What is EDI?
EDI stands for Electronic Data Interchange. EDI emerged many years ago as a format to encapsulate data that needs to be transferred between businesses (B2B) as part of their transactions. This form of data interchange simplifies bulk data transfer between enterprises. Business documents such as invoices, purchase orders, etc., may be stored, transmitted, and processed efficiently using EDI format.
What is API?
API stands for Application Programming Interface. APIs were in use a long time ago as part of interfaces within a system, but Web-based RESTful APIs proliferated in a past decade for the standard ways of interacting with disparate systems. It allows for software programs to connect with each other and API acts as an interface between them.
Use of APIs in B2B context
APIs complement, rather than replace, traditional B2B technologies such as EDI and managed file transfer. Application leaders could use APIs to add new ways of initiating and setting up B2B flows, bring in efficiency through real-time services to enable faster B2B setup, enable automation and optimize their business ecosystem for digital business.
- Web APIs enable real-time integration, and this can help with bringing in efficiencies in initial B2B setup between trading partners. The partners may continue to use B2B for their business documents that already comply with industry standards.
- APIs provide a potential solution for areas that are often manual in nature, within a B2B process flow.
- B2B APIs provide new business channels through API monetization.
How do APIs stack against the use of EDI?
APIs and EDIs have unique advantages and disadvantages in their usage. The key to manage these lies in using the right format based on the context within B2B process flows.
Standards: EDIs provide a wide range of data formats and industry standards for a lot of domains such as Healthcare, Logistics, Retail, etc. On the other hand, although technical standards are simple to implement for APIs, the industry standards for business objects are evolving in for Web APIs.
EDIs suit better for businesses that have to transfer a large number of transactions on a scheduled batch process. The format for EDI can pack a lot of data in an efficient way. The standard business objects formats, such as Purchase Orders, or a Healthcare claim, have matured over many decades and many enterprises have appropriate tools in place for processing transactions in these formats.
EDI standards have also evolved to include standard security layers on top of the actual transactional data and helps with compliance needs for transactions across enterprises. EDI documents can be transferred over protocols such as AS2, AS3, OFTP2, SFTP, etc. It provides an asynchronous method of transaction processing that is preferred by enterprises with large volumes of data.
Where do APIs fit into B2B process flows?
B2B EDI transactions incur initial upfront costs for its setup and deployment. The onboarding of trading partners is often laborious through manual hops for filling in related information about the business data, technical information, and approval processes. APIs provide an opportunity to automate the onboarding of new trading partners into the system. It can help bridge the gap through real-time APIs that provide guidance and accept requests for processing new business data between enterprises.
It is also important to note that some EDI transactions that need real-time processing may be implemented as APIs. For example, there may be thousands of medical claims that were sent as a batch from a trading partner (Clearing House) to the Insurer. If the trading partner is interested in finding the status of a specific claim, they may utilize an API that provides the status, rather than waiting until the batch process is completed and the result is transmitted to the trading partner during the next scheduled timeslot. Implementation of APIs for such use cases helps leverage the power of APIs along with using EDI where it provides the maximum benefit.
Many organizations continue to use EDI to exchange structured documents with trading partners. At the same time, new digital business is enabled by APIs. Organizations that are using EDI for B2B can adapt to support real-time patterns, as well as mobile and the Internet of Things (IoT) using APIs. This is because modern web APIs, particularly REST-based APIs, provide a new channel with a lower barrier to entry than traditional EDI, in terms of both cost and integration time. APIs enable B2B ecosystems to expand to include trading partners that may not have signed up for EDI because of cost or complexity, as well as enabling self-service integration by the trading partners themselves. APIs enable automation of EDI transfers and integration, including as part of a hybrid integration platform.
EDI-based B2B integration has been perceived as strategic for improving the cost, speed, and reliability of B2B e-commerce, and instrumental for improving supplier relationship management. However, historically it has not been seen as strategic to business transformation. The addition of APIs to engage the “API Economy” is, however, a key part of the strategic task of building a digital platform.
Head, Integration-CoE, Prowess Software Services