you shouldn’t choose whether you support EDI or API. You could also just have the right balance of both.
While for enterprises, it’s easier to supplement their EDI communication with APIs, for SMEs investing in EDI can be a significant investment. At the same time, often, it’s the only way to communicate with big players. Nevertheless, APIs have enabled many to receive real-time data from enterprises so that they can improve and digitalize for example, the booking process of containers, truckload, or air freight.
EDI & API – How to Make Them Work Together?
Both EDI and APIs are excellent tools for secure business information exchange. These tools are essential for logistics companies, as data for logistics providers is more valuable than ever.
While you can’t neglect APIs, the truth is they do not disrupt data exchange in a significant way.
Clearly, EDI has shortfalls, like batch processes and daily occurrences (these are not sufficient for proactive decision-making and forecasting). EDI is also challenging to implement (the onboarding process can be surprisingly long) and expensive to maintain, EDI integrations are often cumbersome, especially when using AS2 as a transfer technology and need to deal with a variety of standards, like EDIFACT or ANSI X12. Also, the data quality could be an issue. When companies use traditional EDI tools, there is no way to validate the information and enrich the data. Tools that offer business process integration can be more suitable for that.
We are not trying to bring EDI down, but we also don’t want to glorify APIs. APIs may have some similar challenges to EDI. Some of these are that onboarding and testing are time-consuming and mappings need to be also done, when changes occur to the systems and applications of the trading partner, the connection likely needs to be modified. The same applies when changes in internal applications arise.
Still, API is ideal for B2B and A2A (you are communicating within the same firewall or in the same company or same landscape) communication.
So, how do you bring a somewhat legacy technology (EDI) and a modern one (API) together? You will need to have an integration solution (often based on an integration platform) that can facilitate seamless data sharing between EDI and API. This way, you can unlock the most value from your data.
EDI uses communication protocols, such as AS2, FTP, SFTP to deliver information, while APIs use more accessible and more real-time HTTP/S. While EDI technologies tend to be on-premise, APIs can also be (are always) cloud-based.
Bridging the two worlds requires hybrid integration capabilities, meaning that you will be able to connect on-premise and cloud-based tools to enable improved data sharing. A solution that can connect EDI and API need to be ready to tackle the challenge of the variety of data formats. For example, EDI can work with EDIFACT, X12, RosettaNet, or proprietary format, while APIs are typically using JSON or XML (more modern data formats). An integration solution needs to be able to translate/harmonize the data format so that the system that receives the data gets it in a format that it can understand.
We’ve seen an emerging need for the capability of helping companies that only have APIs connect with those enterprises that do not provide APIs, and all they use for communication is EDI. Often, these companies want to disrupt logistics and utilize data in a way that’s not been done before.
We’ve also seen examples of enterprises that want to take a step towards modernization and have started to use API to complement their EDI efforts.
Benefits of Connecting EDI & API
EDI is so deeply engraved in the DNA of businesses in logistics, supply chain, retail, manufacturing, and finance that we’ll rely on this communication tool for a long time. And that’s fine. It is sufficient for sending confirmation messages, purchase orders, or invoices. Also, we’ve earlier written a comprehensive guide on how one can stick with EDI but do it in a more modern way.
But there will be an increasing demand for supporting connectivity with API. After all, API will add an entirely new and exciting angle to the story. We believe that APIs will bring more visibility into supply chains, and using timely data will improve the traceability of goods as well as improve the ability of better forecasting and demand planning, as well as optimizing processes.
EDI and API need to be able to work together in symbiosis, but first, you need to find the right way to connect them.
Curious how our integration Platform as a Service (iPaaS) could help your organization tackle its integration challenges? Contact us today for a free consultation.