The Pain and Gain of Integrated EDI Part One: The Pain of Integrated EDI

The Pain of Integrated EDI

There is more to the "best-of-breed versus integrated suite" dilemma than mere data synchronization between two disparate enterprise applications. Electronic data interchange (EDI) capability, which for some high-volume industries like automotive suppliers has become a unpleasant required, has been made more dangerous by the level of work that must be dedicated to ensure the accuracy of incoming and outgoing messages. Namely, all EDI solutions from the traditional value-added network (VAN) providers like Global, Sterling Commerce, SPS Commerce, or Inovis provide the fundamental translation process, converting incoming files, such as schedule releases and forecasts into something readable and understandable. These solutions must also convert outbound data, such as invoices, purchase orders (POS) and advanced shipping notices (ASNs) into an acceptable format that can be received by the supplier.

The continued attractiveness of EDI is that it basically works. It has developed into a near perfect system because a swath of companies have invested heavily in it over many years, despite the inevitable costs with getting it up and running. Still, for some enterprises, there are some barriers to using EDI, or at there are at least some compelling reasons to use a Web-based extensible markup language (XML) approach to exchange vital business documents such as purchase orders, delivery notices and invoices. Traditional EDI can be an expensive way to conduct business—prohibitively expensive in some cases of smaller start-ups. Also, its rigid message structure means that companies wanting to perform EDI transactions must beforehand agree upon a common standard to ensure continuity and avoid translation problems.

To complicate things even more, as the preferred standard for batch format transactions for nearly three decades, EDI has proliferated numerous, incompatible variants because EDI users have frequently customized standards to better suit their needs and have developed a vocabulary that fits their specific industry. Thus, standards like American National Standards Institute X.12 (ANSI X.12), EDIFACT, Odette or Tradanet, exist in various industries and geographies. Furthermore, most of the commonly used standards are routinely updated, forcing companies not only to regularly update their own EDI environments, but also to insist their trading partners do the same.

EDI also requires a user company to deploy a communications gateway, mailbox, and software for managing the exchange of business documents. Users need to use VANs, which are essentially proprietary e-mail systems that store and deliver EDI-formatted documents and function like electronic toll roads, charging per document or kilo-characters of data.. Users have to pay transaction charges to VAN providers to ensure transactions are routed to the right recipient and are secure during transport. The amounts can quickly add up and consequently, the technology remains an expensive proposition.. Indeed, EDI has a reputation for being expensive to set up and run. Suppliers' network costs are driven up and they are forced to be proficient in various communications protocols. Aside from the upfront cost of the EDI infrastructure software, including , set-up fees and leased lines fees, companies choosing to go with a provider of VAN EDI networks, face additional costs in maintenance and transaction processing fees such as interconnect costs.

This is Part One of a three-part note.

Part Two will discuss the automotive industry gains.

Part Three will cover other industry gains and make user recommendations.

Microsoft Business Network Addresses EDI

Therefore, the advent of XML in the late 1990s created a great interest among companies that were not inclined to pay transaction charges to the VAN providers, especially if they could use a free or at least, inexpensive medium like the Internet to transport messages. To that end, Microsoft has recently unveiled the Microsoft Business Network (MBN) product, which was designed to help businesses more easily and effectively work with their trading partners (suppliers and customers) through a fully automated Microsoft .NET-connected solution. The solution increases efficiency with a deep degree of integration throughout their enterprise and desktop applications and lowering the total cost of business-to-business (B2B) collaboration.

In other words, MBN uses the messaging and collaboration facilities of Microsoft Outlook and the integration facilities of Microsoft BizTalk Server, to solve the supply chain connectivity part of the overall supply chain management (SCM) puzzle. The product facilitates inter-company collaboration through minimizing data capturing and paper-based processes. It uses several key software components, tools, and community-building services, which will eventually include connectivity options for trading partners of all sizes; a trustworthy Web services network; a library of business process templates; partner management tools; and support to help companies automate their network of trading partners. For more information, see Microsoft Business Network (MBN)—Coming of Age?

