EDI: The Software Standards that are Built to Last

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You might think a set of software standards that can trace its origins to the 1960’s would be looking long in the tooth in 2017. For over 50 years EDI and its underlying standards have been providing the groundwork that has enabled the exchange of data via any electronic means. And, believe it or not, all indications are that it will be around for 50 more.

A Brief History

Like many other early information technologies, EDI was inspired by developments in military logistics. In the early 1960s computer systems started to acquire the ability to exchange data with each other. This was a huge development in information management, but it was virtually without regulation. Then, Ed Guilbert (the father of EDI) expanded upon the standardized shipping manifests he had developed with U.S. Army officers during the 1948 Berlin airlift. These initial concepts later shaped the first TDCC (Transportation Data Coordinating Committee) standards in the US. By 1975 the TDCC had published the first official EDI standards.

Fast forward to the 1980s. EDI begins to adapt and encompass the transportation, food, and banking industries. Companies such as General Motors and Ford in the automotive industry begin to mandate EDI for their suppliers. Several large retailers – including Sears and Kmart –  begin to demand EDI capability from their suppliers.

Today, over 90% of The Fortune 500 use EDI or one of its underlying standards and over 150,000 companies use an EDI solution to manage their EDI connections. Businesses all over the United States come into contact with EDI technologies in one form or another.

Why Does EDI Persist?

Victoria Griffis, Business Development Manager at Kissinger Solutions, thinks that the continued popularity of EDI is clear. “It’s a widely adopted standard that just simply works.” She added. “Businesses have invested in the infrastructure of EDI and no recent technology has provided enough additional benefit to oust it as top dog.”

Beyond the simple effectiveness of EDI, there is also a domino effect in play. Large companies at the center of an industry coerce their suppliers’ partners to adopt EDI. Soon, the second tier suppliers require EDI links to the third their suppliers… and so it goes.

Griffis also believes that the simple “cost of doing business” is what drives companies towards EDI. Market leaders use it, which demands EDI compliance from other companies. “On average, over 12 million EDI transactions happen every day,” says Griffis, “transactions that these businesses want to be a part of.”

There are some barriers to EDI usage – however few they may be. Historically, the biggest hurdle to EDI adoption has been implementation. But, as EDI standards have aged, providers have pioneered new technologies around the dependable standards – technologies like complete ERP integration, automated translators, and direct AS2 connections. These technologies have done wonders to combat the issue of implementation.

It’s also important to note that while EDI might not be perfect, other competing standards have failed to come close to EDI’s effectiveness and widespread usage. Here’s an example: the emergence of XML standards in the late 1990’s did create some interest. But once the shiny newness wore off, major shortfalls became apparent. XML defines a set of rules for encoding all types of documents, while EDI defines a set of rules for encoding specific business documents.  So XML would seem to be more powerful, generally, and it is.  Which is why there was a lot of interest in whether it would replace EDI.  The missing element for wide adoption of XML in place of EDI was a general agreement of the major users on how XML would be used to describe the specific business documents being exchanged by these trading partners.  And since EDI had already achieved this general agreement among huge groups of users (ANSII X12 and EDIFACT, for example), there simply didn’t seem to be a good reason to reinvent that wheel. Also, XML transactions often take more bandwidth to complete. For companies that handle a massive volume of transactions each day, that extra bandwidth can significantly affect costs. And so XML standards never developed the proven track record, the trust, that EDI has built over the years.

The Future of EDI

Both The Gartner Group and Forrester Research have predicted that there will be huge growth for EDI in the next 5 years. It will grow more and more into a “must have” in the world of business. If your company wants to buy or sell goods, you’re going to need to become EDI compliant.

Here at Kissinger, we have noticed a steady and significant increase in EDI interest throughout 2015 and 2016. Now more than ever, businesses of all types are looking to invest in EDI – and in the future of commerce.

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