As business needs evolve, many companies are wondering if API or EDI technology is right for their business. The truth, actually, is that many end up needing both. Each option has its pros and cons, and situations where they are appropriate to use.
What is EDI?
EDI, or Electronic Data Interchange, is a computer-to-computer exchange of business documents in a standard electronic format. Standards, which vary by industry and geographic location, include:
- cXML, the most common format for electronic invoices.
- ANSI ASC X12, a standard originally created for North America, but which is now used globally across many industries.
- TRADACOMS, used primarily for UK retail business.
- UN/EDIFACT, developed by the United Nations for international exchanges.
- ODETTE, used by the European automotive industry.
Information can be shared between employees, departments, or even businesses. The documents exchanged via EDI were traditionally delivered on paper, such as purchase orders and invoices. EDI is an older technology, but it is still used very heavily by many businesses and their trading partners. It's particularly valuable for supply-chain industries such as transportation, logistics and 3PL, and distribution.
What is API?
API (Application Programming Interface) encompasses procedures built to handle the specific tasks or functions that an API program performs. The API may expose the business logic of internal systems and has protocol features used to communicate data between applications. Its tools are sets of building blocks for the construction of new programs.
There are hundreds of APIs for social messaging, finance and payments, ecommerce, and categories enabling all the ways we use apps. APIs are critical to integrating data within a digital ecosystem. There are various types of API's, including:
- Representational State Transfer (REST), an architectural style that makes use of existing and widely adapted technologies, specifically HTTP, and does not create any new standards. This is most commonly used by cloud applications.
- Simple Object Access Protocol (SOAP), a strongly typed messaging framework that relies heavily on XML and schemas. This type is widely used but is becoming less popular.
- Extensible Markup Language (XML), a markup language that defines a set of rules for encoding documents in a format that is both human-readable and machine-readable.
Pros and Cons
EDI is a highly evolved method of integrating business systems in virtually every industry. Within the standards there is great deal of flexibility as many businesses have unique business philosophies, constraints and practices.
- Can be much more cost effective than an API.
- EDI standards vary by industry, geographic location, and other factors. So even though EDI is a widely accepted data
format, unique requirements surround every organization’s EDI exchange process.
- A common complaint about EDI is that it delivers standards without any set guidelines, which means that the standards are a superset of most business needs and each company can pick and choose what aspects of the standard to implement.
- Though rare, some companies violate the standard which can cause havoc on some systems.
- EDI is not a real-time concept. Instead transactions are batched and transmitted with lag times that can cause issues. Errors are often identified later after the transactions have failed in the partners’ system when it may be too late to avoid the operational impact of the data errors.
- API often has more flexibility than standards-based exchanges such as EDI.
- API's can provide real-time error tracking.
- Without standards, each API can have its own rules, capabilities and limitations and it often requires a
developer to create and support it. If the API exchange fails midstream, or if there is error handling and roll back, this can cause problems.
- API integration is not always easy and requires testing to determine its resiliency. Smaller organizations may not
have the right resources to test or quality of implementation which can lead to production issues later on. Your API framework must be able to properly capture all of the errors, alert the user/administrator and have the ability to repair and reprocess failed transactions.
- While API's have the potential to provide real-time error trapping and response, which sounds valuable. However, what level of validation will occur, how scalable will it be and how much will it cost? For example, Amazon
regulates the volume of API requests and may not match the volume needed by your business, especially in busy season.
Now to answer the important question: Which one should you pick for your business?
The big secret: It likely won't be either/or. Many companies find they need both API and EDI to manage all their business processes effectively.
Look to your partners
By examining you internal system integration requirements and the opportunities within your partner ecosystem (including integrations you may not be currently benefiting from), you can determine the best solutions and technology for that ecosystem. For example, financial industries that exchange a lot of sensitive data will require more robust security, governance, and compliance layers than other industries.
Synergy is possible
When it comes to connecting systems, it is not a question of choosing between EDI and APIs. The two can work together and even perform different, complementary roles. API integration may augment EDI initiatives and help deliver more comprehensive B2B integrations within your digital ecosystem.
For instance, APIs can be used to check inventory or pricing in your e-commerce system. And then if, after checking the price and availability of an item, your customer decides to place an order, EDI can initiate the dropship order fulfillment
workflow. The two processes may be equally crucial and work in harmony with each other. It's no wonder that today's businesses are more reliant on EDI and API technologies.
When EDI is best
Exchanging common business documents is a great use-case for EDI. Organizations often connect their internal systems with customers, vendors, suppliers, warehouses, banks, and other organizations for exchanging purchase orders, invoices, payments, ship notices, and other valuable data. Adding a trading partner relationship involves configuring their EDI profile and building the appropriate maps for sending, transforming, and receiving data. Since each trading partner will have different specifics, using flexible and robust solutions that provide full visibility is critical to accommodating all partner scenarios and nuances.
In the end, flexibility is always key
A good integration platform should integrate with both on-premise and cloud applications, allowing individual lines of business operations to execute end-to-end data processing. Acquisitions and other situations could throw a wrinkle into your strategy, so flexible architecture should be a factor.
The ability to handle different scenarios is often critical to a B2B project’s success and how you configure your platform will be based on your unique situation. What is the best way to connect business stakeholders, SaaS applications
and on-premise solutions? Your competitors are likely asking the same questions.
If you can quickly adapt to each opportunity and challenge, whether you are working with EDI, API or both – you will separate yourself from the pack, lower your operating expenses and likely earn new business.