EDI vs API: What’s the Best Method for B2B Integrations?

In modern business facilitating B2B (business-to-business) transactions and data exchange is vital. Choosing the right technology for integrating systems and sending data can make a significant difference in how well you work with your partner and your operational efficiency. The two leading technologies for B2B integration are Electronic Data Interchange (EDI) and Application Programming Interfaces (API). Each offers their own unique approaches to data exchange, influencing how businesses interact with each other, handle data flows and adapt to changing requirements.

In this article, we’ll dive into the key difference between EDI and API within the B2B context. By examining their respective strengths and limitations in key areas. Understanding everything about EDIs and APIs is crucial for businesses aiming to optimise their B2B interactions, strategies and guarantee smooth interactions with partners.

Understanding EDI and API

Before diving into the meat of this article it’s important to properly break down and understand what EDI and API are separately before comparing their features and functions.

What is EDI?

EDI is a technology that automates the electronic exchange of standardised business documents between organisations, such as purchase orders and invoices. By following standards like, EDIFACT and ANSI X12, EDI ensures consistent formatting and compatibility across systems, reducing errors and processing time. Operating through secure networks, EDI supports high transaction volumes and is widely used in manufacturing, retail and logistics to streamline operations and enhance efficiency.

What is API?

An API is a set of rules that enables software applications to communicate with each other. It acts as an interface, allowing different systems to interact automatically. For example, during an online purchase, your credit card details are sent to a remote application via an API for verification. Once validated, the API sends confirmation back, allowing the order to proceed. APIs are integral to many business processes, facilitating seamless interactions and operations.

Key differences between EDI and API

The key difference between EDI and API is that EDI is used to standardise the digital transfer of business documents and information. API, on the other hand, is technology that integrates different types of software applications. Choosing the right one between the two can significantly affect your business operations. Each method brings its own advantages and disadvantages. Let’s break down and compare EDI and API in general before looking at them in the context of B2B integration.

Speed

EDI and API differ greatly in terms of speed, which can have a major impact on business operations.

EDI typically operates on a RT processing model. RT processing handles transactions instantly as they are requested. It provides immediate data transfer and processing, making it ideal for urgent transactions. This method requires continuous system operation which can incur higher costs, but is well worth it for those who want their EDI system to handle transactions faster.

EDI can also operate using a batch processing model. This means data, like transactions, are collected and compiled over a period of time and processed in groups. Batch processing is ideal for handling large amounts of data efficiently, however it does inherently come with delays because it is not working with the data in real time. For example, a high volume of orders might be collected overnight and processed in the morning. This delay is suitable for scenarios where transactions don’t need to be processed immediately, but it can lead to slow response times and is not ideal for fast-paced environments.

APIs are designed to handle real time data processing and communication. They can facilitate immediate data exchanges by letting systems interact directly and instantaneously. A request sent via an API will be sent and received almost instantly provided real time updates and interactions. This rapid speed is advantageous for businesses that need immediate data synchronisation, such as e-commerce platforms which need accurate inventory updates and customer orders provided in real time.

Comparatively EDI and API’s differences in speed mostly concern businesses where time sensitive information is a critical part of their operations, like financial transactions, customer services and inventory management.

Security

In terms of security EDIs and APIs use different methods and protocols with their own set of security considerations.

EDI transactions tend to use secure protocols and methods of encryption to protect data while it’s being transferred. The protocols EDIs utilise include stringent security measures, including authentication and access controls. This framework ensures the secure exchange of data and guarantees that only authorised parties can access it. Dealing with sensitive and valuable business documents means that EDI systems will always provide the best security measures possible for the safe transfer of data.

APIs have a more modern approach to security. They use various protocols designed to safeguard data. Protocols like OAuth2 allow third party applications to obtain limited access to user resources on a server without exposing user credentials. OAuth2 defines a set of rules for issuing access tokens to clients which enables secure and delegated access to resources. Some of these Encryption methods like HTTPS are commonly used by APIs to protect data in transit and use authentication like EDIs do. Techniques like rate limiting and throttling are used to control the amount of traffic and frequency of requests that an API can handle, preventing the system from being overwhelmed and crashing unexpectedly.

