Justifying EDI Change in Your Business

If there’s one thing IT leaders understand, it’s change.  Business changes are a given, and almost no one in IT is working with the same set of technologies they were using five years ago, much less ten or fifteen years ago.  Managing change is a core IT skill.

Even changes that are essential to business operations must compete for budget dollars, however.  And the vast majority of IT spending goes to maintaining existing systems.  That means investments in new IT capabilities and improvements must compete for a small slice of the IT budget.  And spending money in one area means not spending it in another.

When allocating that small slice of budget, IT leaders tend to invest in new systems at the expense of improving existing ones.  As a result, our businesses tend to suffer longer than they should with suboptimal, legacy solutions.  And like governments, they tend to ignore problems with existing infrastructure until disaster threatens.

The broad need for EDI modernization is a case in point.  Modern EDI processes utilize document types, transports, protocols, and application interfaces that were barely on the map 10 years ago.  Yet many businesses limp along with aging EDI translator technology they acquired 10 or 15 years ago.

Businesses that are saddled with outdated EDI technology know they are ill-equipped.  They spend time every day circumventing functional limitations, verifying correct outputs, puzzling over cryptic messages, and trying to keep up with trading partner changes.  But few businesses are equipped to justify investments in better solutions.

When a business outsources EDI to a service provider, it’s relatively easy to measure the direct costs of onboarding, change requests, exception-handling, upgrades, support calls, and other EDI-related activities.  But when EDI is managed in-house, getting a handle on costs and investment return is not so easy.

Sure, there are budget line items for hardware, software licenses, IT staff, VAN charges, and other EDI expenses, but budgets don’t tell a complete story.  Few of the companies we talk with have dedicated EDI budgets, for example.  The resources and personnel that support EDI also support other IT systems.  That not only makes it difficult to understand current EDI costs, it also makes it difficult to project returns on proposed EDI improvements.

Part of what’s missing is accurate measurement of the direct costs of EDI activities and processes.  IT organizations commonly use project estimation methods for partner onboarding, mapping changes, and other EDI activities.  But few actually measure those things on a consistent basis, not only to gauge the total cost of EDI, but also to identify opportunities to reduce costs and improve results.

The lack of metrics for indirect EDI costs is an even bigger barrier to change, however.  A single missed order or late shipment can lead to a scorecard deduction or even lost business.  And the inability to support new documents or protocols, or to deliver new capabilities under a deadline can jeopardize important partner relationships and revenue sources.

Although it may be difficult to measure some indirect costs or to tie them to EDI failings, a careful record of such events, coupled with direct EDI cost metrics, can be invaluable when the time comes to justify investments in EDI modernization.

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