EDI vs. API: Why You Need Both for Partner Onboarding
Savvy enterprises are quickly realizing that being able to connect and communicate effectively in their business ecosystems is critical for success. However, due to the complex mix of legacy systems and cloud applications — as well as a sea of integration technologies to support them — in most organizations, modern onboarding processes are still complex and inefficient.
Business executives responsible for evaluating their B2B programs tend to try nearly anything to improve onboarding, and it often circles back around to an EDI vs. API debate.
What's the Difference Between EDI vs API?
Unlike EDIs, APIs shine in real-time communication. EDI and API are both technologies used for exchanging data between business partners' computer systems. EDI is used for exchanging structured business data between trading partners' EDI systems, while APIs are used for integrating and communicating between different software applications for real-time data exchange.
The fact is, onboarding in 2024 is quite difficult and cumbersome to achieve. Today's B2B onboarding processes certainly require data formats like EDI and protocols like AS2 or SFTP. But modern IT onboarding also spans the deployment of a new cloud or on-premise application, which may require additional API support.
And thus, businesses are more exposed to EDI and API technologies than ever, and each department could proudly give their spiel on which one is the superior tool. However, while EDI and APIs have their pros and cons, each plays a particularly important role in how companies participate in their business ecosystems.
Here's why the API vs. EDI debate is losing its luster in 2024 and why a centralized integration platform that takes an "outside-in" approach will improve your ecosystem onboarding processes.
EDI (Electronic data interchange) is a data format that has been around for decades and isn't going anywhere anytime soon. EDI is a computer-to-computer exchange of business documents in a standard electronic format between different businesses. EDI capability is as universal of a connection method as it is due to its standardized format, and it continues to anchor communications in supply chain industries like transportation, logistics and 3PL, and distribution.
Complicating matters, however, is the sheer number of EDI standards that vary by industry, geography, and other factors. These standards include ANSI ASC X12, TRADACOMS, UN/EDIFACT, and ODETTE. Organizations employing EDI also have to decide which EDI transaction sets to use with their various trading partners. So even though EDI is a widely accepted data format, there are numerous unique requirements that surround every organization's electronic data interchange implementation and EDI exchange process.
How to Support EDI Onboarding
When it comes to onboarding your trading partners, your EDI software must have the ability to connect your internal systems with external customer, vendor, or supplier systems and reliably perform EDI order processing, invoices, ASNs, and other EDI data according to the agreed-upon standards and transaction sets.
Onboarding a trading partner involves configuring your trading partner's EDI profile and building the appropriate EDI mapping routes in order to send, transform, and receive data. Businesses that cannot sufficiently execute these processes:
Risk EDI SLA non-compliance and potential chargebacks
Jeopardize existing relationships with partners
Reduce new sales opportunities
This means your EDI integration technologies must:
Accept EDI and non-EDI data
Seamlessly route data
Securely move data
Provide visibility into these data processes
Because each trading partner will have different needs for you to meet, it's critical that you are able to leverage pre-built project templates and have increased visibility to accommodate all those partners. With the right technology in place, your enterprise will be able to support these requirements.
However, that integration platform also must support the onboarding of on-premise and cloud applications, which help individual lines of business conduct operations execute end-to-end data processing. While your platform's EDI transformation capabilities can support those integrations, you may find it more helpful to leverage its API capabilities.
An API (Application programming interface) is a set of programming instructions that allow different software applications to communicate with each other. They typically define a set of protocols, data structures, and tools for building software applications.
An application programming interface features three important characteristics:
Procedures refer to the specific tasks or functions that an API program performs
Protocols are the formats that an API uses to communicate data between applications
Tools are sets of building blocks that make up the components needed to construct new programs
There are hundreds of APIs for social messaging, finance and payments, e-commerce, and multiple other categories covering every way we use applications. APIs are critical to integrating data with your digital ecosystem because they bring more communication flexibility than standard exchanges like EDI. APIs are hailed for their real-time connectivity advantages, as they are able to connect with partner and SaaS applications quickly and efficiently.
How to Support API Onboarding
Supporting API onboarding also means supporting the various types of APIs, including REST and SOAP varieties. Most cloud applications include REST APIs to communicate as they're more robust and easier to service. SOAP APIs are XML-based protocols that usually provide added security for more regulated data transactions.
It's also important to understand what the business need of the API is, whether it's to speed up a partner B2B ordering process or provide access to another data source or analytics platform. That way, you can better ensure the API enables your trading partner relationship either through a process or in a direct manner.
