ELECTRONIC COMMERCE ON THE INTERNET: THE FUTURE OF EDI
Electronic Data Interchange (EDI)—in existence for 25 years—is the stable component of conducting electronic commerce (EC) on the Internet. Technology has experienced tremendous growth during this time, making EDI an essential tool for businesses in today’s global marketplace. Two significant factors contributed to this success: the Internet and standardization.
The development of X12, the principal standard for EDI transactions today, has had a profound impact on the growth of electronic commerce. As electronic commerce gained popularity, each industry developed its own standards of electronic communication. However, this diversity limited the ability to conduct electronic commerce among businesses that relied on different protocols. Organizations using EDI solved this problem by making one common standard. X12 caused enormous expansion in the use of EDI. That expansion includes service industries such as finance, health care, and insurance.
EDI is contributing not just to interindustry growth, but to increased trade between countries. Until EDI became prevalent, many organizations involved in international business were not able to electronically communicate critical business documents such as advance ship notices or custom forms. Today these transactions take place routinely and seamlessly, helping increase productivity while reducing costs and administrative tasks.
The future of EDI is clear. Now that electronic commerce on the Internet is predicted to grow to a multibillion dollar industry by the year 2000, EDI and the X12 standards will become the mainstay for this growth. The emergence of X12 served to increase EDI compatibility with Internet protocols. As a result, EDI is increasingly accessible through this network. With simply a computer and an on-line browser, businesses can link into secure EDI networks for a minimal investment. By engaging in EDI through the Internet, small and medium-sized firms can compete for business on a level playing field with large organizations; expand their market globally; and improve relationships with their current trading partners.
The use of X12 and the Internet is eliminating the traditional barriers for entry to EDI, such as large cost and trading volume requirements and proprietary software. As a result, new companies and industries are using electronic commerce to gain a competitive advantage in today’s marketplace.