This article is republished with the express written permission of (TAPN) The Accounts Payable Network.

The great irony of electronic data interchange (EDI) is that while it can save companies substantial sums of money, it can be too expensive for many to implement, especially small- and medium-size enterprises. The prohibitive costs of EDI limit its usefulness for large companies as well, for even those that can afford dedicated servers, technical personnel, and consulting services may find that their smaller trading partners cannot. This has kept EDI software from realizing its potential to revolutionize the business process, but that may be about to change.

As it has in so many other areas of life, the Internet is becoming the great equalizer in EDI, lowering EDI’s entry barriers by lowering its costs. EDI transaction sets can be sent over the Internet, using a company’s existing Internet connection, rather than requiring a dedicated server. The value-added networks (VANs) that have traditionally functioned as electronic post offices now offer EDI users other services, such as Web hosting. All this means much lower EDI costs and allows more companies to reap the advantages of the technology.

One cultural obstacle to Internet EDI is security concerns. This is especially true for accounts payable departments, whose managers may be understandably leery about transmitting financial information over the Internet. However, encryption technology is becoming increasingly sophisticated, making security worries less daunting. (Encryption is a process by which readable text is translated into unreadable code during transmission from one trading partner to another; an encryption key allows both trading partners to code and decode messages.) Moreover, in an age where people pay bills, check bank balances, make credit card purchases and apply for loans electronically, cultural resistance to handling sensitive and financial matters over the Internet is rapidly dissipating.

A key factor that is opening up the Internet to EDI is the development of Extensible Mark-up Language (XML), which is playing a growing role in electronic business transactions. XML is a language standard administered by the World Wide Web Consortium (W3C), the body responsible for managing Internet standards development. Unlike a code with rigid standards, XML is more like a spoken language that offers an alphabet and a set of rules for word and sentence construction. This means that XML is flexible and easy to understand.

This flexibility and comprehensibility positions XML to make up for the disadvantages in traditional EDI, allowing it to reduce the cost of EDI by overcoming its complexity. XML alone is not directly comparable to EDI. It provides syntax, but not vocabulary. With other pieces of the XML system – the development of a standard for programmatic interfaces to XML called DOM (document object model), XSLT (extensible style sheet language for transformations), XPath, XSL and XSchema — it represents real progress toward global software interoperability.

As a syntactical tool, XML already can be employed to extend EDI interaction to non-EDI partners. Through the Internet a company with an existing EDI system and an XML-enabled EDI translator can deliver XML formatted documents via e-mail to partners that are not EDI enabled.

Today’s Internet allows greater data transfer capacity than the former VAN connections, which allows the less concise but more descriptive XML tags that are simple and clear. XML can be read by people as well as by machines, whereas EDI is only machine-readable. This means that problems in messages can be spotted more quickly in XML. EDI takes months to master even by highly skilled programmers, but JavaScript, Visual Basic, Python, or Perl script writers can learn XML in a matter of hours. This makes technical personnel easier and less expensive to train and to keep. That is not to say there are not technical challenges facing those implementing XML, as anyone ever involved in implementation of technology will suspect. However, this makes EDI possible for many more organizations, at much less cost than traditional EDI.

Companies that have already invested in EDI systems can tap into the opportunities provided by XML, easily and affordably. By installing EDI-XML translators on their servers, they can leverage their EDI investments and extend their use of EDI to trading partners who have been unable or unwilling to sustain the expense of traditional EDI.

The translators put the EDI standard data format within readable XML tags, opening up the possibility of data interchange with companies.

The flexibility of the Internet appears to be an advantage for EDI. It allows large companies with EDI systems in place to leverage their investments and opens up the world of EDI to smaller companies who have been excluded from its promise in the past. The result can be quicker, cheaper and more accurate trading processes, benefiting both purchasers and vendors.

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