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EDI Basics

EDI Enters its 4th Age: the Managed Services Age — Part 2

by Daniel Ford

The following is part two of a two-part series, "EDI Enters its Fourth Age: the Managed Services Age." To read part one of the series, click here.

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The VAN Age peaked at the turn of the century. Commercial companies had found the Internet and new business models for conducting electronic commerce. Many EDI users that traditionally used VANs decided that the Internet, along with a host of new security encryption standards, could be a substitute and began to abandon traditional VANs. VANs trying to remain relevant dropped prices to retain business.

New document standards emerged, XML, and many traditional users of EDI predicated that both VANs and legacy EDI standards would be gone in less than five years. In many ways the Internet Age was similar in nature to the Pioneer Age: the method of transmitting EDI became point-to-point and it required both the sender and receiver to agree on the same protocols for exchanging data. It seemed as if it was a step back from the VAN Age where every user was free to use the protocol of their choice without having to coordinate with their trading partners.

Progress in the Internet Age, but VANs still have a critical role to play

Implementing Internet point-to-point communications meant opening up secure networks such that outsiders could come in and send and receive information. Again, it appeared as a step back from the VAN Age where users agreed to use a secure and neutral third party, such that no one party would have to intrude into the other party’s private commercial network.

While many companies use some element of the Internet, all but a handful stopped short of abandoning the usage of the VAN. The Internet Age created hybrid technical environments where Internet point-to-point connectivity seemed appropriate when transmitting to large, sophisticated trading partners, while the VAN became relegated to handling lower volume, less sophisticated clients.

With the introduction of the Internet, the method of transmitting EDI became point-to-point and it required both the sender and receiver to agree on the same protocols for exchanging data.

What remains of the EDI VAN business is largely retooled. The VANs themselves are using the Internet as the communications backbone. They have incorporated more value-added services and continue to benefit from the added security they offer by minimizing the need for users to have direct access to each other’s network. Most Fortune 500 companies exited the EDI VAN business, including AT&T and General Electric.

The XML electronic commerce standards that were designed to replace EDI have been largely abandoned. Isolated usage remains and traction to use XML in areas historically ignored by EDI might continue to see some momentum.

Supporting today’s EDI environment in a hybrid environment might have significantly improved the economics of operating EDI but it has clearly added complexity, and while many would argue that we are still in the Internet Age, it has become clear that a new dawn is emerging known as the Managed Services Age.

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There is no debate that the Internet has brought about many new business models, transformed the way business is conducted, and changed the manner in which we share information and do research. It has also changed the way IT professionals now think about their roles and responsibilities. Most IT professionals are now familiar with such terms as “software as a service” (SaaS) and cloud computing.

The emergence of these trends has been fueled by large sums of money from private equity and venture firms. Traditional IT software companies, such as SAP, Oracle and IBM, have focused on transforming their business to take advantage of Cloud computing trends.

Managed Services finds the perfect platform in the cloud

During the Managed Services Age, SaaS and cloud computing will change the face of EDI. The Managed Services Age will move EDI roles and responsibilities (historically managed within a company’s enterprise) to the cloud.

The EDI administrator and EDI technical roles historically dedicated within a given enterprise will now become a shared service skill provided by a cloud provider. The cloud provider will provide a 24x7 EDI infrastructure with state of the art disaster recovery, supporting tools, and a framework that exceeds the typical client environment.

Because the cloud provider will be a specialist performing EDI business process outsourcing (BPO), they will have more experience, more skilled EDI resources and access to expertise that was only occasionally exercised when it was an internal function.

The EDI administrator and EDI technical roles historically dedicated within a given enterprise will now become a shared service skill provided by a cloud provider.

It is also important to note that the cloud provider will have international resources and capabilities. International expansion needs will be easily accommodated without having to hire international resources, and regional EDI standards can be easily accommodated given the cloud provider has the local resources and skills. The cloud provider will translate all of the international standards and protocols and provide the service as a shared resource.

Supporting tools, such as business rules, syntax rules, alerts, and business-specific formats can all be accommodated given that the cost of implementing such tools can now be shared across many companies, where as historically these tools would have been prohibitively expensive on a dedicated basis. Business systems will be freed from their legacy EDI infrastructure and dynamically enabled via the cloud.

Providing these EDI services via the cloud will improve the economics from which companies typically operate with dedicated infrastructure and resources.

These events are taking place today the Managed Services Age has begun. DiCentral has provided a transition for over 1,000 clients to this new Age. If you would like to learn more about how you can take advantage of the Managed Services Age, click here.

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