EDI Service Providers (Outsourcing EDI)

EDI Service Providers – role of outsourcing in EDI process

EDI Service Providers are third parties in electronic data interchange. An EC/EDI relationship with your trading partners can be overwhelming and complex. With global trade and technology changing so rapidly it can be difficult to keep up and will likely become more complex over time. The alternative for many companies is to outsource EDI operation by EDI Service Providers. EDI outsourcing is growing in popularity. EDI Service Providers are in direct competition with vendors who offer software and services for Data Transport, Data Translation and Data Transformation. Both approaches are viable, but it is beyond the scope of this whitepaper to delve into the pros and cons of one method versus the other.

The service provider assumes responsibility for managing the Data Transport, Data Translation and Data Transformation components of the relationship with your trading partners. You only have to maintain one Point-to-Point connection with the server provider. You don’t have to understand how these components work, or worry about day-to-day operations. You must still operate the Data Integration component alongside your business application, however.

How EDI Service Providers Outsourcing work?

In an EDI outsourcing scenario, the EDI Service Providers act as your IT department and EDI operations department all in one. You interact with the service provider, and they deal with your trading partners at the operational level. You are still responsible for managing the business relationship with your trading partners. Integrating EDI with your business application works in the same manner as a non-outsourced solution. Files are exchanged between you and the service provider using a Point-to-Point connection (Data Transport), and you integrate the data with your application.

Many EC/EDI vendors in North America offer ‘web EDI’, which is a method of EDI outsourcing. It is ideal for companies who have low-to-medium EDI activity and no resources to handle the complexities internally. The service provider acts as your IT department and the EDI operations are somewhat shared. They provide you with access to their system through a web browser, to process EDI transactions in real time. After your activities are completed, the service provider will translate and transport files to/from your trading partners. With web EDI, integrating EDI with your business application works in the same manner as a non-web EDI solution. Files are exchanged between you and the service provider using a Point-to-Point connection (Data Transport), and you integrate the data with your application.

How much does it cost?

There are many EC/EDI vendors who offer outsourcing services in North America. Their pricing models are too varied to discuss in this whitepaper. You can assume that the overall costs will be less than what it would cost to manage an in-house EDI operation. These are some considerations when evaluating the cost for EDI outsourcing:

1. You will not have to purchase any Data Transport or Data Translation software.
2. You will have to purchase Data Integration software and possibly Data Transformation software.
3. The costs to integrate EDI with your business application will be the same whether you outsource your EDI operation or not.
4. There is still a cost associated for someone in your organization to manage the business relationship with your trading partners and the relationship with your service provider.
5. If you require bar coded labels to be printed, you still have to purchase software at a cost of up to $1,500, plus a label printer for $1,500 to $3,000.
6. The fee structure from the service provider will include a combination of the following:
   • One-time setup fee
   • Monthly management fee
   • Transaction fees
   • VAN charges
   • New trading partner or transaction setup fees
   • Mapping fees (for integration).

With the web EDI outsourcing method, the pricing model is similar among vendors, and these are some considerations when evaluating the cost:

1. Points 1 to 5 above also apply to web EDI
2. The fee structure from the service provider will include a combination of the following:
   • One time setup fee – flat rate or up to $750 per trading partner
   • Subscription fee – $25 to $75 per month
   • Transaction fees – $1 to $3 per transaction, based on volume
   • VAN charges – If your trading partner still uses a VAN, the service provider will connect to the VAN on your behalf. They will pass the cost on to the customer at a rate of 5¢ to 25¢ or more per KC. Some service providers will bundle the VAN charges into their transaction fees.
   • New trading partner or transaction setup fees – variable $
   • Mapping fees for integration – up to $250 per hour.

EDI outsourcing cost is one of the main points to consider before taking EDI on a higher level in your company. You can get answers to all your questions at EDI Academy seminars. EDI basics and best mapping practise are available around the USA and in Canada.