Four Digital Transformation Trends Shaping the Future of EDI
If you need more evidence that time flies, we are fast approaching the halfway point of 2018. We are also nearing a crucial moment in the world of enterprise technology. Further proof of the non-stop march of time, is that technology evolves at what feels like a daily basis, and enterprises must stay on top of the latest digital transformation trends in order to maximize their advantage to the fullest potential.
According to Chandana Gopal, research manager at IDC, “Enterprises have to continue to invest in modernizing B2B infrastructure in order to stay competitive in the digital economy.” With that being said, let’s take a look at four trends that stand to impact the future of EDI integration, and the extent of its application in the EDI and B2B integration space.
1. IT Skills Shortage
Cloud computing is rewriting the rules for EDI technology deployment and service consumption models. More businesses are looking to migrate applications, connections, data, and integration to the cloud. This includes EDI. However, as cloud computing has grown to astronomical levels, the need for good talent within an IT department has never been higher.
IT skills and tech skills, in general, are integral to doing business. The issue, however, is that there are only so many qualified IT pros to go around and that the cost of an integration skills shortage is far from insignificant.
The London School of Economics estimates that a lack of cloud skills have cost businesses $258 million annually. Cloud computing is designed to provide elasticity, flexibility, and save money, but without the right internal resources in place to handle cloud migration, cloud service adoption, or a cloud-first IT strategy, it’s unlikely that the enterprise can modernize critical EDI process to the cloud unscathed.
When IT departments are faced with a skills shortage, one common approach that many have opted to take has been to outsource. Partnering with an external IT company can reduce costs, overhead, and provide 24/7 coverage that an understaffed or short-skilled IT or integration competency center cannot. Outsourcing the EDI integration skillset means integration competency is no longer an internal requirement. This will inevitably increase the reliability of the digital business transactions, and also provides the control over support and services engagement required to ensure successful migration and maintenance.
2. E-commerce Growth
Without a doubt, e-commerce is by leaps and bounds the fastest growing sector in retail. Online shopping is everywhere, it’s become a way of life, and for traditional brick-and-mortar corporations, the allure of jumping into the e-commerce space is too tempting to pass up – if not to reap untold riches, at least as a life raft.
Between the increasingly disruptive Amazon effect and headline-making, paradigm-shifting acquisitions in the retail space, the e-commerce explosion continues to have a very powerful impact multiple industries.
As the e-commerce growth in the market expands by record margins, a new challenge begins to present itself. And that challenge revolves around the ever-increasing complexity of data and the sheer volume of data e-commerce business processes produce. Because an e-commerce business model depends on many different technologies, from supply chain management solutions to application, data, and B2B integration capabilities, the end result is a very complex environment.
The growing enterprise technology stack is a reflection of the impact that e-commerce is having by adding complexity to virtually every supply chain. With global trading, the need for integrated multi-enterprise digital supply chains to be able to conduct transactional capabilities between trading partners, retailers, and manufacturers is a necessity.
E-commerce supply chain data has an interesting composition. The data comes in all forms, from customers, partners, and retailers. The challenge that enterprises face is around data access, integration, and management. That’s why a modern B2B infrastructure approach is more important than ever, and not something that enterprises should undervalue or take lightly. Even enterprises that have a tentative handle on their current data demands recognize the cascading complexity in the near future. Often, existing technology is more stable and should be considered first when looking to address new and upcoming challenges relating to the e-commerce boom.
EDI is a foundational technology at connecting ecosystems for the seamless flow of supply chain, inventory, and retail data. EDI continues to act as the existing communications standards for most industry-specific supply chains.
- ANSI ASC X12 or X12 for short represents EDI standards for finance, transportation, supply chain, and insurance in North America
- EDIFACT is a common standard outside of the US
- RosettaNet, based on XML, is used broadly in the supply chain, manufacturing, and services industries
- GS1 EDI is used in retail globally
- TRADACOMS or GS1 UK is dominant in retail in Great Britain
- ODETTE is the standard used by the European automotive industry
- HL7 required by HIPAA regulation is predominant in US healthcare
Go anywhere in the world and you can use EDI to conduct business, therefore, the growth of e-commerce is providing a new area of expansion and implementation for EDI.
3. Business Process Integration
Modern EDI offers extensive capability benefits in and around business process integration.
Benefits of Modern EDI
- Any-to-any format transformation, data mapping, and integration
- Process orchestration for intelligent automation
- Asynchronous, synchronous, and real-time transactional capabilities
- Visibility and analytics capabilities that serve operational and business intelligence use cases
- Extensive integration capabilities for on-premise and cloud applications, systems, data, and partners
To underline the importance of business process integration, consider the example of digital modernization:
In this day and age, companies need the ability to conduct business process integration quickly and efficiently to increase business agility. That’s why many modernize enterprise resource planning (ERP) software in order to better conduct business with greater flexibility and reliability. But ERP cloud migration is complex, costly, and risky if done without a guiding strategy that includes business process integration. That’s where EDI, or rather, modern EDI comes into play.
EDI must coincide with integrated business processes with ERP systems and other core business applications that run the enterprise. It’s EDI that connects the data, applications, trading partners, and underlying revenue-generating business processes. Across every back-office system from the enterprise financial solution to your customer relationship management (CRM) program, EDI provides a versatile toolset to ensure business process integration.
4. Growth of Blockchain Technology
It seems like every few years or so, the latest and greatest technology appears, and all of a sudden, everyone says it’s going to replace EDI. Years ago, it was XML. A few years back, it was APIs. Now? Enter blockchain. Even Gartner recognizes that the mechanisms of industry hype have promoted blockchain to a fever pitch before its time has realistically come for most businesses.
The truth of the matter, however, is that while blockchain is effective for certain types of processes, it will not replace all B2B transactional technology. If anything, blockchain technology will only stand to augment existing EDI systems, and work hand-in-hand with them.
Blockchain does offer an effective way for trading partners to communicate with one another, and the potential risk in that is minimum. Blockchain is also still relatively new, and there is no denying its potential once fully realized. Blockchain is a shared ledger, so it can ease the process by which information is shared between a buyer, seller, and a third-party logistics supplier. But it’s not going to replace EDI.
The end result is that the way companies currently conduct B2B transactions does not necessarily have to change drastically – if at all. In fact, it can continue to operate the way that it has, while at the same time, blockchain can add an increased amount of visibility between three parties that only makes EDI a more powerful technology.
There’s no denying that blockchain is on the bleeding edge. However, little more than a decade ago, Forrester estimated that daily EDI volume worldwide fell in the neighborhood of 20 million business transactions. The firm further recognized that EDI and XML accounted for approximately 88%-95% of all B2B transactional volume. While these numbers have inevitably shifted, and while blockchain represents a disruptive force, the fact is that EDI remains ingrained in transacting everyday business processes across every industry, making EDI a natural fit as a component in any B2B integration technology stack.
EDI in a Nutshell
Yes, EDI has been around for a while. But there is a reason for it. EDI represents the most dominant set of standards in B2B – more than APIs and certainly more than blockchain. In fact, many of the forces of digital transformation have further embedded EDI into business processes. The importance and volume of B2B traffic continue to grow from industry-changers like e-commerce to modernization efforts requiring new skills and technology. Regardless of what the future holds, EDI remains a constant fixture of doing business. As Ken Vollmer, former principal analyst at Forrester described EDI: “Its ongoing growth means it will continue to be the dominant document exchange alternative for many years to come.”