Hubspan White Paper: Beyond Traditional EDI

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1 March 2010 Hubspan White Paper: Why Traditional EDI no longer meets today s business or IT needs, and why companies need to look at broader business integration Table of Contents Page 2 Page 2 Page 3 Page 3 Page 4 Page 5 Page 5 Page 6 Page 6 Executive Summary Definitions of EDI The Limitations of Traditional EDI A Brief History of EDI and Related Standards New Solutions for Advanced EDI Business Process Integration The Three Stages of B2B Interaction WebSpan: A Complete Solution for Advanced EDI Conclusion GLOBAL INTEGRATION ON DEMAND

2 Executive Summary EDI (Electronic Document Interchange) is an immensely useful standard and process, and has become nearly universal over the course of several decades. Traditional EDI, however, no longer meets today s business or IT needs. There are multiple reasons for this, including an increased need for interoperability, broader business process support and real-time interactions. Among nearly all industries, we have seen increased complexity in IT systems and interoperability requirements across companies needing to exchange information. It is no longer realistic to assume or expect your suppliers, customer or other partners to adhere to a single standard or business process for information exchange. Most organizations want to leverage existing applications and systems, and customers have the power to insist you do business their way. Also, companies want to do more than just exchange documents. They want the exchange to be part of a broader business process and fit into key initiatives, such as business process management and service oriented architecture (SOA). Companies require more sophisticated process work flow, business rules, security policies or compliance management. These lie outside the realm of traditional EDI. Finally, static document exchange, such as sending and receiving an 850 purchase order is rarely enough in today s global, real time economy. In addition to sending a PO, you may want to query the vendor s inventory levels, delivery time or current pricing. This requires real-time interactions that traditional EDI does not support. These challenges and others have led to the development of powerful new advanced EDI solutions. This new generation of EDI provides agility, reliability and scalability by providing comprehensive business-to-business integration processes. Definitions of EDI For example, today s advanced EDI solutions support multiple standards, formats, applications and protocols, allowing all parties to work from their existing systems and do business in their preferred way. This allows you to easily extend your existing applications, middleware and EDI implementations behind the firewall to vast business communities. These solutions also go beyond document exchange to support the overall business process and centralized services infrastructure. Importantly, companies also have a choice of how to consume this new generation of advanced EDI solutions, with many vendors providing on-premise or cloud-based, often called software-as-a-service (SaaS), products and services, or a combination of the two. The benefits of SaaS-delivered solutions include ease of scalability and the ability to start small and grow, limited capital expenditures and affordable subscription pricing, and on-demand reliability and agility, among others. One example is WebSpan, a cloud-based platform from Hubspan and IBM that solves the problems associated with traditional EDI. It is delivered as a service so you can focus on your business rather than on the complexity of major B2B integration initiatives. EDI (Electronic Data Interchange) is traditionally defined as the electronic exchange of documents between companies, using a network or the Internet. Vendors known as Value Added Networks (EDI VANs) have managed most of the EDI traffic over the years. The National Institute of Standards and Technology defines EDI as: the computer-to-computer interchange of strictly formatted messages that represent documents other than monetary instruments. EDI implies a sequence of messages between two parties, either of whom may serve as originator or recipient. The formatted data representing the documents may be transmitted from originator to recipient via telecommunications or physically transported on electronic storage media. As the above definition implies, the successful exchange of documents requires specifying what documents are to be exchanged as well as how they are to be processed. Thus EDI has also come to mean a specific document standard, such as ANSI X12, EDIFACT or Spec ANSI X12 is probably the most widespread standard employed today. EDI standards provide: A syntax and encoding scheme for messages, specifying the structure of datav A data dictionary Combinations of data elements to be used for standard messages such as purchase orders or price updates White Paper Page 2

