by Carol Stigum | May 15, 2024

Cloud EDI Solutions: A Complete Overview, Key Benefits, and Why Companies are Moving Toward Them

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EDI, or Electronic Data Interchange, is the digital transfer of structured business documents between trading partners, customers, suppliers, and vendors. Traditional EDI solutions have been around for years and are a critical way to exchange data among all members of the supply chain. EDI was a significant improvement over manual B2B communications, such as email and fax. Thousands of standard business documents could be sent automatically and directly from one system to another, such as from a supplier’s internal system directly to the seller’s system.

Unfortunately, traditional EDI solutions are expensive, especially for smaller businesses. Since they are on-premises solutions, they require upfront investments in hardware and software. They require knowing the maximum capacity you might need in the future, in order to avoid expensive equipment upgrades. They also require specialized knowledge and the hiring of additional staff. On-premises solutions lack modern security protection, leading to costly security breaches if not properly maintained.

Fortunately, there are more modern, cloud-based solutions available. Cloud-based EDI is beginning to replace the traditional methods, as it is more flexible and adaptable to evolving technical infrastructure.

This article will explain what cloud EDI solutions are, the benefits of cloud-based EDI over traditional methods, and why many companies are switching.

What are cloud EDI solutions?

There is much talk about moving business operations to the cloud, and for good reason. The cloud offers scalability, so that businesses can adjust computing resources up or down based on demand. Cloud applications can be accessed anywhere with an internet connection, save money on hardware and maintenance, and offer data security and protection.

Cloud EDI enables businesses to leverage these standard cloud-hosted benefits while maintaining their ability to exchange structured data with their trading partners over the internet. Cloud services are flexible and customizable. Growing your business? Cloud EDI adjusts with you, scaling up with your business without maintaining your own servers and an extensive IT staff to support the hardware and software. Your outsourced cloud partner shoulders these responsibilities to your benefit.

Moving to cloud-based EDI from traditional systems doesn’t have to be difficult. Modern cloud EDI platforms simplify EDI onboarding processes and integration workflows so that existing systems can easily be replicated in the cloud. Cloud EDI solutions use the same standardized electronic formats you are familiar with, such as ANSI X12 in the United States, UN/EDIFACT globally, and XML, to format such business documents as purchase orders, invoices, and receipts. It then sends the documents securely using communication protocols such as AS2, SFTP, or HTTPS.

Key benefits of cloud-based EDI solutions

  • Improved efficiency and agility: If you are familiar with cloud computing, you know that a key benefit is the cloud’s ability to scale to fit your current business needs. Where an on-premises solution requires you to predetermine the maximum capacity you will ever need, cloud-based software lets you scale your volume up or down, depending on your needs, only paying for the resources you use.
  • Enhanced collaboration: Cloud-based EDI allows for standardized communication between business partners, by using data mapping to facilitate the exchange of information between different message formats. Standardized communication reduces errors and delays in obtaining documents. In addition, cloud-based EDI makes it easier to onboard new trading partners with pre-defined templates and testing environments. Cloud-based EDI also makes it possible to access and exchange data from separate locations and time zones. If you have an internet connection, you can access the information you need.
  • Streamlined processes: Cloud EDI solutions can automate many parts of the EDI process, such as validation and format translation. This minimizes manual errors and transmission failures due to incorrect formatting. Cloud EDI also allows you to integrate with your backend business systems, such as ERP (Enterprise Resource Planning), CRM (Customer Relationship Management), and SCM (Supply Chain Management) systems. Your EDI system can become part of your overall workflow automation.
  • Improved security and protection: Cloud EDI documents are transmitted over secure communication protocols, with the extra security of data encryption. Digital signatures ensure the validity of your documents. Having EDI documents in the cloud allows you to restrict access to authorized users. The cloud also offers the protection of redundancy, so that you can continue your operations in the case of hardware outages or other disruptions.
  • Cost savings: Cloud-based solutions have proven themselves as cost-saving. You have the reduced infrastructure and maintenance costs that come from a cloud-based solution. In addition, on-premises EDI often involves using value-added networks (VANs) to provide secure communication between trading partners. VANs charge transaction fees for their services. With cloud-based EDI, using direct connections and secure communications can reduce or eliminate transaction fees.

Why are companies adopting cloud EDI solutions?

Companies recognize the continued need for EDI, and without the pitfalls of traditional EDI tools, moving EDI solution to the cloud makes sense.

As mentioned earlier, companies are moving to cloud EDI because of lower costs, scalability, ease of onboarding new partners, and flexibility of exchanging different formats of data from different systems. Moving to a cloud-based EDI is an easier transition since so many business systems are already in the cloud. Large organizations often have thousands of trading partners and must integrate with many different systems with different data formats. They might need to integrate legacy systems with non-EDI documents. Traditional EDI systems have difficulty handling these challenges.

Cloud EDI solutions are also a great option for smaller companies. Many small businesses do not have the IT resources to set up and maintain EDI software on their own. Many EDI vendors offer cloud EDI as managed services, meaning that the vendor helps you develop EDI integrations. The vendor will also deploy and manage the integration.

Whether your business is large or small, you don’t want your EDI system to become too overwhelmed as you grow your business, or your system to become obsolete. As you grow, you don’t want to pay increased per-transaction fees to a VAN. Customer demands change rapidly, and you want your EDI to be able to meet increased and changing customer demand. Cloud-based EDI also makes it easier for companies to expand into different markets, with fast and reliable data exchange, regardless of geographical location.

CData Arc: A unified EDI solution

CData Arc is a modern, cloud-based solution that simplifies EDI with a self-service, visual, drag-and-drop interface that lets users easily connect EDI with their backend CRM, ERP, and data storage systems. CData Arc is a cost-effective way to simplify data exchange with your supply chain, with none of the per-document transaction fees associated with VANs.

CData Arc is an all-in-one EDI solution for B2B EDI integration, supporting every major EDI standard, document, and protocol. CData Arc is available as Arc Cloud, with no installation, hosting, or management requirements, or as an instance in your AWS or Azure environment.