Last week’s post explained why EDI will continue to matter to small businesses for decades to come. But there’s been a lot of fuss over XML in recent years, with some loud voices clamoring for it to replace EDI as the standard for transmitting documents between business trading partners. However, that has not happened. Why is that?
Actually, there are some very good reasons that EDI still predominates.
XML a better technology?
In some ways XML is a better technology. Tags are an advantage of XML. Tags within an XML document can be used to give fields meaningful names so that reading a raw XML file can be done manually without referring to additional documentation. Tags can also be used to enforce business rules and data relationships. Even complex data relationships like tree structures and inheritance can be communicated within an XML document. EDI does not offer any of these advantages.
XML files are about 10 times larger than an EDI file for the same data transmission. While the cost of data storage continues to come down, the available storage for a specific installation may be limited.
One or two main XML standards have not emerged. XML has dozens of standards. Examples include CIDX for the chemicals industry, RosettaNet for the high tech industry, PIDX for the energy industry, SPEC2000 for aerospace, and papiNet for forestry.
In contrast, EDI has two mature standards. ANSI X-12 is the dominate standard in North America except for the US automotive industry. EDIFACT is the standard for Europe, Asia, and the automotive industry in the United States. Multiple versions of both standards have been issued over the last 40 years and both standards are stable.
The battle between Betamax and VHS video tape standards is relevant to an XML vs. EDI standards discussion because although Betamax was “better,” it was VHS that won.
Some of you may remember in the late 70’s and early 80’s that Betamax from Sony and VHS from JVC were fiercely competing video tape formats. Betamax produced sharper images and had better sound.
However, JVC shared their standards with other manufactures and rapidly captured market share for the VHS format. The resulting economies of scale overwhelmed Betamax. VHS controlled 70% of the market in 1980 and by 1986 it held a 93% share. A consumer considering buying a Betamax or VHS video player had many more choices available in VHS movies to rent and could buy a VHS player at a lower price.
The VHS standard won because of its market share dominance.
Challenges with Multiple Customers
With either EDI or XML, each customer will have their individual compliance requirements based on their individual business rules.
However, a supplier considering exchanging electronic documents with several customers can choose EDI and have a high level of confidence that their customers will agree to use EDI because adoption is so widespread. EDI is used by hundreds of thousands of companies to communicate business documents. It is very likely that most of the customers will insist on EDI because they have chosen not to use XML.
A few customers might be willing to use XML, but they may each have chosen to use a different XML standard. Using XML may mean supporting different standards for different customers and there will still be customers to support who use EDI. Specialized industry standards for XML may occasionally offer compelling benefits, but this is the exception rather than the rule.
XML For Internal Use
XML has gained some traction for communication between systems within a company. XML’s advantages can be beneficial because one standard can be used internally and support is then much simplified. Translation of EDI transactions with external customers into a standard XML format with internal systems is an approach that has gained traction and which continues to grow. However, even with internal systems XML competes with the file format choices of CSV, fixed length and tab delimited.
EDI is a safe choice for small businesses. The battle between XML and EDI for electronic document communication between trading partners is over for most current and potential customer relationships.Why Hasn’t XML Replaced EDI? by Steve Brewer