TechnologyXML spells the end for EDI – eventually!

XML spells the end for EDI - eventually!

Cost reduction, increased efficiency and close collaboration with customers and suppliers are the watchwords of today's businesses. Yet, while UK business is busy investing in supply chain improvements to increase on time delivery and rolling out intensive CRM solutions to enhance customer relationships, in accounts departments across the land staff spend dozens of man-hours a month re-keying data into purchase ledgers!

Yet, there is a workable, affordable technology solution that enables communication via email of such information between any IT platform: and it’s not EDI!

XML provides simple, cost effective communication via email of information between any applications, removing the need for any manual data entry, reducing errors and releasing staff to concentrate on revenue generating activity.

So why are so few organisations using it?

XML – the facts
eXtensible Markup Language (XML) provides a straightforward mechanism for creating standard data definitions. It is a meta language that can be used to define data characteristics of documents by ‘tagging’ pieces of information to explain its purpose. As a result, the ‘invoice value’ tag allows different software applications to recognise the tag and incorporate the data into their systems. This means that data can be exchanged between any systems using XML.

The key to its widespread adoption is the creation of widely accepted standard data definitions. By defining a common data schema in XML that is understood by two companies, those companies can readily exchange data and import the data directly into their own applications.

More valuably, the creation of a common standard enables many companies within the same value chain – such as those across a supply chain – to simply interact and exchange information.

In the UK, BASDA (the British Application Software Developers Forum) has developed eBIS-XML (electronic Business Interchange Standard in XML) the world’s first many-to-many ‘open-standard’ for the exchange of business documents like orders and invoices. eBIS-XML enables any organisation to exchange financial information via email. And for those with ever presentconcerns about e-mail security, XML has inbuilt security, offering the potential for automatic integrity checking.

XML – the benefits
The benefits of such a simple technology are clear, overcoming as it does decades of frustration at failed interaction between systems at a price point that makes it an extremely attractive alternative to EDI.

Platform independence, the use of e-mail and simplicity of implementation mean that the technology is open to even the smallest organisation, opening up new markets to those who could not afford EDI and therefore could not trade with large corporations who demand use of EDI as a prerequisite.

Furthermore, the automation of information entry – from purchase orders to remittance advice – removes an entire tier of manual intervention in the Finance Department. With the majority of transfers occurring without staff interaction, they are free to proactively manage exceptions efficiently or can be deployed to work in more revenue generating areas such as credit control.

The technology also provides the potential to introduce new services or price points to attract customers. For example, a stationery company burdened with the huge cost of processing orders could offer a discount to companies using XML. The move would both reduce the stationery company’s cost base and encourage customer loyalty.

XML – the challenges
Such a list of benefits makes XML sound like the IT industry’s Holy Grail – so why has it been such a damp squib to date? One of its major problems is that, although now an open industry standard, no one organisation is successfully promoting XML with the amount of money or effort needed. Nor, as an open standard, does it deliver financial reward to any specific supplier company, so vendors have limited vested interest in its success.

Further, XML provides the basis for success in that it provides a platform for standard definitions. But widespread deployment depends on the acceptance of those standard definitions. While in the UK BASDA’s efforts with eBIS-XML are laudable, further standards are being developed both in the US and to meet industry specific requirements.

Such new standards could potentially muddy the water – however it is also possible that industry specific XML deployments could in fact encourage its adoption between companies in one industry area, such as across the aerospace supply chain. The challenge then will be to extend its use beyond specific markets to embrace other, non-industry suppliers, such as stationery or contract staff.

A further constraint on the deployment of XML is that such industry groups are often already entrenched in an extensive investment in EDI. The larger organisations, particularly retailers, used their market position to impose the adoption of EDI on the marketplace – insisting that suppliers had EDI orelse lost their business. For those smaller organisations that could not afford either the up front cost of EDI deployment or on going connection charges, XML offers a perfect solution for both parties. It is cheaper both to implement and run.

However, for the larger companies it does not, on the surface, offer enough to undermine the EDI investment. Although they could manage more suppliers in a more cost effective manner, most organisations are looking to reduce not increase their supplier base, removing that benefit as an argument for adoption.

No doubt there will be a gradual adoption of the technology – perhaps next time a retailer faces a technology refresh it will consider XML over EDI, and the migration will begin.

As ever, the lack of adoption hampers further adoption. Just as there is no value in owning the only phone, the ability to exchange information with other systems only has value when a plethora of other organisations have bought into the concept. A widespread adoption will prompt system to system communication way beyond that achieved with EDI – in a flexible and costeffective manner that will, eventually, spell the end for EDI.

Indeed, despite downplaying the technology, vendors are increasingly offering XML support. PS Financials supports XML, although, to date, we have seen limited interest in the technology.

XML – the practice
While adoption of XML has been limited, there is increasing interest from the public sector, including the development of a public sector e-procurement system expected to save millions.

The BASDA eBIS-XML standard is being used in other government developments, including the Government’s GovTalk initiatives for Inland Revenue’s PAYE and Corporation Tax electronic returns, VAT and Stakeholder Pensions.

However, to date, there is little incentive for UK business to develop their XML end of the bargain, since the financial compensations for delivering XML enabled tax returns are minimal. Undoubtedly, once XML adoption is widespread, the Government will benefit from cost effective financial information processes but such developments alone will not prompt widespread adoption.

A more significant development is the enthusiasm from the Ministry of Defence and other government departments to move towards XML and to encourage customers and suppliers to adopt the technology. As with early EDI adoption, it will be pressure from the larger players in the economy that drives the introduction of XML.

XML – the reality
For once the IT industry has delivered a technology that works, is cost effective and should deliver rapid ROI – and yet adoption levels are laughable. Yet it obviously offers clear benefits for any organisation looking to drive cost out of the business. So can you really afford to ignore this valuable technology?

  • Richard Pierce is managing director PS Financials plc.

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