Why Companies are Moving from Traditional to Cloud-Based EDI
Aaron Keeports
Here is everything you need to know about cloud EDI:
- Why Companies Are Migrating to Cloud EDI
- Common Challenges with Traditional EDI
- Benefits of Cloud EDI for Modern Enterprises
- Choosing the Right EDI Solution: Cloud, On-Premises, or Hybrid
- Why Cloud EDI?
- Why On-Premises EDI?
- The Best of Both Worlds
Companies across the world continue to rely on EDI for their important B2B data exchanges because it's a standardized and effective way to communicate with all the members of their business ecosystem, which today includes trading partners, customers, suppliers, and vendors, and so many other entities. While the demise of EDI has been predicted for years (and greatly exaggerated), it's the demise of traditional EDI mechanisms that's more likely happening right now. That's because as businesses look to improve agility and IT flexibility, cloud-based EDI platforms have become a preferred way to get there.
Traditional on-premise EDI (Electronic Data Interchange) usually refers to the exchange of electronic data format types, which are defined by standards organizations, usually X12 and EDIFACT. Modern EDI generally includes more of the governance, onboarding, and data transformation processes that enable traditional EDI, and it reflects how diverse a business ecosystem really is in the era of today's digital commerce.
Traditional EDI methods have worked for many years and become tried-and-true solutions that enterprises rely on, but there are more modern solutions that offer new and effective ways for companies to conduct business using EDI and even non-EDI. Because there are so many partner and customer data requirements that companies must manage, from protocols to support for connections across systems, applications, and other data resources, a modern cloud-based EDI solution gives companies more flexibility than a traditional EDI system.
Here's how the modern enterprise can benefit from cloud-based EDI software as part of a hybrid integration platform.
Here's Why Companies are Migrating to Cloud EDI
Certain traditional EDI tools become restrictive and inflexible, which is why many organizations are turning to a form of cloud EDI instead. Cloud EDI software offers a combination of technological and business process improvement designed to meet the demands of a 2024 business. From data transformation capabilities to streamlined automation, cloud EDI tools put your enterprise in a position to tackle any potential integration challenges that arise, without having to deploy and manage the software and hardware.
A centralized cloud integration platform capitalizes on an EDI translator that can accept and transform EDI (as well as most other data formats like XML and flat files) and then move that data to other systems and applications, whether internal or external.
In short, when you need to connect legacy, on-premise processes, systems, and applications within your environment to cloud applications - which is the case for most businesses today - cloud EDI offers more elasticity and business agility.
Common Challenges with Traditional EDI
Because many traditional EDI providers have become outdated as more companies embrace cloud IT strategies, it becomes more difficult for enterprises to conduct successful EDI in order to keep up with the demands of modern customers. Here are some of the most common challenges enterprises face from their EDI technologies and why they should strongly consider a move to a cloud-based EDI solution.
Rising Costs
EDI certainly is an expensive investment. But maintaining outdated and legacy EDI solutions can further exacerbate costs. When an enterprise owns software and hardware for EDI, that also requires various financial and employee resources to manage all of it. Additionally, when something does go wrong, the hours and costs for maintenance also add up quickly.
Scaling
Yes, EDI is a standardized data format, but the members of your digital ecosystem will each have their own EDI transactional sets (with different EDI codes) that you must be able to support. From industry to industry, even standardized EDI requirements will vary, which becomes a huge problem across numerous trading partners. Outdated, homegrown, or one-off EDI software will not be able to scale to support all the data requirements necessary to participate in your ecosystem as the business grows.
Lack of Automation
One of the biggest benefits of modern EDI cloud solutions is that they can integrate with other business systems and applications to automate EDI order processing or other more general business cycles, like order to cash and procure to pay. Traditional EDI mapping solutions are usually pretty rigid and can only perform specific EDI tasks because they can't natively integrate EDI with an ERP or CRM for end-to-end processing. Companies try to address it by throwing people and manual resources at the problem, but that's time-consuming, inefficient, and unscalable.
Complexity
B2B and EDI integration can become complex in a hurry with all the trading partner demands in the queue. Legacy EDI tools often cannot keep up with the required changes, EDI implementation issues, and are prone to errors. Businesses can become overwhelmed with the number of errors that their EDI transactions are throwing. Additionally, validating each segment in order to render a transaction as EDI compliant can prove challenging as well without the right technology.
