Choosing an EDI Option: In-house or Outsource?

The market is flooded with many EDI software solutions and outsourced solution providers. It can get difficult to choose which one would suit your needs the best. You need a solution that can automate & streamline your EDI activities, make your business process seamless & faster and at the same time help you avoid unnecessary IT costs. More organizations in various industries are now adopting EDI technology to manage the exchange of a wide array of business data with their Trading Partners. There are many EDI technology providers in the market today. Whether you are going to use EDI for the first time or are planning to switch to a new system here are some factors you can consider when choosing an EDI technology to best fit your business needs.

Options for implementing and managing EDI. 

The first thing to check is whether it’s best for your business to choose an in-house EDI program or take services of an externally managed EDI solution or service provider. You may want to select an option that brings down your overall cost of ownership, streamlines your business activities and helps increase productivity.

The three basic options are as follows:

1. In-house EDI: purchased EDI software that is operated by internally managed or contracted resources.  Costs generally include initial and ongoing license fees, infrastructure costs and the costs of full time EDI technical resources.
2. Hybrid EDI Managed Service: purchased software that is operated by an external service provider under contract.  The external party may provide a service that is general purpose for managing all activities associated with managing the EDI software, or provide a specific service such as onboarding new Trading Partners and then handing off / integrating with an existing internal solution.  Several variations of this model exist and are designed to fit your business and technical needs.  Costs include initial and ongoing license fees for your inhouse software, cost of software hosting infrastructure plus cost of any inhouse/external resource. This option generally economical for very large organizations with substantial EDI operations where certain core EDI functions are maintained internally whereas other, more difficult or otherwise time- consuming areas (such as Trading Partner onboarding) are outsourced to service providers.
3. Fully Outsourced EDI solution: a fully outsourced option where a third-party organization provides an outsourced service (generally a SaaS/Cloud service) without the requirement of any hardware or software being purchased. Business models can vary, but costs are usually tied to usage metrics such as number of documents, Trading Partners or integration points.

If you choose a fully outsourced option, the solution provider will take on the responsibility of all the necessary components needed to set up EDI services like translation software, mapping, technical support, licenses, operating systems, maintenance contracts, and more. The software would be wholly owned and managed by the external service provider.

On the other hand, if you choose to do EDI in-house, your company is responsible for all the components like translation software, mapping, technical support, licenses, operating systems, maintenance contracts, and more. A hybrid option is popular with very large organizations that have significant EDI operations.

It is essential to decide whether your company has the time and IT resources to make EDI a useful part of your day to day business operations than outsourcing them to an expert.

Understanding EDI transaction volume

It is best to have an idea about the volume of your monthly or annual EDI transaction volume because many outsourced EDI services are ‘pay per transaction’ based.  An EDI transaction is any EDI document sent or received by your company.  Many entry-level web-based EDI solutions are also pay per transaction, but help you avoid significant upfront costs of purchasing or implementing software . Many web EDI solutions provide light integration capabilities (such downloading of data in a standard excel format).  So, if your company has a low transaction volume, a web-based solution may be a good choice to get started. As your volumes and Trading Partners grow, you should consider a more robust program such as an in house EDI program or an outsourced service.

About the Author:

Jose Stein is a Partner in spice™ Technology Group, a consulting and B2B/B2C integration and solutions company. Prior to that, he held senior executive positions in a variety of retail and distribution companies focusing on bringing about financial acumen and delivering efficiencies through processes and technology.