IS EDI Getting its Second Wind?

It doesn’t seem that long ago that Electronic Data Interchange (EDI) was on its way out. With the development of third-party e-Invoicing networks as well as other invoice automation solutions, there didn’t seem to be a need for the 1980s version of EDI technology. However, EDI, which had been a very reliable one-to-one connection between customers and their key supplier organizations for years, seems to still be a strong technology that customers and suppliers have not given up on.

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How EDI compares to third-party e-Invoicing and other invoice automation solutions

When compared to third-party e-Invoicing and other invoice automation solutions, EDI still provides some benefits that supplier organizations should consider.

  • Lower Costs.

    EDI is viewed as more expensive to implement when compared with third-party e-Invoicing. Some websites quote thousands of dollars to purchase the software and hardware needed to have an internal EDI system. However, EDI costs have dropped considerably. Many services are now offered through a provider over the internet, which means there is no need to purchase unique hardware or software to start using EDI.
  • Connection Possibilities.

    Third-party e-Invoicing has long been touted as a "one-to-many" connection solution that EDI simply couldn’t provide. With the advent of third-party business clouds designed to integrate any number of EDI connections, the "one-to-many" automated connection is now possible with EDI.
  • High Volume Capabilities.

    portal integrationWhile many third-party e-Invoicing providers offer different submission methods such as manual entry via a portal for smaller volumes or an automatic file upload for higher volumes, that flexibility as not indicative of EDI. High volumes have been a staple for EDI users, often justifying the one-to-one connection between customers and their strategic suppliers.
  • Error Elimination.

    Compared to some invoice automation solutions, EDI remains purely electronic. Some solutions may be touted as automated, but still include manual processes, such as invoices mailed or e-mailed to a third-party clearing house that then scans or manually enters the invoice data before submission. This process invites errors while a purely electronic EDI solution is designed to eliminate virtually all of them.

Because 3rd-party e-Invoicing has not become as ubiquitous as everyone thought – at least not yet, EDI is not only hanging around but appears to be gaining in strength.

Reasons why EDI remains strong

The growth of third-party e-Invoicing, invoice automation and other invoice submissions is not necessarily the death knell for EDI. There are a number of benefits EDI offers that benefit both customers and supplier organizations.

  • Large volumes.

    When compared to processing invoices via paper, EDI still holds a significant advantage. By handling large volumes, a single EDI file upload can represent a cost of pennies per invoice processed compared to several dollars when submitting invoices via email, fax and other paper-based methods.
  • Security.

    EDI offers transmission over distinct communication protocols and security standards. These standards have been in place for decades and represent a very reliable and proven means of data communication.
  • Integration.

    Although EDI represents a one-to-one connection between the customer and their supplier, third-party e-business solutions can now integrate several EDI connections into a single interface. Because there are EDI VANs (value-added networks) that operate similar to other communication networks, supplier organizations can now integrate their one-to-one connections in a way that replicates a one-to-many connection.
  • Complementary Technology.

    EDI can be incorporated into an existing ERP system that a company already uses to manage other invoice to cash processes, often allowing for seamless integration. These complementary technologies can help to add even more value to the business, by allowing orders to be processed quicker, thereby improving the order-to-cash cycle.

Although third party e-Invoicing and other invoice automation solutions continue to make headway and may still capture a more significant portion of market share around how suppliers submit invoices, we should not count out EDI. Some may point to the notion that "if it ain’t broke, don’t fix it." Many larger companies have made significant investments in EDI since coming to prominence in the 1980s. It is a testament to the technology that it has continued to be a reliable way customers and suppliers can transact business and reduce costs.