Despite the flexibility of Application Programming Interfaces (APIs), Electronic Data Interchange (EDI) remains the dominant method for B2B data exchange, accounting for a staggering 78% of all B2B transactions and processing over 20 billion transactions annually.
With the global EDI market expected to reach $4.5 billion by 2030, growing at a CAGR of 12.5%, it's clear that EDI is far from obsolete. In fact, it’s thriving more than ever.
So, why does EDI continue to thrive in the face of newer technologies like APIs? In this article, we'll go over the similarities and differences between API and EDI to understand why EDI remains a staple B2B data-sharing technology and how integrating API and EDI can offer more ways to leverage and use EDI systems for growth.
EDI vs API: What’s the Difference?
EDI and API are both used to exchange and transfer data, but that’s about where their similarities end.
What Are APIs?
APIs are a set of protocols and tools that enable different software applications to communicate and exchange data with each other. They can be used for a wide range of purposes, from connecting mobile apps to backend systems to enabling third-party developers to access a company's services and data.
To better understand the concept, you can think of an API as a waiter in a restaurant (bear with me!) In this analogy, the kitchen represents one system, while the customer represents another. The kitchen can’t communicate directly with the customer, so the waiter acts as an intermediary, following a set of protocols to exchange information between the two parties.
The waiter takes the customer's order, relays it to the kitchen, and then delivers the prepared meal back to the customer. Similarly, an API facilitates communication between different software systems, allowing them to exchange data and perform actions based on predefined rules and protocols.
What is EDI?
EDI, on the other hand, is a mature, standardized technology specifically designed for B2B data exchange.
Unlike APIs, which are more open-ended and can be used for a wide range of integration scenarios, EDI is built around a set of well-defined standards and protocols honed over decades to meet the unique needs of B2B communication.
EDI standards such as ANSI X12 and EDIFACT provide a common language for businesses to exchange key documents like purchase orders, invoices, and shipping notices.
In essence, EDI is specialized to B2B data exchange, commerce, and trade—and has been developed as such for decades. APIs, on the other hand, offer a more general, all-purpose means of sharing data between diverse apps and systems.
The Benefits of EDI Remain Strong Today
Despite the rise of APIs, EDI continues to offer a range of enduring benefits that make it an essential tool for modern businesses looking to supercharge their operations and enhance their ease of doing business.
Let’s talk about why EDI remains the staple technology of B2B data exchange.
Major Retailers and Industries Mandate EDI
EDI is the de facto choice for data exchange in many key industries worldwide, and major retailers often demand their partners use it.
For example, retail giants like Walmart, Target, and Amazon require their suppliers to use EDI for all B2B transactions, including purchase orders, invoices, and shipping notices. (Click here to learn more about EDI in retail.)
EDI is also the standard for businesses in the distribution, manufacturing, transportation, and healthcare industries, among many others in North America, Europe, and Asia-Pacific.
As Joe Cicman, senior analyst at Forrester Research, explained, “When I look at the spread of EDI, I look at the power map in a supply chain. The buyers like Walmart and Ford have the power. They mandate that their suppliers adopt EDI. That’s how it spreads.”
Secure Data Exchange with Protocols like AS2
EDI offers robust security features crucial for protecting sensitive B2B data. One of the most widely used security protocols in EDI is AS2.
AS2 provides secure, real-time data exchange over the Internet with built-in encryption and digital signatures. It ensures EDI transactions are transmitted securely and that both the sender and receiver can confirm the data's authenticity and integrity.
This is particularly important for industries with strict data security and compliance requirements, such as healthcare (HIPAA) and finance (PCI DSS).
Proven Reliability and Scalability
Finally, EDI has a proven track record of reliability and scalability. It’s designed to handle large volumes of data and complex business processes, and it can scale to meet the needs of even the largest global enterprises.
EDI providers offer a range of tools and services to ensure the reliability and availability of EDI transactions, including backup and recovery systems, performance monitoring, and 24/7 customer support.
The Limitations of APIs
Given EDI’s prominence in B2B data exchange, it's clear that APIs alone are insufficient for managing B2B data exchange.
But why can’t they effectively challenge EDI’s dominance?
While APIs excel at real-time, ad-hoc data sharing, they lack the standardization and industry-specific features that make EDI valuable for B2B transactions.
APIs typically use more general-purpose data formats (like JSON or XML), which lack the rich, structured data models provided by EDI standards. This can make it more difficult to ensure data consistency and integrity across different trading partners.
APIs also lack the built-in support for key B2B processes that EDI provides. EDI standards include specific document types and transaction sets for common B2B scenarios, such as:
- EDI 850 Purchase Order
- EDI 810 Invoice
- EDI 856 Advance Ship Notice
- EDI 855 Purchase Order Acknowledgement
- EDI 997 Functional Acknowledgement
In contrast, APIs often require custom development to support these B2B-specific use cases, which can be time-consuming and costly.
And without the standardization provided by EDI, there's a greater risk of discrepancies and errors creeping into the data exchange process.
API Security is a Major Concern
Another factor that impedes the usefulness of APIs for B2B data exchange is security.
According to Gartner, “Unmanaged and unsecured APIs are easy targets for attacks, increasing vulnerability to security and privacy incidents.”
Using APIs to exchange sensitive data—as is typical in EDI workflows—could expose businesses to data leaks and theft, which can cause catastrophic financial and reputational damage.
With the average data breach cost hitting $4.45 million, tried-and-tested secure data transfer technologies like EDI remain dominant for security-conscious businesses.
The Power of EDI and API Integration
So, does all of this mean that companies have to choose between EDI and APIs?
Not at all. The future of B2B integration lies in combining the strengths of both technologies.
By integrating EDI with API-based systems, companies can get the best of both worlds:
- Leverage EDI's standardization, reliability, and industry-specific functionality for their core B2B transactions.
- Use APIs to enable real-time data sharing, connect with new trading partners for non-sensitive or business-critical data transfer, and integrate with internal systems like ERP and WMS.
Combining API and EDI, enabled by modern EDI solutions like 1 EDI Source, can enable comprehensive end-to-end supply chain visibility and unlock new methods of leveraging data to drive efficiency and profits.
Real-World Integration Scenarios
At 1 EDI Source, we offer API extensibility through our HQXchange (HQX) platform’s flexible web service integration toolbox. It’s designed to integrate with virtually any open API endpoint through SOAP (a way for different software systems to communicate using a standardized format) or RESTful web service integration (a simpler, more lightweight approach to connecting software systems.)
Through API integration, HQX allows companies to connect EDI transactions with other cloud-based systems and applications seamlessly. This enables real-time data sharing, automated workflows, and end-to-end visibility across the supply chain.
With The Right Platform, EDI and API Can Work Together
EDI remains dominant in B2B data exchange, and despite being around for decades, APIs show little sign of changing that.
However, the future of B2B integration lies in converging technologies like EDI with modern innovations like APIs.
Achieving this vision requires more than just technology. It requires a willingness to think differently about B2B data exchange, to break down silos, and to seek out new ways to drive efficiency, visibility, and value across the entire trading partner network.
With our leading integration capabilities, 1 EDI Source enables businesses to tap into new levels of system connectivity while enhancing their EDI workflows. Contact one of our EDI experts, who can offer advice and guide you through the process.
