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The COVID-19 pandemic has significantly amplified the demand for companies to seamlessly handle omnichannel exchanges, as reported by a recent Nielsen study. In addition, as a result of the pandemic, work-from-home and remote management requirements have forced enterprises to adopt cloud-hosted applications.
Enterprises that had previously relied on legacy systems are now looking at using application programming interfaces (APIs) rather than Electronic Data Interchange (EDI) for partner onboarding — often igniting a debate surrounding whether EDI or API is the better option, especially when it comes to omnichannel communications. However, each plays a vital role in how companies interact with their business ecosystem.
EDI for Business Exchanges
Today’s modern B2B onboarding processes span the deployment of cloud and on-premise applications, which require both API and EDI support.
EDI, a data format that pre-dates cloud technology by several decades, continues to be leveraged today by manufacturers, suppliers, wholesalers, and retailers to support business transactions and partner onboarding. Due to its standardized format, EDI has become the industry go-to for computer-to-computer exchanges of business documents, including new orders, invoices, and order status updates.
EDI continues to be a cornerstone of supply chain-oriented business communications due to its widespread adoption and continued use by enterprises that prefer to leverage legacy, on-premise systems in which they have invested countless resources over years of operation, rather than investing in cloud-based, digital technologies. However, while EDI is a ubiquitous data format, it is not without its complications and unique requirements depending on the situation and purpose of the EDI exchange.
While EDI is standardized to allow streamlined communications, the specifics of that standardization vary by industry, geography, and other factors. Just to mention a few, ANSI ASC X12, TRADACOMS, UN/EDIFACT, and ODETTE are all commonly used EDI standards. Therefore, organizations that operate in multiple industries or geographic markets must determine which EDI transaction standard to use with each individual partner, supplier, and customer to ensure the EDI transfer is properly received.
API for Business Exchanges
On the other hand, enterprises that have invested in digitalized technology solutions and migrated to the cloud leverage APIs for business exchanges. There are hundreds of APIs, each of which serves its own specific purpose — from social messaging and form fills to finance and payments to e-commerce, as well as many other application uses and categories.
While there are hundreds of different APIs, each can be broken down into three distinct characteristics: procedures, protocols, and tools. Procedures refer to the specific tasks or functions that an API program performs. Protocols are the formats that an API uses to communicate data between applications. And tools are sets of building blocks that make up the components needed to construct new programs.
These three components make APIs critical when it comes to integrating data with an organization’s digital ecosystem because they offer significantly more flexibility than largely standardized business exchange formats like EDI. In addition, due to their digital nature, APIs can link with partner and SaaS applications quickly and efficiently, providing the advantage of real-time connectivity.
Why EDI and API Are Both Critical to Omnichannel Success
Both EDI and APIs serve the simple purpose of transferring data from one computer to another. The specifics of data exchange requirements are dictated by a business’ ecosystem of partners, suppliers, and customers.
Traditionally, enterprises relied on EDI for business-critical order-to-cash and procure-to-pay processes before the days of e-commerce and omnichannel trading. However, the hybrid nature of today’s business ecosystems requires the flexibility of API to ensure real-time integrations are performing as expected across an enterprise’s value chain. Even still, some industries, such as finance, may require more security, governance, and compliance layers than non-standardized API can provide.
While both formats serve their unique purposes and provide certain advantages, having a combination of the two makes sound sense and will likely best support a growing business, especially when it comes to omnichannel engagements. This is because API and EDI are not mutually exclusive; they’re complementary.
API integration augments EDI and provides a deeper integration context, but EDI also enables downstream business processes and data orchestration. For example, API may be necessary to perform specified tasks such as looking up catalog inventory or price checking with e-commerce platforms. On the other hand, once an order is ready to be placed, EDI may be the data format needed to kick off the ordering processes. Could you say that one of those is more important than the other? The customer wouldn’t have ordered the product(s) if they couldn’t check inventory or pricing, but the order wouldn’t have taken place without EDI.
Many companies think that they need to switch entirely to API to handle digital exchanges and keep up with the evolving digital age. However, there is a healthy mix of companies that have moved on to digital and executed cloud migrations; plus there are those that continue to rely on legacy systems — and all of that is OK. Because, with today’s single-platform integration solutions, companies don’t need to choose between one or the other. If businesses can simply make sure they are meeting the omnichannel demands of their customers, regardless of the data format, they can efficiently deliver and avoid dropped or missed orders.