3 The Limitations of Traditional EDI Why is traditional EDI no longer adequate for today s business needs? The fundamental reason is that most businesses need more than just the exchange of documents in a single standard. Also, business relationships across all industries, be it manufacturing, health care, insurance or others, have become fundamentally more complex and distributed, and need to operate in real time. Finally, companies can no longer demand that partners or customers adhere to their standards, but rather must create business community networks that have inherent interoperability and flexibility. There are three ways in which conventional EDI falls short: 1. Many standards, but not interoperability: While the establishment of EDI standards was a great first step, it does not address the myriad of applications, data formats or protocols companies have to deal with today. To exchange information across systems, companies are faced with multiple standards in a nearly endless number of combinations. The documents can be held in various enterprise applications, such as SAP, Salesforce.com, or legacy systems, and may need to be sent or received in any number of formats, from EDI to XML to HTML, and others. There are multiple communication protocols, such as HTTPS, FTP, SMTP, and others, which companies must manage to establish the connections. There are even multiple EDI standards, not just one, including ANSI X12, EDIFACT, Tradacoms and Spec2000. On top of all that, EDI standards are like building codes: they only give requirements, not specifications. Just as a code is not a building design, EDI standards are not implementation designs. Each customer, partner or supplier can implement the standard in a different way, resulting in interoperability issues. 2. Document integration, but not process integration: Traditional EDI only manages documents and not the associated processes. For example, the standards specify the data fields in an 837 health care claim, but not who has the authority to issue one, access the claim, or how to route it. Or for a manufacturer, EDI does provide standardized documents, like the 856 shipping notice, but it does not allow the company to dictate specific security policies or tie the exchange to the firm s overall supply chain management process. Business processes and business rules are critical, but they re outside the scope of traditional EDI. 3. Batch exchange, but not real-time interaction: EDI originated as a batch process where documents were gathered and then sent in a group. This worked well when people such as purchasing agents managed the documents and coordinated by phone or with their suppliers. Batch, however, does not allow for real-time transactions, such as inventory queries. At today s speed of business, level of automation and degree of integration, real-time information exchange is essential. A Brief History of EDI and Related Standards Many companies and industries independently developed ways to exchange documents electronically, as far back as the late 1960s. There were no general standards, so each industry developed its own. Standards were independently developed by multiple industries, such as the Railroads in the U.S., Export companies in Britain, working with the U.K. government and then the U.N., General Motors, Sears, K-Mart, U.S. grocery stores, insurance companies and pharmaceutical companies. The K-Mart s system was used by hundreds of companies in the mid-1980s. This proliferation of standards led to the first inter-industry EDI standard in 1975, although it only covered some industries. The first generic formats, the original ANSI X12 standard, were published in The standards have evolved and expanded for nearly thirty years. They are now used throughout the world for B2B integration, including for an estimated 85-90% of all ecommerce transactions. White Paper Page 3

