EDI misconceptions prevent businesses from realizing technological value


iStock 000010874966Small resized 600One of the unfortunate side effects of rapid technological evolution is that misconceptions often emerge regarding new solutions and the systems they're supposedly intended to replace. This happened from an infrastructure standpoint when the cloud adoption soared and technology industry observers began questioning whether mainframes were dead. Similar notions have cropped up regarding electronic data interchange solutions, creating worry that the technology is outdated, or worse, not providing any value.

Much like the negativity surrounding mainframes, these notions that Electronic Data Interchange is on the decline stem from an inaccurate perception of how the technology has evolved. Janet Sun, a member of the IBM user group SHARE, recently explored this issue in a blog post. Sun compared the evolution of mainframe technology to that of automobiles.

"Are the cars of today different from the cars of 1964? Absolutely. Well, today's mainframe is faster, has more capacity, is more reliable and more energy efficient than the mainframe of the 60's, 70's, 80's, or even those delivered three years ago in 2010," Sun wrote.

The same concept applies to EDI, and is helpful for understanding why the technology plays a vital role in B2B integration processes today.

Myth 1: The Internet replaced EDI
Just like the cloud supposedly replaced mainframes, many industry observers contend that the Internet replaced EDI systems. Instead, the Internet actually serves as the backbone for many modern EDI solutions. New data exchange methods may have emerged, but this has not diminished the value of already proven solutions. In his analysis of several myths regarding EDI, IBM Insights contributor Brian Bailey argued that the Internet has actually spurred EDI adoption.

Myth 2: It's difficult to achieve ROI
Part of the draw of some newer solutions is that they may be easy to setup. However, it's important to ensure that functionality is not sacrificed for the sake of being easy to deploy. As Bailey noted, EDI requires a lot of upfront tasks such as developing programming interfaces and creating data maps, leading some decision makers to believe this lengthens time-to-value. 

This is simply a case where a little more work early on will save a considerable amount of time in the long run. EDI allows organizations to automate transactions and other processes. In addition, the issue of complexity can be addressed by leveraging EDI mapping services to expedite time-to-value and make it easier to achieve expected ROI - organizations that leverage the technology stand to gain a significant return. For example, Bailey estimated the average cost savings that could be achieved by shifting away from manual tasks across three types of transactions:

  • Purchase order: $9.89
  • Invoice: $11.58
  • Remittance: $12.96

Those savings would be significant even if they were only realized for a single type of document. For instance, a survey of accounts payable departments revealed that 62.4 percent of respondents processed more 5,000 or more invoices per month, with 15.8 percent handling more than 40,000. This translates to close to $58,000 in monthly savings on the low end and $463,200 for organizations that deal with high volume.

Myth 3: EDI is declining
Holding to the idea that EDI is on the decline may result in missed opportunities for automation. While the concept probably comes from the other negative ideas that have emerged over the years, the EDI market itself remains healthy.

"IBM Sterling Collaboration Network, which is IBM's value added network, has seen year over year growth in traffic during the decade since I started working there," Bailey wrote.

Furthermore, one survey revealed 46 percent of those polled relied on EDI "heavily," and another 31 percent said they used it to some extent. Bailey predicted that organizations will likely use new data exchange technology to complement traditional technology, but that EDI is not likely to go anywhere in the near future.

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