Overall, when it comes to EDI vs API, security depends on how well each method is implemented and managed. EDI’s private networks provide robust protection while API’s offer more flexibility to incorporate advanced security features but require more management.

Scalability

Scalability refers to a system or technology’s ability to handle increasing volumes or work and accommodate growth without sacrificing performance. 

EDI systems are known for their consistency and reliability and are designed to handle large volumes of transactions. However, as transactions grow, EDI systems may require additional configuration or hardware upgrades. This can include adding more servers or increasing network capacity to maintain optimal performance. Despite this, EDI’s fixed standards and protocols ensure dependable data exchange, though they may present challenges when adapting quickly to new business requirements or integrating emerging systems.

APIs are built to be more adaptable and easier to integrate with other systems. They can be updated or extended with new functionality more easily than EDI systems. The ability to quickly adjust and scale APIs helps businesses stay agile and responsive to new requirements and increased transaction volumes.

While EDIs are built to handle large volumes of data, scaling it is complex and costly. APIs provide more flexibility and scaling options making them better suited for environments where rapid growth and adaptability are important.

Flexibility

Flexibility in the context of B2B integration refers to how easily a system can adapt to new requirements, changes and integrations. This includes the ability to support diverse data formats, adjust to evolving business needs and integrate with different systems.

While EDI excels in maintaining a consistent and reliable method for exchanging documents, it offers a high level of stability and standardisation that can be beneficial for established processes. Although its flexibility is set by fixed formats and protocols, this structure provides dependable and secure data exchange across a wide range of systems.

The dynamic nature of APIs allows businesses to rapidly adapt to changes and new requirements. Whether adding new endpoints, adjusting data structures or integrating with emerging technologies, APIs provide a more agile and responsive solution. This flexibility supports continuous importance and innovations, making it easier for businesses that need to stay responsive.

Making the decision: EDI vs. API

Understanding these key differences is a critical part of the decision making process. By knowing what each excels at and can offer will give you the insights you need to make a confident decision.

Considerations for choosing EDI

Keep the following in mind when choosing EDI for your business:

• Existing infrastructure: If your business and partners already use EDI systems then continuing to use them is the more practical choice. EDI integrates well with established systems.
• Industry requirements: Certain industries, like retail and logistics, have well defined EDI standards that are essential for regulatory compliance and efficient supply chain operations. If your industry mandates or favours using EDI then it might be your best option.
• High volume transactions: EDI is best suited for managing large volumes of transactions. If your business deals with high transaction volumes but can tolerate periodic processing delays then EDI is a good fit.
• Cost considerations: EDI systems may require significant initial investment and setup costs, which could play a factor in your decision. Consider EDI if you have the budget for a long term, stable solution.

Considerations for choosing API

These are the key considerations to keep in mind when deciding if API is better for your needs over EDI:

• Modernisation and integration: If your business aims to modernise its systems and integrate new technologies, API’s flexibility will benefit you greatly. 
• Industry requirements: APIs are best utilised by businesses that need real time data exchange and responsiveness. If instant updates and interactions are a critical part of the way you do business then an API will provide the speed you require.
• Flexibility: The way APIs are designed makes it easier for them to scale efficiently with evolving business needs. If you anticipate rapid growth or frequent changes in your business requirements then API is a more suitable option.
• Cost considerations: While APIs have lower upfront costs compared to EDI, the ongoing maintenance and development costs need to be kept in mind when choosing API over EDI.

How Data Interchange can help

Choosing between EDI and API is a critical decision for businesses looking to streamline their B2B integrations. Both technologies bring their own set of advantages and limitations, impacting how data is securely exchanged, how easily systems can scale and how adaptable they are to changing needs. 

If you are ready to streamline your B2B integrations and optimise the way you exchange data then contact our experts today and they will help you make the right choices and unlock the full potential of your business.