For years, enterprises have used electronic data interchange services to manage B2B transactions. But APIs promise to simplify slowpoke legacy B2B integration processes. So why haven't businesses rushed to use them?
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Today, many companies are missing out on new opportunities to use application program interfaces to optimize their B2B transactions by sticking with outdated EDI services, according to industry analyst Anne Grackin, CEO at ChainLink Research. According to her, those companies that begin using APIs as a major part of their B2B integration processes over these outdated services could achieve faster partner onboarding, take away the strains associated with sharing critical and increase the scalability of their business processes to allow for future growth.
For decades, EDI has ruled over the B2B integration space, acting as a de facto standard for transactions between businesses. EDI can be cumbersome to use, however, in this age of the Internet and new IT platforms, and now the use of APIs for B2B integration carries the potential to change the way organizations think about the EDI services they use.
A look at EDI today
Beginning as a collection of data transferred over telephone and Telex in the 1960s, EDI is now used by over 100,000 companies in the United States for their B2B interactions with business partners. In fact, many large companies such as Sears, Amazon and Walmart often push suppliers to be EDI or AS/2 compliant.
"The U.S. and Europe are very EDI dominant," Grackin said. "The standards have been in place forever."
And the use of EDI is growing, she added, at a rate of about 7% a year worldwide. This is largely due to the nature of the data often being transferred using these protocols.
"The thing about EDI is the data is compliant with archiving," Grackin said. "The data is very leverageable or portable in those EDI standards."
The problem with EDI
However, not everyone in the industry is happy with EDI, including Eric Rempel, CIO at Redwood Logistics, a strategically integrated logistics provider that makes significant use of APIs to manage B2B interactions. He referred to EDI as a "necessary evil" in the area of transportation and logistics and points out that this "standard" often can cause frustration. Rempel said that in an effort to "get away" from EDI, he encourages clients his company manages logistics for to send data via Web services, or APIs, rather than EDI to simplify B2B integration efforts.
"Unfortunately, this is a standard that's so prevalent, especially in our industry ... that we have to have an EDI strategy," Rempel admitted.
Anne GrackinChainlink Research
Rempel sees EDI as an "old dial-up modem standard for what eventually became XSD documents" and that EDI doesn't stand up as a standard because uses of it are not, well, standardized.
"It is used differently by a whole bunch of different companies, and shippers can use them one way and carriers can use them another," he said.
Users also have been frustrated by another segment of the EDI services -- the EDI value-added network (VAN). As Grackin pointed out, organizations -- especially smaller companies -- will often outsource their EDI management to a third-party provider, many times in the form of an EDI VAN. But with a VAN, organizations potentially may be paying for services they don't need.
According to Rempel, some organizations send their data through an EDI VAN to go through seemingly unnecessary data format changes simply because of a belief that going through the EDI process is a necessity.
"It's a little outdated, and you can get things done a lot faster without [EDI], and it's the same data -- just put in a different structure," Rempel said.
He cites a particular case where a client using SAP would send XML-based code through an EDI VAN to be translated into an EDI format, only to be sent to Rempel's company to be translated back into XML and returned to their SAP system. After recognizing that unnecessary costs were being run up by this process, Rempel said his team finally convinced the company to cut those costs by sending the XML data to Redwood Logistics directly.
Grackin also pointed out that EDI VANs have frustrated customers by invoking what she said is "unfriendly power" by dictating which particular platforms that particular provider would choose to -- or choose not to -- interact with.
"A lot of these VANs said, 'I'm not going to take transactions from x or y,'" Grackin said. "And, like I said, a lot of big companies said, 'That's not your choice.'"
How APIs can help
What's the solution to getting off this, as Rempel calls it, "standard without a standard?" He said the answer lies in APIs.
"APIs are easier. They're human readable, you know what the elements are and it's got structure," he said. "Unless you've looked at thousands of EDI documents before, you're just going to say 'this looks like arbitrary characters.'"
And there is also a question of efficiency, at least according to Ken Yagen, vice president of products at the API provider MuleSoft.
"If they can go through an API and have that API then bridged into the EDI transaction ... that allows them to operate in a more efficient manner and move a lot more quickly," Yagen said. "These applications don't need to necessarily go through a separate EDI translation, so you can have more straightforward processing of business transactions."
Rempel also stressed that APIs can allow for more direct communication between companies as opposed to the traditional method of parsing data through each company's unique EDI VAN or other management system.
"It's just a much easier methodology," Rempel said. "You've got instant gratification rather than waiting for flat documents that need dramatic parsing."
Grackin agrees that these APIs are certainly valuable, especially when it comes to the scalability they provide for organizations dealing with rapidly growing amounts of data.
"The value of these tool sets is immeasurable, especially if you're a growing business," Grackin said, noting that they can help organizations avoid the typical scramble associated with parsing through B2B integration data.
What to expect
Grackin noted that there are ways to get around making heavy investments in EDI infrastructure, especially for smaller companies. She pointed out that many large retailers, such as Walmart, offer a sort of "forgiveness" strategy for small suppliers who may not be entirely EDI compliant, allowing the company to send the data directly to them, even if it is in spreadsheet form, to be translated into EDI.
Expect more organizations to use APIs for B2B integration soon enough, our sources said. Rempel sees APIs coming on strong in the next few years, as organizations recognize the cost savings they can provide over traditional approaches like an EDI VAN. He also said that a boom in API-based B2B integration will come when APIs become easier for non-IT people to create, and that's something that is happening.
In Yagen's view, there won't be a reduction in EDI transactions, but increasingly APIs will be used to manage EDI-based transfers. He said he's seeing greater recognition of the value of moving from EDI transactions to increased usage of APIs, particularly in larger companies looking to consolidate pre-existing investments in EDI-based infrastructure.
"People are testing waters," Yagen said. "I think you'll see the growth. You won't see the EDI transactions diminish, but you'll see a growth in API transactions rather than traditional B2B EDI transactions."
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