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How a Modern Cloud EDI Solution Can Help Overcome Obstacles
A modern business needs modern EDI capabilities to compete in today's hyper-digital business landscape. Take TaylorMade, one of the largest golf equipment and golf ball manufacturers in the world, and its decision to modernize its EDI and embrace web-based EDI software in the cloud. The company needed to expand into APAC and other markets, but to do that, the interactions with its products and catalogs by its partners needed to be seamless to ensure reliable fulfillment and distribution.
TaylorMade utilized Cleo Integration Cloud to migrate its EDI to the cloud. Now the company can move and transform all its EDI data to support the requirements of its digital ecosystem, from trading partners to customers. Migrating its ecosystem to a single, centralized EDI cloud solution enables the millions of transactions a year and supports TaylorMade's omnichannel revenue streams. Cleo's cloud EDI software is specifically built to handle the many different transactions your business needs to handle to keep up with its digital ecosystem.
Common Questions About Cloud EDI
Beyond these basic advantages of cloud-based EDI however, as you consider this option, some additional questions may arise:
1. What are the security considerations when moving my EDI to the cloud, and how can I ensure my data is protected?
Security is paramount when dealing with sensitive business information. Here's some guidance for cloud-based EDI:
- Provider security measures: Evaluate the provider's security certifications, access controls, and data encryption practices. Look for providers compliant with relevant industry standards.
- Data ownership and control: Ensure the provider's policies clearly outline data ownership and control, allowing you to retain full control over your data.
- Disaster recovery and backup: Understand the provider's redundancy and disaster recovery plans to guarantee data availability and business continuity in case of unforeseen circumstances.
By carefully assessing these aspects, you can ensure that your data remains secure and protected when transitioning to cloud-based EDI.
2. How can I migrate my existing EDI system to the cloud, and what are the associated costs and potential disruptions?
Migrating from an on-premise system to the cloud requires planning and consideration:
- Migration strategy: Collaborate with the chosen provider to develop a comprehensive migration plan outlining the process, data transfer procedures, and testing protocols.
- Cost considerations: Factor in potential migration costs beyond the monthly subscription fees, such as data migration charges or custom development needs.
- Minimizing disruptions: Work with the provider to minimize disruptions during the migration process. This might involve data synchronization, phased implementation, and comprehensive communication with your team.
A smooth migration requires detailed planning and communication with your chosen provider, ensuring a seamless transition and minimizing business disruption. Overall, an EDI cloud structure offers numerous advantages for agility and efficiency.
3. What are the ongoing maintenance requirements and responsibilities associated with using a cloud-based EDI solution?
While cloud-based EDI reduces IT infrastructure upkeep, ongoing management responsibilities remain:
- User management and access control: Maintain control over user access and permissions within the cloud EDI platform.
- Data monitoring and security: Regularly monitor your data for errors or suspicious activity.
- Staying current with updates: Ensure your team stays updated on any software updates or security patches provided by the cloud EDI provider.
By proactively managing these aspects, you can maintain the optimal performance and security of your cloud-based EDI solution.
Remember, cloud-based EDI offers significant advantages, but understanding the security considerations, migration process, and ongoing responsibilities is crucial for a successful and secure transition.
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Choosing the Right EDI Solution: Cloud, On-Premises, or Hybrid
Most businesses are not all that well-versed in EDI or EDI integration, and it's why so many today are moving toward cloud EDI solutions. By refocusing your employees' time on core business initiatives and leaving the tedium of EDI to the experts, you'll be able to more quickly execute on your important business goals.
Cloud EDI
Cloud-based Electronic Data Interchange (EDI), also known as web-based EDI, allows businesses to exchange documents such as purchase orders, invoices, and shipping notices over the internet using cloud infrastructure instead of traditional on-premise systems. This modern approach to EDI offers greater scalability, reduced IT overhead, and faster onboarding of trading partners. It typically requires:
- An EDI solutions provider to manage infrastructure and IT support
Rather than maintaining your own servers or hiring internal staff to manage EDI operations, a cloud EDI provider handles the entire infrastructure. This includes system maintenance, software updates, uptime monitoring, and technical support, allowing businesses to focus on their core competencies without worrying about the complexity of EDI systems.
