Executive Briefings

EDI: The Gift That Keeps on Giving

I remember the moment that I was introduced to the wonderful world of electronic data interchange. It was the early 1980s, and I had been assigned to cover the meeting of a mysterious cabal of techheads who were working to create a set of standards for digital communication between businesses. They were gathered in a large conference room in the old Hilton Hotel at the San Francisco International Airport. The meeting was already under way by the time I arrived, and as I passed through the doors I was subjected to a torrent of bizarre numbers and acronyms like "TDCC" and "ANSI ASC X12." Participants seemed to be speaking a foreign language, but one message was clear: they were determined to see their work embraced by the business world at large. Good luck with that, I thought. If you want to be understood and appreciated by the general public, there's no better way than to talk in tongues and call your committee a name that sounds like some fifties-era sci-fi robot.

Of course I was wrong; EDI became part of business parlance fairly quickly. It was a bit slower catching on as a workable means of B2B communication, but eventually most big companies laid out the money and resources necessary to begin exchanging key documents and data electronically. There were plenty of bumps along the way, most notably the clash between two sets of standards: The Accredited Standards Committee of the American National Standards Institute (ANSI X12) in the U.S., and United Nations EDI for Administration, Commerce and Transport (EDIFACT) elsewhere in the world. The two camps eventually enacted a shaky truce under which neither yielded, relying instead on kludgy translation software to go from one protocol to the other. And you thought the battle between VHS and Betamax was ugly.

EDI was a big improvement over phone and fax, but it had its limitations. Among them was the need for an entity called a value-added network (VAN) to serve as intermediary between communicants. This virtual post office slowed down transmissions and made it impossible to relay information on a real-time basis. Most reports and documents were sent in batch mode at specified times of the day or night.

With the maturation of the internet came a new communications protocol, Extensible Markup Language (XML), which enabled the real-time exchange of messages without the need for a third party in the middle. While many businesses have welcomed XML, it remains a work in progress, given that its original designers offered few specifics on how users should process documents transmitted in that format.

And what of EDI? Is it ready for the technology trash heap? Alas, not yet. Too many businesses have invested too much time and effort in developing their EDI infrastructures to abandon them now. At the same time, the emergence of the Applicability Statement 2 (AS2) internet protocol has provided a way for companies to use EDI without the need for a VAN. Technology offers us a constant parade of the new, but it rarely sweeps away the old at the same time.

Like it not, B2B systems will have to support both formats for some time to come. What's changing is the notion of what constitutes an acceptable level of communication and systems integration between trading partners. Less than a decade ago, companies "were very happy with moving documents point-to-point or in a multi-tier model," says Karthik Srinivasan, chief technology officer of E2open, Inc. "Now that's a given.... Customers want additional value-added services on top of B2B."

Put simply, the world's getting more complicated. Companies have expanded their market reach as well as their universe of sourcing options. New security regulations mandate a far more thorough vetting of suppliers. Third-party logistics providers have jumped into the mix and want to play a much bigger role in the management of data. In some cases, there's an even greater need for traditional EDI to help sort out all the participants and geographies. "EDI is not dead," says Srinivasan, "but it's evolving to meet some of the new demands."

The rate of acceptance of XML depends partly on the industry in question. High-tech has proved to be a faster adopter, with creation of the RosettaNet initiative to formulate transaction standards in that sector. The healthcare industry has been slower to jump on the XML bandwagon, says Srinivasan.

Certain companies that made a big commitment to EDI are reluctant to switch. They need to be led along a migration path that involves a phased rollout of XML-based frameworks, Srinivasan says. But under no circumstances can they stand still. Many suppliers, customers and other partners lack EDI capability and prefer the simpler requirements of XML - essentially, a computer and a browser. What's more, says Srinivasan, the technology is advancing to a place where old-style EDI can't easily go: the world of smartphones, tablets and other mobile devices.

The biggest impediment to the growth of XML is the same one that stymied EDI: the lack of workable standards for users the world over. "We still spend a significant amount of time just trying to map different data formats," says Srinivasan. Trading partners need one protocol for classifying shipments and documents, without the need for translation or integration software. To which I say: Good luck with that. Human nature appears to rule out unanimous agreement over a single way of doing anything. I'm guessing that we'll continue to see rooms full of experts speaking languages comprehensible only to themselves. But I've been wrong before.