Microsoft's intention with MBN has been to make the EDI process easier by removing at least one layer of the technical problem, so that its partners can then focus more on the business issues that customers really cares about. Accordingly, MBN will support generic EDI with XML standards, while it will also enable interoperability with other EDI standards and more traditional EDI data transports in future releases. MBN will support generic versions of ANSI X12-formatted documents such as the 810-invoice, 850-order request, and 856-ship notice. Additionally MBS is committed to providing maps that translate any company-specific EDI implementations into the generic format. The product will also provide VAN-like functionality for direct XML-to-XML data exchange. However, Microsoft notes it has been in talks to provide a connection to at least one high-profile proprietary VAN. Trading will involve additional customary charges such as per document or per kilo-character of text, in addition to the purchase and subscription costs for MBN.

Increasing Demands on EDI

Besides traditional VAN support, MBN will also eventually provide support for emerging EDI Internet Integration standards, such as Application Statement 1 (AS1) and Applicability Statement 2 (AS2), as to meet the increasing demand for Internet delivery of EDI services rather than over proprietary VANs. Namely, while VAN-based EDI traffic has by and large been flat lately, Internet EDI transactions have been growing at an annual rate of over 50 percent. Specifically, during the past few years, a number of EDI suppliers have breathed new life into this old workhorse technology by developing offerings that use the Internet as the communications medium, eliminating the need for multiple VANs, and driving the per-transaction cost down. Namely, an EDI standard, AS2 has been developed by the industry consortium Internet Engineering Task Force, and it enables secure EDI-formatted orders to be transmitted solely using the Internet, effectively opposing the need to use VAN services.

In addition, vendors have developed hosting services that reduce or eliminate customers' need for in-house EDI resources. EDI complexities can be hidden behind a browser-based "thin" client interface, making EDI communications practical for many small companies that would not have considered it before. As a result, although XML is more flexible and easier to use than EDI, EDI protocols will run for years among major manufacturers or retailers that have heavily invested in it , and have the clout to demand their trading partners use EDI. As a matter of fact, EDI, XML, and any other format are merely "semantics" and input streams for expressing data. Whether a transaction is transmitted in EDI format or XML is largely second to the rapid growth of electronic document and data exchange. For more information, see EDI versus XML—Working in Tandem Rather Than Competing?

ACCPAC Exchange Offers Competition

Possibly the fiercest competition to MBN might come from ACCPAC Exchange. It is the first EDI offering to integrate mid-market accounting applications with IBM Business Exchange Services (recently acquired by GXS). It is aimed at delivering affordable EDI transaction documents over the Internet. ACCPAC Exchange was designed to enable small and mid-size businesses overcome the significant cost and infrastructure obstacles typically associated with traditional EDI VANs. The solution purportedly will relatively easily create inexpensive trading communities with suppliers and customers. Utilizing the Internet, the fairly new product supports established EDI (ANSI X12 and EDIFACT) and emerging "EDI over the Internet" (AS1 and AS2) standards.

ACCPAC Exchange also integrates with the ACCPAC Advantage Series and ACCPAC Pro Series accounting systems, and consists of software and services that should deliver affordable Internet-based EDI processing. Additional integration exists between ACCPAC Exchange ASN and the ACCPAC Warehouse Management System (WMS) module. Its components include a translator, mapper, and application integrator. It uses Cyclone Activator as its communication software, and IBM Business Exchange Services as the gateway for EDI communication. To that end, businesses can use the ACCPAC Exchange Transaction Manager to send and receive transactions to other businesses. These include purchase orders destined for a supplier-via an EDI data transfer service hosted at ACCPAC Online. IBM Business Exchange Services would then act as a central data transfer manager for EDI transactions, transmitting the data either exclusively through the Internet or, when required, by accessing traditional EDI networks. This flexible transaction delivery should insulate businesses from the complexities of dealing with multiple EDI networks, while enabling them to electronically trade with not only traditional EDI VANs, but also Internet-based trading communities.

Businesses can either use ACCPAC Exchange to adopt pure Internet-based EDI right away, or, as the market evolves, to gradually adopt Internet-based EDI while benefiting from a lower cost alternative to the traditional EDI fees they may already be paying. The system's connectivity with traditional EDI networks should ensure a smooth transition, while integration with the ACCPAC accounting solution should provide for rapid implementation and increased operating efficiencies.

This concludes Part One of a three-part note.

Part Two will discuss the automotive industry gains.

Part Three will cover other industry gains and make user recommendations.