While software-as-a-service, platform-as-a-service EDI providers and managed EDI services are becoming more common, sometimes, you just can’t avoid purchasing EDI software. EDI software solutions are essential for orchestrating EDI transactions with your B2B trading partners.
In this blog, we want to guide you to understand better what you’ll get for your money when you decide to purchase EDI software solutions. We will explain what’s an EDI software, what are the standard features that should come with it, how you can benefit from it and why and when you would need. In the end, we will just shortly introduce you to cloud-based EDI that has been gaining popularity.
If you are looking for EDI software, you should visit our 25 Great EDI Service Providers blog in which we gathered some of the best EDI companies in the market.
What is an EDI Software?
EDI software is merely a tool (it can be on-premise or cloud-based one) for transmitting B2B transaction messages (e.g., purchase orders, confirmations, invoices) automatically. The communication can be facilitated between two or multiple endpoints (systems and applications of the trading partners or even internal departments/partners). It’s typical for example to connect transportation management systems (TMS) with enterprise resource planning (ERP) systems. Using an EDI software, the parties eliminate the need for manual work so that the messages between the stakeholders can move more quickly while also companies frequently see fewer errors in the messages.
On-premise EDI software is a preferred option when the company needs to have the software behind a firewall for safety purposes. For some, it can be favored over a PaaS for B2B integration. (Though it’s important to mention that the cloud is also a secure option for data sharing.)
Common EDI Features
Besides transmitting messages between systems and application, an EDI software would typically have the following features as well: EDI translation, EDI mapping, and security.
Different systems and applications operate by using different data formats and standards. For ease of communication, it’s essential to translate the data format during the data transfer, so that the endpoint would receive the information in a scheme that it can understand.
EDI software solutions need to utilize data mapping. The data mapping process is essential to enable the data translation process. Let’s assume that your system is using X12, but your partner wants to receive the messages in JSON format. You will have to be able to match fields that can be found in the X12 document to match fields in the JSON message.
When you are using on-premise EDI systems, only those trading partners can communicate with you that got the permission from you – this brings one layer of security, as well as EDI systems typically use protocols such as FTP and HTTPS for communication between systems.
Benefits of using EDI Software
The most important benefit of any EDI software or solution is that it will fully automate data sharing between the trading partners and remove the need for manually entering data, thus improving data accuracy. According to Harvard Business Review, poor quality data costs the U.S. $3 trillion per year, thus the value of accurate and clean data cannot be emphasized enough. Communicating with your partners electronically will most likely also have a positive impact on the customer experience and partner relations (e.g., buyers and sellers will be able to interact faster).
Who Needs an EDI Software?
Most multinational corporations are communicating through EDI, but it can make sense also in other cases for small businesses or non-profits (note though that EDI software costs can be high). Some companies are not going to communicate in any other way than EDI, so if for example, you want to have your products on the shelves of a big department store, you’ll most likely need to deal with EDI.
EDI can be direct (point-to-point hand-coded), web-based EDI, EDI VAN (EDI Network), or complete B2B integration built on top of an integration platform. Based on your company’s requirements (e.g., the volume of your EDI transactions and the number of trading partners (often also referred to as endpoints), you need to decide which one is the most suitable for you. Typically, small companies can simply use web-based EDI (though if you don’t have resources for EDI integration, consider cloud EDI – more about it later). For smaller companies, investing in EDI software is not always the most feasible option.
Large companies tend to need complex B2B integrations. For simple EDI transaction message transmission, most enterprises already have well-established EDI software, but in some cases (e.g., when a company would want to monetize data that comes from different sources), they may need to invest in complex B2B integration solutions.
While on this list, we only included companies that provide on-premise software for EDI, we still think it’s essential in this blog to shortly talk about cloud EDI.
For the last couple of years, the market has been shifting towards cloud-based solutions – and not only just concerning EDI.
As EDI is merely a secure way of transferring data between two or multiple options, the cloud can be the right channel for it. Most web-based EDI tools are cloud-based, you will also come across cloud-based EDI software, and there are iPaaS (integration platform as a service) providers that offer solutions for dealing with EDI integration.
Cloud EDI can be beneficial (and totally affordable) for both small and medium-sized enterprises. For small businesses, as they deal with lower volumes, they won’t need to break the bank as they don’t even need to pay a fragment of the typical EDI software price.
For large enterprises, cloud EDI offers a possibility to quickly and effectively deal with complex integration challenges – for example when they need to connect hybrid environments.
How to choose the right EDI service?
Like in some of our previous articles, we again need to emphasize that choosing EDI software depends on your specific requirements.
To make it easier for you to decide, we have prepared an EDI buyer’s guide that contains essential information on what functionalities you would need when you have to use an EDI software. It also compares the most common EDI solution types (EDI software, web-EDI, and managed EDI services). You’ll even get a list of questions that you should be prepared to answer and a list that will help you to ask the right questions from the EDI vendors you want to evaluate.