EDI vs API: Differences, Advantages, and Why You Need Both

When your business needs to exchange data with other businesses, you face an apparent choice between EDI (Electronic Data Interface) and APIs (Application Programming Interfaces). Both technologies enable B2B communication, so it may not be obvious when or why you need one versus the other.

Modern organizations frequently need both EDI and APIs to satisfy their B2B needs. This blog clarifies the role of each of these technologies and why they work best when used in combination.

What is EDI?

EDI provides a method to reliably send and receive data with external businesses. EDI defines the structure and content necessary to exchange purchase orders, invoices, shipping notices, and other documents with trading partners. This standardized format eliminates the need for manual data entry and paper-based communication, streamlining business processes and reducing the risk of errors.

EDI plays a crucial role in enhancing efficiency, accuracy, and speed in B2B transactions, making it an indispensable tool for industries like logistics & supply chain management, retail & e-commerce, suppliers & manufacturing, and healthcare.

The key advantage of EDI lies in its ability to establish seamless communication between disparate computer systems, allowing organizations to exchange data effortlessly with their partners, regardless of the software or hardware they use. This interoperability fosters collaboration and promotes a more connected and responsive business ecosystem.

To learn more about EDI, please see our complete guide.

What are APIs?

APIs serve as digital bridges that enable communication between different software systems. As a broad umbrella term, APIs are used in many contexts in which software connectivity is important, but the context most relevant to this article involves bridging the gap between different business’s software systems.

In the context of business interactions, APIs function as a set of protocols and tools that allow one system to interact with another, facilitating the exchange of information in a standardized and efficient manner. Much like EDI for document exchange, APIs streamline communication between businesses by providing a structured interface for software applications to connect and share data.

APIs offer businesses a versatile and dynamic means of communication, transcending the limitations of traditional point-to-point integrations. The flexibility and scalability of APIs make them integral for digital transformation initiatives, allowing businesses to adapt and grow in an increasingly interconnected world.

EDI vs APIs: 3 differences

While EDI and APIs can serve similar roles in enabling business-to-business communication, the technical differences between the two technologies help determine the circumstances in which you should use one or the other. Here are 5 pertinent differences:

1. Format flexibility: EDI uses established document definitions with a relatively narrow and rigid structure and purpose. APIs provide a more flexible and modular format for granular control over the type and content of messages.
2. Integration complexity: APIs tend to present a lower barrier to integration than EDI documents. EDI is a more specialized technology and thus requires specific familiarity and dedicated expertise. APIs are used more broadly throughout the software world, and thus are more likely to be directly familiar to programmers and IT professionals.
3. Interoperability: While APIs are flexible and less complex, they are also less interoperable. EDI is a mature and established technology that is ubiquitous throughout the supply chain, retail, and healthcare industries. Implementing an API may only enable communication with a single trading partner, while implementing EDI may enable data exchange with a wide range of external organizations.

Pros of EDI

The importance of EDI comes primarily from its ubiquity. If exchanging EDI documents is a trading partner’s only method of facilitating B2B communication, then you simply need to implement EDI on your end as well. Since many organizations in relevant industries have already invested in EDI, this situation is both common and unlikely to disappear.

While EDI has technical downsides that may make it more challenging to implement, it provides a perfectly functional method for automating and digitizing the exchange of critical business documents. If your organization wants to break away from manual data management or paper documents, then EDI is a safe bet for ensuring you can still communicate with your business partners.

Cons of EDI

As an older technology, EDI is less agile and more complex than cutting-edge protocols. The document-based data model and file-based transfer mechanism impose implementation restrictions that can feel clunky or outdated. As a result, EDI integration can take longer than other forms of integration.

EDI also suffers from its narrow scope. Since EDI is a point solution for B2B document exchange, it is rarely part of a programmer’s or IT professional’s general knowledge bank. As a result, EDI implementation typically requires dedicated professionals with specific expertise.

Pros of APIs

APIs are a flexible, modern technology that enable simpler & faster integration. APIs can be integrated piece-meal so that small packets of information are exchanged instead of full business documents.

APIs also benefit from being used in many software development and management contexts. It is likely that an organization’s technical team has pre-existing API knowledge that can be leveraged when implementing APIs for B2B communication.

Cons of APIs

A relatively low percentage of businesses have adopted APIs for use in B2B communication. As a result, implementing an API-driven integration for exchanging business data may only provide a communication channel for a subset of your business partners.

Further, APIs are defined for specific trading partners rather than for specific business documents. This means that if you need to exchange Purchase Orders with five different partners, you have five different APIs to implement rather than one EDI document standard to support.

Why you need both

The necessity of both EDI and APIs for communicating with trading partners emerges from two points:

1. APIs provide faster, easier, and more flexible B2B integration
2. EDI is a more common, interoperable standard

Integrating every trading partner with APIs would save your organization time, money, and headache – if it were possible. The technical superiority of APIs motivated an enterprising minority of businesses to move away from EDI towards APIs for B2B communication.

However, EDI is still considerably more established and ubiquitous as a technology. Moving away from EDI entirely in favor of an API-driven approach introduces the significant risk of being unable to communicate with critical trading partners. The inertia of EDI is unlikely to be overcome due to its self-reinforcing nature: organizations are forced to implement EDI to ensure interoperability, which simply adds to the number of organizations who demand EDI from their partners.

The most beneficial approach is to support both APIs and EDI. When your trading partners support APIs, you can leverage the technical advantages that this approach provides. When your trading partners don’t support APIs, you know you can always implement an EDI integration to ensure B2B communication.

How to use both

The key to leveraging both EDI and APIs is to ensure you have the proper software tools for your business. Modern B2B integration platforms like CData Arc provide simplified access to both EDI integration & APIs for business communication.

If you are using legacy technology or manual processes to communicate with trading partners, then upgrading your software infrastructure will help ensure you can leverage every technology relevant to your business.