Seamless data exchange is critical for modern business operations. It enables different departments within a company to share information smoothly with each other, which fosters cross-departmental collaboration, and facilitates communication between a company and its external partners, which helps build stronger business relationships.
To enable exchange of data between different internal and external systems, companies can use one of the two most popular integration technologies – electronic data interchange (EDI) or application programming interfaces (APIs). To decide which one would be optimal for your software project, you should understand how both technologies differ and what their unique features and strengths are.
In this article, we cover the concepts of API and EDI, highlight their pros and cons, and provide considerations on what app integration services and technology to opt for.
Looking into API
APIs are sets of protocols and rules that allow different systems to communicate and exchange data, and here is a brief description of how API integrations work. A website, mobile app, or other software sends a request for information to a specific API endpoint. The endpoint processes the request, authenticates it, and then retrieves the necessary data from another system that stores that information. The server then sends a response back to the client app, which processes the received data.
Similarly, APIs enable different systems to interact with each other’s functionality. One of the common examples is an ecommerce app interacting with a payment gateway.
Pros
- Wide applicability
Due to its versatility, the API technology can be applied to a wide range of business areas and operations, from integrating payment gateways to syncing inventory and order management tools or automating social media posting.
- Data exchange speed
APIs can retrieve and share data in any format in real-time, enabling dynamic and swift data integration, as well as continuous communication between different applications.
Cons
- Lack of data standardization
Primarily, APIs focus on data transfer, not ensuring consistency and quality of the transmitted data. To avoid potential data quality issues, companies need a robust data quality framework standardizing how different apps communicate and exchange information.
- Security challenges
APIs can be susceptible to various security attacks, and since companies typically need multiple APIs, the potential attack surface can increase dramatically, so businesses implementing this data exchange model must pay special attention to cybersecurity measures.
Exploring EDI
Electronic data interchange is a computer-to-computer exchange of data in an electronic format without human intervention. Companies generally use EDI to automatically exchange various types of business documents (including purchase orders, invoices, and product catalogs) within their organizations or with external parties instead of sending them manually.
Typically, the EDI process works as the following. First, an EDI tool retrieves business data from an ERP system, accounting system, or other corporate system. Then, an EDI tool automatically translates the data into a standardized format and transmits it to a target system. After the recipient receives the data, an EDI system notifies the initial sender about the success of the EDI transaction. If some data should be sent in response, the whole process goes in the opposite direction.
Pros
- Standardization
Since EDI systems transform and standardize documents according to predefined rules before sending them, companies can ensure data accuracy while reducing the risk of discrepancies and miscommunication between teams and business partners.
- Security
EDI systems incorporate robust security mechanisms, including encryption, access controls, and audit trails, enabling companies to ensure that information is protected from unauthorized access and that all legal compliance requirements are met.
- Widespread adoption
EDI is a mature technology that has been in active use for almost 40 years, and many organizations already have established EDI processes (especially those operating in highly-regulated sectors, such as healthcare, manufacturing, or finance).
Cons
- Data exchange delays
Although modern EDI solutions can offer near real-time data sharing, many legacy EDI systems still rely on scheduled batch data processing, which can cause delays in data exchange and slow down business processes.
- Limited application scope
While EDI systems are primarily focused on the exchange of structured business data, their application scope is rather limited and they are primarily used for one-to-one B2B document transactions.
Choosing between APIs and EDI
The choice of the most suitable data exchange technology should be primarily dictated by your integration needs and data management ecosystem. So you should clearly estimate business goals of data integration, analyze how your company currently collects, organizes, analyzes, and utilizes different types of data, and define organizational and industry-specific data integration requirements.
Then, you can proceed to the selection of a particular data exchange model. To make a better choice, you should compare them both from multiple perspectives:
- Technology focus
EDI helps transmit structured business documents, primarily in batches, while APIs enable real-time exchange of different types of data. So if your company has to make many standardized data transactions and their speed is not a top priority, EDI can be a more suitable option. But if you need to dynamically transmit data varying in structure and format, APIs can be a more preferable choice.
- Application scope
Although EDI can automate various data transactions, in practice, its use rarely extends beyond B2B communication and exchange of purchase orders, invoices, or other documents. APIs, on the contrary, are highly versatile and can be applied to a vast range of business processes involving data exchange, helping companies ensure interoperability.
- Data security
API-enabled data interchange is typically considered less safe compared to the EDI one, and companies using APIs typically have to implement additional measures to secure the transmission of data from system to system. So if a company lacks strong cybersecurity expertise in-house, it should opt for EDI, unless they are ready to enlist the help of a reliable third-party consultant to assist with securing APIs.
- Implementation complexity and cost
The complexity and cost of API integration can be lower compared to EDI integration since APIs are typically easier to set up and require less ongoing maintenance. Which is why many small to medium-sized companies with limited IT resources and budgets prioritize the use of application programming interfaces for data exchange.
As mentioned previously, careful consideration of the aforementioned factors will enable decision-makers to choose the optimal data exchange technology. But it is also important to note that, in many cases, selecting a hybrid EDI/API model, or leverage “best of both worlds”. can also be a sound third option. By augmenting batch processing capabilities of EDI with API-driven real-time data exchange, a company can implement a more holistic and strong data management strategy, orchestrate data flows more efficiently, and ensure swifter exchange of large data volumes with business partners.
Final thoughts
Electronic data interchange (EDI) and application programming interfaces (APIs) are two distinct data exchange approaches, each with its own strengths, downsides, and purposes. You should carefully consider the differences between them while taking into account your unique data requirements to choose the optimal data exchange technology for your company.
If your company operates in a complex data environment and defining the right data exchange approach is too challenging, you can consider turning to a third-party app integration partner. An experienced partner can audit your existing data ecosystem and analyze your company’s data management requirements to help you define and implement the right data exchange technology and strategy, enabling data interoperability.