EDI Pricing

February 22, 2019

We get quote requests for EDI pricing daily. It is not a surprise. EDI providers typically lack transparency in terms of what you are going to pay for EDI services. It makes it extremely difficult to compare EDI service providers/EDI vendors.

 

We wanted to help you by writing a detailed article on the topic. While it's difficult to say a price at this point as all EDI projects are different by the end of this article, you should have a good understanding of how much you should not pay and how a modern EDI service pricing model looks like.

 

High EDI Costs

 

So, I googled what are the different data interchange pricing options that EDI vendors offer. I didn't find too many concrete information, but instead, I came across this exciting forum discussion around EDI.

 

David (we changed the name) asked this question:

 

“We are paying somewhere in the neighborhood of $3.00 per transaction for EDI.

 

What 'should' we be paying?”

 

For more context, the discussion continued like this:

 

“It is a 3rd party and includes a tiered approach.

We pay $25,000 a year for the subscription.

Then we pay:

- $2000 a year per trading partner for volumes < 2000 transactions per year

- $3000 a year per trading partner for volumes > 2000 but < 5000 transactions per year

- $5000 a year per trading partner for volumes > 5000

 

We did approx. 25 000 transactions last year, divide the total subscription cost, tax, shipping, handling, licensing, docking fees and we paid about $3.00 per transaction.

 

We have 'others' (these are out of work "LOST" actors) who say they are paying under $1.00 per transaction.”

 

Frankly, David, we think you should pay a lot less than $1 per EDI transaction – the tech is matured, so there is no reason to spend as much. While the low transaction volumes normally result in higher prices, still, you shouldn't pay near as much as you are currently paying.

 

To demonstrate how the costs could be lowered, we will explain how our modern EDI pricing model looks like and where the real savings could be.

 

The pricing model was created considering that small and medium-sized enterprises need to be able to communicate with large retailers (Amazon, Costco, Walmart, etc.) without leading to extra high overhead costs.

 

EDI is a commodity

 

EDI was created to become the de facto technology for B2B communication across trading partners. Therefore, EDI should be a commodity for anyone that is engaging in B2B business and needs to communicate with one or multiple trading partners via EDI transactions.

 

The fact that EDI must be used in most cases when someone is trading goods with large enterprises (and mostly, there is no way around, you must have EDI in place) should not mean that EDI providers should use it to their advantage to charge higher prices.

 

David’s example above shows how the costs can be really high. Even those that are saying that they pay around $1 pay too much. The tech is mature, so why the high prices?

 

Traditional EDI pricing

 

David’s example demonstrates how traditional EDI pricing models work. Breaking it down, you’ll see why the cost is so high.

 

First of all, they are paying for the subscription. It could also be software, like an EDI VAN cost. That’s slightly more than 2000 dollars a month just for the software.

 

The pricing that David shared can be only applied to one single connection. It means that David's company would most probably need to pay extra if there were more connections. The unit prices go down when the volumes are bigger, but as the volumes are relatively small in David’s case, so he will never be able to get to drive his costs significantly down.

 

At this point, it’s good to look into the math:

 

David had 25 000 transactions in a year, so he paid for these $5000. To this, we need to add the $25 000 subscription fee. The $30 000 divided by 12 months is $1,2 per transaction. As you can see from the example, David counted some other costs as EDI overhead cost as well, that's how he got $3 in the end.

 

The truth is that even $1.2 is still too high price. Also, David did not account the work that his team needed to do to set up and any maintenance work.

 

How does modern EDI pricing look like?

 

In this case, you need to find an EDI provider that is using the cloud for facilitating EDI connectivity. Moving your EDI integrations to the cloud is a lot more simple than you'd imagine and you do not need to purchase a software.

 

In Youredi's case, the best thing that you do not need to have an IT team that can work around the EDI VAN or the software you purchased, neither they need to do point-to-point integrations or hardcoding. Instead, you can just purchase a modern EDI managed service, so the EDI vendor will take care of developing and deploying the connection and continue to maintain the solution.

 

Typically, you pay a one-time setup fee per connection. The price depends on the complexity of the connection.

 

The unit price is typically a lot smaller than in David's case and the more transactions you have the cheaper the unit price will become.

 

All in all, with Youredi, David should save on the overhead costs, but also he could save on the software fee, as well as on the unit prices.

 

It's good to remember that we do not know David's case in more depth, therefore, it's hard to estimate what would be our pricing. Nevertheless, when your gut says that you are paying too much, you should look for alternatives and always ask for a quote.

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