How Do On-Premise EDI Solutions Work?

Following the sharp increase in digitisation of the 1990s, sharing business-critical documents like invoices and shipping notices electronically was a natural progression from paper-based processes.1

Since then, electronic data interchange (EDI) has become central to overcoming supply chain problems and facilitating the accurate transfer of sensitive data. Today, EDI fulfils the same fundamental function, and the advantages EDI has to offer remain similar — but solutions have evolved. 

In addition to technological developments such as value-added networks (VANs) and application programming interface (API) integrations, businesses now have multiple options for their EDI system, such as:

  • On-premise solutions
  • Cloud services
  • Managed services

In this article, we’ll be looking at on-premise EDI, the benefits this can provide to businesses and what the future holds for EDI. Let’s get started.

Additional reading: Check out our free eBook The Supply Chain Centred Business for more on the benefits of EDI and how it can help you gain a competitive advantage.

A closer look at on-premise EDI

Before the days of super-fast networking and cloud computing, hosting software on-premises using physical hardware was necessary. As a result, EDI software is often installed and hosted with on-premises infrastructure, including servers, databases, and computer systems, and operated by staff on location.

The exact requirements of on-premise EDI vary from business to business, but most setups likely feature the EDI infrastructure itself combined with data integration solutions for ERPs and communications services for managing requests securely.

What does on-premise EDI involve?

On-premise EDI is corporate-owned EDI software that is installed and operated from a customer’s in-house server and computing infrastructure. With an on-premise solution, customers can retain control over all aspects of their EDI system, including:

  • Data security
  • Access
  • Integrity

As with any EDI solution, there are three key pillars required to ensure an effective on-premise system:

  • Hardware: On-premises EDI implementation requires servers, databases and operating systems to store, receive, send and organise data entry. In addition to core infrastructure, it’s also necessary to invest in backups and redundancy.
  • Software: EDI systems receive internal data, translate it into outbound EDI according to the stipulated standard, and accept inbound electronic documents, converting them to internal data.
  • Staff: Personnel are required to operate EDI software solutions and monitor data transfer. EDI is dynamic and complex when dealing with multiple business partners. However, in-house EDI skills are depleting as outsourcing and managed services grow in popularity

The pros and cons of on-premise EDI

Unsurprisingly, the utilisation of an on-premise EDI solution comes with its own specific advantages and disadvantages. As a result, businesses need to weigh up these pros and cons before deciding if on-premise EDI is right for them.

Let’s take a look at what’s good about on-premise EDI and what it lacks in a little more detail.

The benefits of on-premise EDI

Whilst there are several advantages businesses can access by deploying on-premise software within their EDI system, there are two that stand out above the rest:

  • Full control: Businesses can manage point-to-point connections and security considerations themselves. Total command over the transformation and integration of data in-house can provide swift and timely changes — eliminating the need for third-party support.
  • Cost reduction: With an on-premise EDI, there are no additional upfront costs — whereas, with cloud-based software for example, businesses will need to pay data and provider fees, along with maintenance costs.

What on-premise EDI lacks

Whilst on-premise EDI offer increased levels of control and can help reduce the total costs associated with EDI implementation, there are still several drawbacks to this approach that lead some businesses to look at alternatives. These include:

  • Requirements for specialist skills: The self-service nature of on-premise EDI means businesses need competent in-house teams to avoid significant costs due to implementation issues. EDI management requires rare and in-demand skills, which means it’s crucial to keep internal EDI skills and those of partners in mind.
  • Increased deployment time: With on-premise EDI, software can slow down deployment time and onboarding processes for trading partners, leading to lost revenue and slower data processing times.

Crucially, one of the major reasons so many businesses deploy EDI is to reduce complexity. However, when engaging with partners using different communication protocols and message formats, an on-premise EDI system can make processes and communication even more complex.

Who should use on-premise EDI solutions

Given the specific benefits and drawbacks that come with the deployment of on-premise EDI, these solutions are better suited to certain businesses than others. For example, on-premise EDI can be an effective system for:

  • Businesses who are fully confident in their existing in-house EDI expertise
  • Businesses with a low number of stable trading relationships
  • Businesses who only deal with partners with existing EDI capabilities

On-premise EDI vs cloud-based EDI

technological advancements and the advent of new software has led to the rise of new and innovative solutions, such as the cloud.

The cloud migration services market is expected to reach $448.34 billion by 2026 following the adoption of Software as a Service (SaaS) models.2 Numerous applications have moved to the cloud, and EDI is no different.

Cloud-based EDI includes a growing number of web-based tools that allow businesses to send, receive, store and manage electronic documents. These tools are accessed and operated over a network connection — as opposed to an on-premise computer.

Both EDI via VAN and Web EDI are examples of these new and innovative cloud solutions. Compared to an on-premise approach to EDI, a cloud-based system can provide businesses with a wide range of benefits, such as:

  • Cost-effectiveness
  • Increases in operational efficiency
  • Better end-to-end visibility capabilities
  • Smoother internal and external collaboration

In addition to this, a VAN system is generally easier to scale due to the fact that the provisioning of resources and integration of new supply chain partners is often delivered by the provider. Essentially, businesses outsource the construction and maintenance of the EDI system — all that’s left for them to do is use that system effectively.

Given these advantages associated with cloud-based EDI, it is the most suitable solution for businesses:

  • Looking for enhanced flexibility and scalability
  • Seeking to simplify the supply chain and EDI management
  • Who have limited or no EDI expertise in-house

Get the support you need for your EDI solution

At Data Interchange, we understand that the future of EDI will be defined by flexible solutions that pull on multiple types of EDI — including both on-premise and cloud-based tools.

DiNet, our private cloud Value Added Network, comes with protocol translation support and access to over 10,000 business partners via a single connection. You can also benefit from built-in audit trail functionality alongside sophisticated analytics and reporting capabilities, all of which allow you to:

  • Eliminate in-house EDI specialist costs
  • Maintain a single connection to all business partners
  • Oversee all EDI transactions in real-time

You can also take things further with a managed service from Data Interchange. Our team are on hand to carry out the maintenance of the entire EDI system, including trading partner management, data integration and implementation — helping you enjoy the benefits EDI has to offer without the hassle and delay if something goes wrong.

If you’re ready to start your EDI journey, you can talk to an expert at Data Interchange to get started.

1  A Very Short History of Digitization

2  Cloud Migration Market – Growth, Trends, COVID-19 Impact and Forecasts (2022 – 2027)

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