EDI dinosaur lives and grows

The technology industry may be buzzing about XML and business-to-business marketplaces, but within large corporations, the old tried-and-true electronic data interchange initiatives still rule.

Users attending last week's Data Interchange Standards Association conference here said not only that EDI is alive and well within their companies, but also that its usage actually continues to grow - because they are either expanding the number of their EDI trading partners, increasing the ANSI X.12 transaction types they use or bringing smaller suppliers into the fold through Web-based forms that are cheaper to use.

"I think EDI is here to stay," said Michael Goodwin, lead EDI analyst at Bank of America's commercial finance division in Tucker, Georgia. He noted that his group saw electronic invoices soar from 66% to 94% of the total during the past two years, as more trading partners ramped up.

Power-generating companies such as Allegheny Energy have no choice but to increase their EDI partnerships in their new deregulated world.

"Each state is requiring that EDI be the medium to support the data," said George Bialon, an e-commerce analyst at Allegheny Energy in Greensburg, Pennsylvania. He said his department has had to double its EDI staff in response.

Similar mandates due to take effect in the health care industry are also driving companies' increased EDI usage, industry analysts noted.

Even some software vendors that promote the XML content-tagging language have seen recent EDI benefits. IBM, for example, claims to have slashed paper invoices by 90% after linking up with more than 12,000 smaller suppliers using Web-based EDI. Small companies have typically resisted traditional EDI because of the expense involved in setting up a system. Now, they simply need a PC, a Web browser and an Internet connection to access and fill out forms that are translated into IBM's EDI system.

While EDI volume may not be increasing at a rate of 30% per year as it did in the early 1990s, it's rising at a "healthy" 15% clip, said Daniel Ferguson, a vice president at Faulkner & Gray's Electronic Commerce Research Group in Chicago. Each year, his company surveys 1,500 to 2,000 customers of large EDI vendors to give the vendors an indication of the market potential.

"Volume is growing despite all the hype that Internet people put out, and it will continue to grow robustly over the next three to seven years because companies are still saving tremendous amounts of money using EDI," Ferguson said.

Cambridge, Massachusetts-based Giga Information Group predicts that the value of EDI transactions will soar to $4 trillion in 2003, up from about $3 trillion at the end of last year.

"EDI is a lot more extensive than people have realized," said Giga analyst Ken Vollmer. "There's a definite dichotomy between popular press and what's going on in the real world. If it's not new and sexy, no one wants to talk about it. But for people in the [EDI] trenches, I don't think we're going to be able to pry them away from it."

Changes Happen

That's not to say that EDI hasn't undergone several transformations. For instance, many companies have shifted the transport mechanism from more expensive private networks to the Internet, analysts noted. But at the back end, the story remains the same. Companies that have gone to great trouble to make sure EDI data flows into their applications aren't in any hurry to change the system.

"Until there's an off-the-shelf solution that self-integrates with any application, it's going to be hard to just dump EDI," said Dave Oppenheim, director of e-commerce at Cessna Aircraft in Wichita, Kansas. Oppenheim noted that his company is getting "much deeper" into EDI, adding a shipment and billing notice, remittance advice and electronic fund transfers to its transaction roster.

While XML holds promise with its more flexible, humanly readable data format, many EDI users said they're content to wait until XML standards are nailed down before implementing any changes. Right now, many are just exploring the new options.

"XML sounds simple, but the fact remains that someone has to do the mapping and integration work," Oppenheim said.

"Why jump?" said Carol Farrar, an EDI analyst at Smurfit-Stone Container Corp. in Alton, Illinois. "It's too costly for a large company to do that. We'll wait for the standards to come out. We're not going to be the beta."

Join the newsletter!

Error: Please check your email address.

More about Giga Information GroupIBM AustraliaSmurfit-Stone Container

Show Comments

Market Place