Despite its widespread use in nearly every business industry, electronic data interchange software (EDI) is often cited by working professionals as a technology that’s soon to be obsolete. However, EDI trends remain steady even in the face of new data exchange tech such as APIs — most prominently, because EDI still gets the job done.

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After speaking with several experts and thought leaders in the document transfer sphere, one thing is clear: EDI is not only here to stay, but its market also continues to grow. Let’s go into detail and see how different company sizes and markets might handle EDI going forward.

Table of Contents

• The Future of EDI
  • Large Companies and In-house Processing
  • Smaller Companies and Heavier Demands
  • EDI vs. API
  • Aging Markets and IT Shortages
  • PEPPOL and EDI Integration
• To Sum it Up

Key Takeaways

• Larger companies may benefit from in-house EDI processing.
• Newer technology puts heavier demands on smaller businesses.
• Some experts believe APIs will replace EDI, while others find they work well together.
• Workers with relevant EDI skills are harder to find as technology evolves.
• The PEPPOL protocol may make it easier for businesses to integrate EDI.

The Future of EDI

Here are the top EDI trends you should watch out for:

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Large Companies and In-House Processing

Smaller businesses tend to opt for third-party EDI services that charge a few cents per purchase order (or PO), rather than handling data processing in-house, in order to save money. However, as companies get larger and make more orders, they may find this approach no longer works for them. We spoke to Jim Gonzalez, owner of EDI Support LLC, for his thoughts.

In the future, what I see is a lot more people bringing it back to in-house processing. When you’re paying 10-15 cents per PO, and you maybe only get 10 of those a week, that’s okay. But [larger companies are] doing a thousand of them — or two thousand of them — because we’re becoming more of a drop-ship type world. That’s when they start to see the value of having their process in-house.”

Some vendors are already attempting to combat this shift. Many are trying to change how EDI software is traditionally priced, charging per relationship rather than per transaction, or using a software-as-a-service (SaaS) model. However, payment structure isn’t the only reason companies may want to move back to in-house processing.

Gonzalez explains:

The big trend is less and less EDI companies out there for clients or consultants to choose from… Things are happening to reduce the playing field, which makes it harder for smaller organizations to grab the attention of new clients. Who suffers ultimately? The business looking for an EDI solution that doesn’t treat them as a number and can truly reduce their order processing costs.”

Gonzalez’s advice to larger companies is to make sure they have a specialist or consultant on hand to help them navigate the EDI market as it grows.

Smaller Companies and Heavier Demands

According to Jeff Douglas, solutions manager at Babelway, smaller-sized businesses may continue to engage in the aforementioned outsourcing of EDI processing: “I think what we’re seeing now is a burst of new iPaaS [Integration Platform as a Service] vendors that are saying that this technology can be put back into the hands of the companies.

They’re saying that it’s not complicated and you can empower your business by doing this yourself without a third party. And you kind of beat some of the extra cost and frustrations … Seeing that trend of SaaS in the EDI world gives companies more power and more control which I think is good for their business.”

This is especially true for businesses looking to grow. According to Douglas, there’s tension in the relationships between large and small companies. For instance, a large company like Walmart can dictate what kind of B2B communications it wants to use, but then on “the other end of it, you have these small companies that are met with all these demands from their larger partners…

They’re burdened with supporting all the standards and technologies out there in order to do their business in the world of electronic exchange. Unfortunately, the demand to support multiple things is not going to go away for them … If you want to grow your business, you’re going to have to accommodate these demands.”

Considering this and the lower cost of entry of software-as-a-service vendors, smaller businesses may gravitate towards iPaaS models rather than taking on the responsibility and up-front costs of in-house processing. Larger businesses that are limited in resources may also find third-party processing beneficial for their needs.

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EDI vs. API

Jan Arendtsz, founder and CEO of Celigo, explains: “It’s an annual ritual to predict the demise of EDI. Competing standards, web services and modern APIs — all have been forecast to end EDI at one time or another. But EDI is here to stay for now as it still works well for many users.” For companies that find EDI inaccessible (whether it’s due to a lack of expertise, technical resources, or infrastructure), though, there are still options.

…Using a cloud-based integration platform (iPaaS) accelerates the process and reduces the time to complete EDI integrations. Modern iPaaS is intuitive enough for business users yet robust enough for the needs of IT. A next-generation iPaaS platform will enable API enhancements and drive B2B process improvement — with or without the help of IT.”

APIs are often touted as being cheaper, faster and more flexible than EDI. Erik Kiser, founder and CEO of Orderful, believes they could replace EDI much sooner than we think.

Our vision is to get both sides of the supply chain communicating through our API and then completely eliminating EDI altogether. I think that the evolution of that is very real, but it’ll take some time. Maybe five or 10 years to get enough momentum in the market to get API to API communication going.”

