Various forms of electronic file exchange have been in use since the 1960s. In the mid-1980s, whatâ€™s now
known as Electronic Data Interchange (EDI) was first introduced. It formalized the process of exchanging
files in a structured, standard format. Over time, EDI has evolved to include a broader range of technologies under
the umbrella of Electronic Commerce (EC).
EDI is used to some degree in nearly every industry. It has become widely adopted because it offers companies the ability to become more efficient and productive, and thereby more competitive. EDI gained wide acceptance during the 1990s, backed by strong mandates from the retail, manufacturing and transportation industries. Some industries have forced EDI compliance on their trading partners, while others are more casual about adopting the technology. Todayâ€™s global economy is putting more pressure on everyone to bring their costs down, and EDI is one way to reduce those costs. While EDI is the backbone of EC technology, it is by no means the only technology available for increasing productivity.
Pre-1980s Before there was EDI
Prior to the mid-1980s, electronic computer file exchange was realistic only for large companies with mainframe computers and knowledgeable IT staff. It only made economic sense to exchange files electronically if you had large trading partners with high volumes of data. Data-transmission lines were expensive, which made reel-to-reel tapes the most practical medium. The structure of the files being exchanged was determined by one or both parties, with no standards as a guide.
For all other companies who didnâ€™t have the computing power, expertise, or resources to exchange files electronically, paper was the only option for conducting business.
Mid-1980s EDI attracts attention
The first EDI standards emerged in the early 1980s. The advent of the personal computer (PC) made EDI a possibility for companies of any size. The first EDI translation software vendors and Value Added Networks began offering services to help large companies bring their smaller suppliers onto EDI. It seems trivial today, but using a PC, modem, EDI translation software and an electronic mailbox instead of paper was a drastic step. The start-up cost for suppliers easily reached $10,000 or more. Most ended up doing â€˜rip and readâ€™ EDI, which entailed receiving a document electronically, printing it on paper, and re-keying it into their business application. To send a document back to a customer, the data would then be keyed into the EDI translation software. This process turned EDI into a glorified fax machine, and integrating EDI into a companyâ€™s business application was the furthest thing from anyoneâ€™s mind.
Early to mid-1990s E.D.I. or D.I.E.
Various industries, especially retail, continued to drive the adoption of EDI. Retailers were hungry for more, and their suppliers reluctantly complied. The phrase â€œE.D.I. or D.I.E.â€ was coined as a warning for companies to adopt EDI technology or face the consequences of losing customers and falling behind their competitors.
Large companies who had integrated EDI with their business applications from the outset were growing weary of the â€˜rip and readâ€™ habits of smaller companies. As the number of transactions made by small companies increased, thoughts of integrating EDI surfaced, and new vendors offering software and services began to emerge.
Late 1990s The Internet changes everything
EDI was no longer viewed as the only technology for doing business electronically. It had become a â€˜bad wordâ€™ to some, and was perceived as overly complicated and costly for small companies. The Internet and the dot-com era spawned hundreds of new companies that were developing revolutionary applications for the Internet, some of which were going to replace â€˜oldâ€™ technologies like EDI with XML2. These applications were touted as drastically changing the way companies would do business.
The reality was that the companies who invested heavily in EDI were not about to throw away their investment and start all over again because of XML. Instead, new optionsâ€”including XMLâ€” emerged from the Internet, and made it possible for companies to achieve 100% adoption of E-commerce with their trading partners. Files could be transported via the Internet, and web forms were an economic alternative available to small companies.
Two significant developments in the late 1990s were: 1) the realization that integrating EDI into business applications was a necessity, and 2) the development of HIPAA EDI standards. Large customers in the retail industry started imposing fines on their suppliers who made re-keying or other errors in their EDI data. This affected the profit margins of suppliers, and one way to reduce errors was to integrate EDI.
The Health Insurance Portability and Accountability Act (HIPAA) resulted in a set of EDI transactions being developed for the healthcare industry. This had a significant impact on the adoption of EDI in healthcare.
Early 2000s EDI thrives once again
EDI survived the dot-com crash, and showed no signs of going away anytime soon. The Internet helped take EDI to a new level, much as the PC did in the 1980s. Initiatives such as web EDI, EDI-INT and integrating EDI made significant gains. The developers of the most popular business applications also recognized the importance of allowing EDI and other data formats to be integrated with their products.
A new service that developed during this time was EDI outsourcing. Some companies had become increasingly frustrated with EDI because they were always playing catch-up with new developments and demands from their trading partners. Costs were escalating, and as a result, EDI outsourcing grew in popularity. Companies preferred to pay someone else to deal with their EDI headaches.
Today Still more to come
The EDI technology developments of the past two decades have made it possible to conduct business in ways that couldnâ€™t have been imagined prior to the 1980s. The Internet had the greatest impact, making it possible for a company of any size to do business anywhere in the world. With the number of technology options available, there is no reason why any company, large or small, canâ€™t use EC/EDI technology in their business. In fact, it has become mandatory if a business is going to survive.