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I remember the moment that I was introduced to the wonderful world of electronic data interchange. It was the early 1980s, and I had been assigned to cover the meeting of a mysterious cabal of techheads who were working to create a set of standards for digital communication between businesses. They were gathered in a large conference room in the old Hilton Hotel at the San Francisco International Airport. The meeting was already under way by the time I arrived, and as I passed through the doors I was subjected to a torrent of bizarre numbers and acronyms like "TDCC" and "ANSI ASC X12." Participants seemed to be speaking a foreign language, but one message was clear: they were determined to see their work embraced by the business world at large. Good luck with that, I thought. If you want to be understood and appreciated by the general public, there's no better way than to talk in tongues and call your committee a name that sounds like some fifties-era sci-fi robot.

Of course I was wrong; EDI became part of business parlance fairly quickly. It was a bit slower catching on as a workable means of B2B communication, but eventually most big companies laid out the money and resources necessary to begin exchanging key documents and data electronically. There were plenty of bumps along the way, most notably the clash between two sets of standards: The Accredited Standards Committee of the American National Standards Institute (ANSI X12) in the U.S., and United Nations EDI for Administration, Commerce and Transport (EDIFACT) elsewhere in the world. The two camps eventually enacted a shaky truce under which neither yielded, relying instead on kludgy translation software to go from one protocol to the other. And you thought the battle between VHS and Betamax was ugly.

EDI was a big improvement over phone and fax, but it had its limitations. Among them was the need for an entity called a value-added network (VAN) to serve as intermediary between communicants. This virtual post office slowed down transmissions and made it impossible to relay information on a real-time basis. Most reports and documents were sent in batch mode at specified times of the day or night.

With the maturation of the internet came a new communications protocol, Extensible Markup Language (XML), which enabled the real-time exchange of messages without the need for a third party in the middle. While many businesses have welcomed XML, it remains a work in progress, given that its original designers offered few specifics on how users should process documents transmitted in that format.

And what of EDI? Is it ready for the technology trash heap? Alas, not yet. Too many businesses have invested too much time and effort in developing their EDI infrastructures to abandon them now. At the same time, the emergence of the Applicability Statement 2 (AS2) internet protocol has provided a way for companies to use EDI without the need for a VAN. Technology offers us a constant parade of the new, but it rarely sweeps away the old at the same time.

Like it not, B2B systems will have to support both formats for some time to come. What's changing is the notion of what constitutes an acceptable level of communication and systems integration between trading partners. Less than a decade ago, companies "were very happy with moving documents point-to-point or in a multi-tier model," says Karthik Srinivasan, chief technology officer of E2open, Inc. "Now that's a given.... Customers want additional value-added services on top of B2B."

Put simply, the world's getting more complicated. Companies have expanded their market reach as well as their universe of sourcing options. New security regulations mandate a far more thorough vetting of suppliers. Third-party logistics providers have jumped into the mix and want to play a much bigger role in the management of data. In some cases, there's an even greater need for traditional EDI to help sort out all the participants and geographies. "EDI is not dead," says Srinivasan, "but it's evolving to meet some of the new demands."

The rate of acceptance of XML depends partly on the industry in question. High-tech has proved to be a faster adopter, with creation of the RosettaNet initiative to formulate transaction standards in that sector. The healthcare industry has been slower to jump on the XML bandwagon, says Srinivasan.

Certain companies that made a big commitment to EDI are reluctant to switch. They need to be led along a migration path that involves a phased rollout of XML-based frameworks, Srinivasan says. But under no circumstances can they stand still. Many suppliers, customers and other partners lack EDI capability and prefer the simpler requirements of XML - essentially, a computer and a browser. What's more, says Srinivasan, the technology is advancing to a place where old-style EDI can't easily go: the world of smartphones, tablets and other mobile devices.

The biggest impediment to the growth of XML is the same one that stymied EDI: the lack of workable standards for users the world over. "We still spend a significant amount of time just trying to map different data formats," says Srinivasan. Trading partners need one protocol for classifying shipments and documents, without the need for translation or integration software. To which I say: Good luck with that. Human nature appears to rule out unanimous agreement over a single way of doing anything. I'm guessing that we'll continue to see rooms full of experts speaking languages comprehensible only to themselves. But I've been wrong before.

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