4 New Solutions for Advanced EDI Because of the challenges traditional EDI presents, technology vendors began looking for ways to move beyond just EDI and incorporate greater flexibility, interoperability and business process management. Many of the early EDI VANs have incorporated new features and capability to address some of these issues. There is also a new breed of vendors that built business integration platforms designed specifically to accommodate the complexity, needed interoperability and real-time business exchange required by companies across all industries. The most agile of these solutions are cloud-based platforms typically delivered with a range of expert services to help manage the integration and the business communities. These advanced EDI solutions provide multiple benefits. Most importantly: Complete interoperability: Today s solutions provide any-to-any support across multiple standards, protocols, formats and applications. Maybe you use Ariba, while your partners use PeopleSoft and Oracle; you might be using HTTP while they use FTP; you may have standardized on ANSI X12 while they ve chosen EDIFACT. Best-of-class advanced EDI solutions support all these standards and more, and mediate transparently between them. The bottom line: You don t have to ask your customers or vendors to change their systems in order to work with yours. This also means you do not have to change your infrastructure. Rather, they actually extend your existing applications, middleware and EDI implementations to vast business communities. Business process support: Advanced EDI solutions connect business processes between companies, not just documents. They support cross-enterprise interoperability of security, workflow, business rules, compliance, and other processes. They support the business processes on each side of the exchange, mediating the policy and process differences between you and your partners. Many of the solutions incorporate business process modeling and management capabilities or tie into your existing BPM solutions. cloud computing, enable real-time, on-demand information exchange. Some solutions can also help your company appear to operate in real-time, even if your systems cannot. For example, the more advanced cloudbased integration platforms enable both synchronous (real-time) and asynchronous transactions, and bridge between the two. Advanced security: Today s solutions offer improved compliance, security and policy management. Leading integration solutions provide assurance of security over the entire transaction, including encryption (for data at rest and in motion), access controls, authentication, security policy mediation and key brokering and management. Look for vendors that adhere to strict security compliance mandates, such as PCI DSS or SAS 70 Type II. Flexible consumption models: Many solutions no longer require a hefty investment of software and hardware that you need to deploy and manage, leveraging innovative cloud-based platforms and managed services. Today s cloud-based integration solutions offer all the benefits of software-as-a-service, going far beyond the services provided by traditional EDI VANs. These include costeffective subscription pricing, the ability to start small and scale as needed, expert managed services to manage the community on-boarding and changes, and deep knowledge of integration, technologies and industries. Many companies are choosing to outsource integration to enable their IT staff to focus on core strategies and projects. Advanced EDI provides strong benefits, and the business uses are wide-ranging. Operationally, it can cut costs and increase efficiency. On the supply side, it can provide better visibility, shorter response times and increased accuracy. On the demand side, it can help generate higher revenue, improve customer service levels and create stronger customer relationships. Finally, in some cases, it may simply be a requirement for doing business with a major customer or partner. And unlike traditional EDI, these advanced EDI solutions can help you adhere to those requirements quickly and cost-effectively. Real-time information exchange: Your IT solutions must support the real-time nature of business transactions. Advanced EDI solutions, particularly those that leverage White Paper Page 4

5 Business Process Integration As mentioned above, one of the most important elements of today s advanced EDI solutions is the ability to provide business process support rather than just document exchange. In doing so, business integration enables alignment across the business and IT sides of the house, making sure that multi-enterprise transactions are extending business processes, adhering to IT policy and helping achieve the business goals. For example, an integration process that supports the overall customer experience should lead to improved efficiencies, time-to-market, revenue and customer satisfaction, among other metrics. It s helpful to look at how business-to-business (B2B) interaction has evolved. There has been three key stages in this evolution: 1. The first stage of B2B interaction was unstructured, person-to-person interaction. This is still common in small or early-stage businesses. The process is manual and focused on personal relationship and face-to-face meetings or personal exchanges. 2. The second stage is traditional EDI - a computer-tocomputer data connection for exchanging documents. Data connections allow one business to send documents to another, such as a manufacturer sending catalogs and pricing updates to its distributor network. This is the domain of VANs (value-added networks), EDI translators, and basic IaaS (Integration as a Service) providers. 3. Business Process Integration is the third stage, involving enterprise-to-enterprise integration of business systems and overall business processes. This stage automates the execution of multi-enterprise processes, not just the exchange of documents. For example, a health-care provider might want to interactively query insurance coverage limits, check deductible levels, submit a patient claim and receive an immediate acknowledgment all critical steps in the overall benefit claims process. This kind of multi-enterprise integration requires not only connectivity, message management and translation, and mapping and choreography, but also a business process layer with security, workflow, business rules, etc. This is the domain of today s best-in-class B2B integration providers and business process integrators. The Three Stages of B2B Interaction Stage 1: No Integration Unstructured Technology: phone, fax, mail, face-to-face Process: person to person, with manual execution of business processes Service providers: staffing agencies Stage 2: Data Integration Data connection Technology: EDI Process: computer to computer connection, for batchoriented data exchange Service providers: VANs, EDI translators, IaaS (integration as a service) Stage 3: Business Integration Enterprise connection Technology: Advanced EDI including compliance, security, business rules, interactivity and workflow Process: business-to-business integration, for crossenterprise interaction Service providers: business process integrators, B2B integration outsourcers White Paper Page 5

