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EDI is not the modern solution for B2B integration. So what is?

March 10, 2019

Organizations have been using EDI (electronic data interchange) software for years to handle B2B (business-to-business) data transfer of business transactions like purchase orders and inventory movements. The first uses of EDI systems were in the 1970s, however while there have been several major revolutions in technology since the 1970s, businesses have still stuck with a 40 year-old concept for their business transactions. Using modern integration solutions there are now less costly, more flexible and more scalable ways to do B2B transactions.

What is EDI

EDI technology originated with the aim of digitizing information found in paper documents, and automating the transfer of that information between organizations. Formatting conventions for EDI transactions are very strict, and there are different EDI standards with their own conventions, e.g., EDIFACT, X12, ODETTE, and AS2. Transmission protocols for EDI documents varies from old-style file transfers – FTP/SFTP/FTPS – to email and more recently HTTP. In many cases, EDI transfer is handled via third party VANs (Value-Added Networks), which act as a gateway for routing EDI files between senders and receivers; they may also validate or re-format the data.

The problems of EDI

EDI can be a monster of technical complexity. There are significant costs and efforts in setting up an EDI process, from understanding the specific EDI standards and ensuring transaction data conforms to those standards, in selecting the right EDI VAN, to implementing the data mapping and integration between systems.

Depending on the VAN selected, there may well be standards and restrictions that the VAN imposes. Sometimes, VANs will charge for services that aren’t really needed, such as data reformatting. Because of their architecture, a VAN change can be slow and costly.

While EDI is supposed to be standard, there are different standards depending on the industry type.

So while EDI services are still widely used, there are many challenges. To address challenges organizations should consider another solution architecture which makes use of modern integration technology.

B2B integration challenges
B2B integration challenges

The modern solution to B2B integration

With the growth of e-commerce and electronic trading between businesses, today’s B2B networks must be architected for a many-to-many communication environment, and for multi-protocol support to handle different B2B standards. As digital business grows, companies need to improve the speed that they can onboard business partners, and ensure that their B2B integrations are flexible and scalable to cater for future growth and changes.

The use of JSON or XML in transactions

Most documents transferred nowadays are created in JSON or XML -based format from applications like ERP or accounting systems. By the same token, most recipient systems will expect to read the transactions in JSON or XML form, so there is no need to translate those transactions into an EDI format.

Use APIs to simplify legacy EDI services

APIs are the way that modern software is being inter-connected and transactions processed. As business moves to hybrid systems (cloud + on-premise), a decentralized architecture is evolving which requires loosely coupled integrations. This is where APIs work well because they can consolidate multiple systems and provide a common backend for applications.

Using APIs make it is easier, cheaper, faster, and more convenient to provide direct communication between business partners. As systems change and new partner solutions evolve, APIs give organisations more flexibility and speed in setting up integrations to new applications.

By adopting APIs, organizations of any size can be involved in a partner ecosystem that uses data interchange to make business more efficient.

For developers, they can build a set of APIs that act as the basis for integrations, and then reuse those APIs to reduce development time and effort for new B2B integrations.

The modern platform for B2B integration – iPaaS

An integration platform-as-a-service (iPaaS) is a cloud-based middleware solution that handles APIs and integration regardless of what systems are involved, who built and manages them, or where they are located.

With an iPaaS, developers can make use of API management tools that enable prebuilt integration and automation capabilities, which makes the building of integrations easier and quicker. An iPaaS also provides a development environment with a centralized place to create, maintain and manage APIs.

As data and protocol standards change, for instance JSON vs XML, an iPaaS will allow you to handle multiple methods, data formats and transfer protocols for an end-to-end integration solution.

A few years ago, a Gartner analyst commented:

most CIOs have yet to recognize that traditional, established integration strategies cannot cope with digitalization’s fast technology innovation and accelerated pace of business.

Using an iPaaS for B2B integration need not be just a technology project, but can also be past of a digital transformation initiative to enable frictionless commerce.

The modern B2B network foundation is a challenge of many-to-many communications, multiple protocols and data formats, and different industry standards. Understanding that an integration platform is a much better way than EDI to address these challenges will allow business and technology managers enhance their trading partner performance.

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