Kiser estimates that most EDI software is custom-built, increasing the need for consultants and other costly resources and giving companies an incentive to try something that’s easier to maintain. But that doesn’t mean API is without its own difficulties – Kiser explains that hiring engineers and developers for a newer technology can be a major economic challenge, especially for suppliers.

The challenge to this is going to be the friction as companies shift to communicate with APIs…Developers typically want to go work for startups, or they want to go work for software companies. So the friction of getting an API connected to their ERP or system of record is really the hard part about this.”

Despite the popular view that EDI is on the way out, IBM provides a somewhat different perspective: that APIs work best alongside, rather than in place of, EDI systems. According to them, while “EDI is ideally suited for batch processing of mission-critical transactions like financial documents and periodic updates, APIs enable real-time data exchange for proactive decision-making to drive competitive advantage.”

This is a promising approach to document transfer. Instead of completely throwing out one technology in exchange for another, integrating the best of EDI and API capabilities allows businesses to stay rooted in an industry-standard technology they know works while expanding its capabilities to keep up with a rapidly shifting technological landscape.

Companies need to support both a core set of EDI transaction types and API capabilities or risk missing out on important opportunities to drive revenue, growth and competitive differentiation,” IBM says.

Aging Markets and IT Shortages

Whether companies choose API, EDI or a mix of both, they need to pay close attention to hiring staff that can make the most of whatever technology they adopt. However, according to Jett McCandless, co-founder and CEO of project44, staffing an EDI project will definitely be the bigger challenge.

No one that graduated with a computer science degree in the last 10 years has been trained on EDI. That isn’t because they forgot to train them. There are better technologies to accomplish today’s goals. In today’s world, companies are competing for the best software engineers. The best software engineers don’t want to use EDI…

“Unless companies want to run like they did yesterday, continuing to invest in EDI is wasteful. The technology is old and will soon be antiquated. EDI is only capable of automating 10% of the workflow for transportation and logistics. It’s also slow, inflexible and expensive to maintain.”

Wayne Marshall, VP of professional services and ISO at EDI Staffing, also believes companies should be concerned about the lack of EDI expertise. However, he’s not so sure EDI is going anywhere anytime soon. He said:

EDI continues to grow even after 40 years. EDI is especially prevalent in the healthcare and logistics industries these days.”

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These industries are a significant part of why such old technology is expected to see continued growth by many in the coming years. Fortune Business Insights expects the global EDI market to be worth over $4.5 billion by 2030, with a CAGR of 12.5%.

Marshall agrees that it might be difficult for companies using EDI to find the labor they need, however.

While many companies have chosen to outsource their EDI to third parties, many others continue with in-house programs, and we find new companies coming on board frequently. There’s a great demand for EDI/B2B implementation services, as good EDI resources are not always easy to find.”

PEPPOL and EDI Integration

How will companies and partners support EDI if its market is projected to grow so quickly? One EDI trend taking off in Europe is the Pan-European Public Procurement On-Line (PEPPOL) protocol. According to Douglas:

PEPPOL is a really interesting movement lead [sic] by Europe’s government entities … It seeks to facilitate EDI connectivity the same way a VAN would, but in a standard way.”

Companies sign up to become PEPPOL participants, which basically means they’re signaling to other companies they’re ready to receive data in accordance with this protocol. Douglas continues:

It eliminates this lengthy setup process that’s standard with traditional EDI. If you’re a participant, your partners can send and receive information with just the flip of a switch, leading to a very low cost of entry … It’s exciting; it’s the closest thing I’ve seen that can have a widespread adoption because of the low cost of set up.”

EDI remains an industry standard for supply chains, with at least 59% of companies making use of it. For the remaining 41%, who need to catch up, protocols like PEPPOL can help them future-proof their document transfer technology.

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To Sum it Up

Even as businesses adopt newer data transfer options such as APIs, EDI remains the industry standard for most companies – simply because they know it works. However, concerns such as staffing, improvements on older systems, and company size weigh on the EDI market as well. Between the advent of APIs and the introduction of PEPPOL, there’s plenty to keep an eye on in this sphere of technology.

If you’re looking to invest in some new document transfer software, SelectHub is exactly the place to do research. Take a look at our EDI software buyer’s guide for some of the top products on the market, our comparison report to see how different software options stack up or our software requirements checklist to see if your system is ready to implement something new.

What’s your opinion when it comes to the future of EDI? Let us know your thoughts in the comments below!

Contributing Thought Leaders

As Solutions Manager at Babelway, Jeff helps IT leaders in small- to mid-sized companies across industries implement strategies and tools that moves beyond daily maintenance of network infrastructure, hardware, and key systems (TMS, ERP, etc). He strongly believes the success of a company resides in the empowerment of its employees.

Wayne Marshall is the Vice President of Professional Services at EDI Staffing. His responsibilities include strategy development, new business development, sales, marketing, consulting, contract management, general regulatory compliance, managing of technical resources and projects, and most recently, HIPAA compliance as the Information Security Officer.