6 WebSpan: A Complete Solution for Advanced EDI WebSpan is a SaaS Integration Platform that combines the innovative, cloud platform and managed services of Hubspan with integration software from IBM WebSphere. The result is a highly flexible and secure solution that leverages the Software-as-a-Service model to reduce the cost and complexity of integrating processes within and between enterprises. The WebSpan cloud-based solution handles basic to complex integration processes - from managed file transfer to advanced EDI to sophisticated ecommerce operations and more. WebSpan Advanced EDI is a comprehensive solution that automates critical business processes between you and your business communities. WebSpan not only provides strong EDI transactional support, it also seamlessly mediates the various formats, protocols, applications, security policies, workflows and business rules between your organization and your integration community. WebSpan enables companies to work within legacy EDI systems while extending your EDI to work hand-inhand with other standards, systems and cutting-edge business processes. The WebSpan Advanced EDI solution optimizes the sharing of information over the Internet with a comprehensive integration platform plus managed services. How WebSpan is Different from a VAN or Clearinghouse Managing an EDI program is often complex and expensive, which is why many companies across industries have chosen to outsource their EDI to a qualified service provider, such as a VAN or Clearinghouse. These service providers handle the connectivity and delivery of the EDI, ensuring the sender and receiver are able to transmit the EDI documents more easily. While this is a critical piece for EDI, this is just the first step for the WebSpan Advanced EDI solution. Beyond connectivity and transmission, the WebSpan platform incorporates EDI into an overall business process, while providing vast features across security, management, process visibility and compliance to internal and external regulations. With WebSpan, EDI experts also manage the entire process for you, including on-boarding, connections, community management, ongoing account management and Tier 1 support. WebSpan Provides Interoperability across Standards and Formats With WebSpan, you no longer have to worry about who is using what standard or in what way. You can maintain the EDI standards and business rules you want, while still integrating with a multitude of other formats. For example, you can send an invoice in the EDI 810 format, and WebSpan enables your customers to use Oracle, SAP and Ariba on the other side, providing the transformation, business rules, security and other services required by all parties. WebSpan provides comprehensive integration services across companies, systems and business processes. White Paper Page 6

7 Conclusion The need to exchange information electronically is a necessity for businesses across industries and geographies. Since EDI was introduced in the 1980 s, many companies have adopted an EDI standard or process to expedite and streamline the transmission of data between businesses and systems. The American National Standards Institute (ANSI) formed the X12 standard in an attempt to make it easier for companies to communicate on a single EDI standard. EDI has not only survived but grown in usage over the past few decades. But today, the phrase standardized EDI has nearly become an oxymoron, what with multiple standards, such as EDIFACT, Tradacom, Spec 2000, along with more than 400 standardized business documents. And many companies have outgrown the capabilities of traditional EDI. In fact, legacy EDI does not meet today s requirements in three key areas: multiplicity of standards, increased need to automate the overall business process rather than just the exchange of documents, and demand for real-time information exchange. There is also the need to improve overall security and compliance to key internal and external regulations. Another step in the EDI evolution is required. What s needed is a more flexible system of interoperability across standards combined with increased security, visibility and business process, as well as improved adherence to compliance mandates. To meet today s demands, a new breed of advanced EDI solutions have emerged that support multiple standards and legacy systems, integrate business processes between companies, and provide cross-enterprise realtime interactions. WebSpan is a cloud-based advanced EDI solution delivered as a service that meets today s EDI challenges and provides a cost-effective approach to business process integration. WebSpan makes your business more competitive, agile and responsive Automates business processes with a cost-effective subscription pricing model Allows all members of the integration community to work in their existing systems Mediates between security policies and business rules to sustain compliance to internal and external regulations Provides the highest level of data protection, identity management and access control rules Includes expert managed services for on-boarding, community management and change management About Hubspan, Inc. Hubspan is the leading provider of business integration solutions, helping companies automate business processes and provide strong collaboration among internal and external communities. Hubspan s cloud-based integration platform is cost-effective, scalable and reliable. With its any-to-any connections, Hubspan ensures seamless interoperability across systems, applications, and standards. Thousands of companies worldwide, from small and medium enterprises to Fortune 500 companies, successfully use the Hubspan platform every day to achieve stronger business collaboration. For more information, go to White Paper Page 7

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