Enterprises solving application onboarding processes with APIs usually go about it in several ways. They can:
Build from scratch the API-based integrations, which can require extensive resources and time
Tweak the provided APIs and add on to them, which means they're responsible for making fixes when the API gets updated
Leverage a prebuilt application connector that integrates with the application's APIs but is maintained by the vendor
A centralized integration solution will provide the platform to take accomplish any of those approaches, but its rich APIs and application connectors will dramatically accelerate your ecosystem onboarding processes and deliver faster time to value.
Why You Need EDI and APIs
Both EDI and APIs each transfer data from one system to another, so how do you know which to use? The simplest answer to that question isn't a very clear-cut one, because it will depend on your ecosystem of trading partners and applications. However, the longer answer is that you'll likely need to support both mechanisms on a single platform if your business intends to grow.
In the diagram below, you can see how Cleo Integration Cloud (CIC) uses EDI and APIs to automate, orchestrate and direct dataflows between you and your trading partners.
On the lefthandside, EDI processes flow bidirectionally based on what is being communicated and on the righthandside internal format data is ingested into back-end ERP systems via an API connection:
This is what a vendor means when it refers to the "outside-in" approach to integration because your data exchange requirements often are dictated by your ecosystem. By understanding your ecosystem at large, you can determine the best solutions and technologies that will ensure your participation in that ecosystem. Some industries that exchange a lot of financial data, for example, may require more security, governance, and compliance layers than non-standardized API integrations can provide.
Additionally, you likely won't have to choose between EDI and APIs because they are complementary to each other. It isn't so black and white that your enterprise needs one or the other, but rather both technologies working together. API integration augments EDI and gives deeper context to the B2B integrations with your digital ecosystem, while EDI helps enable downstream business processes and data orchestration.
For example, APIs may be necessary to look up catalog inventory or check pricing within an e-commerce platform. If a customer decides to make the order, EDI may be necessary to kick-start the ordering, shipping, and fulfillment processes. Both processes, you might argue, are equally critical to business success.
Whether onboarding a trading partner, customer, cloud service, or SaaS application, each has its own unique configuration, customization, and integration challenges. But the fact is, your competitors are facing the exact same challenges. Whoever can quickly adapt to each communication and data requirement — whether it's EDI, non-EDI, or API — will separate themselves and earn new business.
Frequently Asked Questions
What are the advantages and disadvantages of EDI and API integrations?
Standardized format: Ensures universal compatibility and ease of connection with other businesses.
Secure: Offers robust security features to protect sensitive data exchange.
Well-suited for high-volume data transfers: Efficiently handles large datasets.
Complex setup and maintenance: Requires significant technical expertise and resources to implement and manage.
Limited flexibility: Lacks the adaptability to cater to unique business requirements.
Not ideal for real-time data exchange: Designed for batch processing, making it unsuitable for scenarios requiring immediate data updates.
Flexible: Adaptable to accommodate diverse business needs and data formats.
Real-time data exchange: Enables instant data communication and updates.
Easier setup and maintenance: Generally requires less technical expertise and resources compared to EDI.
Security considerations: May not offer the same level of security as EDI by default.
Limited adoption: Not all businesses have adopted APIs, potentially hindering communication with certain partners.
When is it best to use EDI and when is it best to use API?
The optimal choice depends on your specific needs. Here's a general guideline:
Use EDI when:You need to exchange standardized business documents with established trading partners.
Data security is paramount, and you're comfortable with a slower, batch-oriented approach.
High-volume data transfers are a regular requirement.
Use API when:Real-time data exchange and integration with various applications are crucial.
Flexibility and adaptability to cater to unique business needs are essential.
Your trading partners or desired applications primarily rely on API communication.
How does the speed of EDI and API integrations compare?
APIs are generally faster than EDI due to their real-time nature. EDI involves a more structured, batch-oriented process that may introduce delays. However, the specific speed difference can vary depending on factors like implementation, data volume, and network connectivity.
Remember, in today's business landscape, many companies leverage both EDI and APIs to address their communication and data exchange requirements effectively. The best approach depends on your specific needs and the context of your business operations.
Cleo handles EDI, non-EDI, and API-based integrations with a flexible consumption model
Choosing Cleo for today's EDI needs means you won't have to invest in a separate solution to support API-based transactions (and vice versa). Plus, Cleo is the only company that gives you complete flexibility over how you use the CIC platform — self-service, managed services, or a model that blends both. You choose.