- A web-based EDI translator to format transactions
Data exchanged between trading partners needs to be standardized and structured according to specific EDI formats (such as X12, EDIFACT, or XML). A web-based EDI translator automates this process, converting incoming and outgoing data into the correct formats so systems on both sides can interpret the information correctly. This ensures seamless integration between disparate systems.
- A secure network, often a multi-enterprise commerce network, to connect trading partners
A reliable and secure communication layer is essential for transmitting sensitive business documents. Cloud EDI often relies on a multi-enterprise commerce network, which connects a wide ecosystem of buyers, suppliers, logistics providers, and other partners. These networks provide built-in compliance, encryption, authentication, and audit capabilities, ensuring data security and regulatory adherence while simplifying partner connectivity.
Benefits of Cloud EDI:
Many businesses consider cloud-based EDI as a more efficient way to send and receive EDI transactions. Assess the benefits of using cloud EDI to interact with your trading partners:
- Lower costs
Cloud EDI eliminates the need for businesses to invest in expensive on-premise hardware, software licenses, or dedicated IT staff to manage infrastructure. With a subscription-based model, you only pay for what you use—making it more cost-effective for businesses of all sizes. - Less maintenance
System maintenance, software updates, data backups, and server management are all handled by the cloud EDI provider. This reduces internal IT workload and ensures your system is always running on the latest, most secure version. - Scalability
As your business grows or experiences seasonal demand, cloud EDI allows you to scale up (or down) quickly without investing in new infrastructure. Additional trading partners, transaction volumes, and system integrations can be added with minimal effort. - Automation
Cloud EDI platforms often integrate directly with ERP, TMS, and WMS systems, automating the exchange of business documents. This removes the need for manual data entry, reduces errors, accelerates processing times, and improves overall operational efficiency.
Drawbacks of Cloud EDI
While cloud EDI offers significant advantages, it’s important to consider potential challenges before implementation:
Reduced control
System changes, updates, or custom configurations typically require coordination with the provider, limiting direct control over the environment.Vendor dependency
Relying on a third-party provider means switching platforms or vendors can be time-consuming and may require careful planning to avoid disruption.
On-Premises EDI
The traditional EDI deployment model, on-premises EDI, operates on in-house infrastructure managed by the organization’s internal IT team. This setup typically requires:
EDI translator software to convert documents into standard EDI formats
Dedicated servers and backup systems to store, process, and protect data
Internal IT support for ongoing maintenance, troubleshooting, and updates
Benefits of On-Premises EDI:
Full control
Offers complete ownership over data, configurations, and integrations—ideal for businesses with strict security or compliance requirements.Customizability
Enables tailored configurations and workflows that align closely with unique business processes.Best for smaller, stable operations
A good fit for companies with consistent, manageable EDI transaction volumes and fewer trading partners.
Drawbacks of On-Premises EDI:
High upfront and ongoing costs
Requires significant capital investment in hardware, software licenses, and specialized IT personnel.Manual processes
Often involves more hands-on data handling, increasing the risk of human error and slowing down operations.Limited scalability
Scaling up to meet growing business demands often involves costly upgrades to infrastructure and additional staffing.Complex management
Maintaining security, compliance, and system performance requires deep technical expertise and constant oversight.
Hybrid Cloud EDI: The Best of Both Worlds
A hybrid EDI model offers flexibility by combining cloud-based automation with on-premises control. This approach integrates seamlessly with ERP systems like NetSuite, SAP, Sage, Intuit, and Acumatica—helping businesses stay agile while maintaining critical system continuity.
Partnering with a provider like Cleo ensures smooth integration, enhanced scalability, and full ERP compatibility—giving you a modern, tailored EDI solution that grows with your business.
Cleo Integration Cloud modernizes your EDI by connecting, integrating, and analyzing the end-to-end data flows across your ecosystem and internal systems. With cloud-based EDI from Cleo, modern enterprises can:
- Accelerate EDI partner onboarding
- Say "yes" to new integration requirements
- Scale to meet changing market demands
- Drive more revenue
Contact Cleo today to set up a demo to learn how Cleo Integration Cloud can solve your EDI challenges.
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