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The third of my EDI questions of frustration. High costs of EDI are of course caused by the answers to the first two questions; “Why is EDI so difficult?” and “Why does take so long?” Yet there are some unique reasons EDI costs too much.
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The number one cost of EDI for most companies is employees. I’ve worked for some of the largest and most well know companies in the world. Some of my responsibilities included budgeting. I know how many employees they had supporting EDI. Some companies are spending tens of millions of dollars a year just for EDI payroll. Small companies, as well, who just need to hire one consultant to help them implement EDI will pay more for that person, which has been me most of my career, far more than the cost of their EDI solution.
EDI Software is quite expensive. For my first EDI outsourcing company I paid over $30,000 for EDI software. That was a special deal and I would consider it very cheap compared to prices for the leading brands today. They also usually include yearly maintenance fees that most small companies couldn’t afford. So, the software is a significant expense but far less than employees.
The fact that it takes months to deploy a partner just multiplies all these costs. When I had my first EDI outsourcing company from 1995 to 2005 I would show up for a week contract, install, develop maps, configure partners, setup data communications, with closets full of dial up modems and deploy several trading partners in that week. And I’d document everything, including dataflow diagrams and support tasks as well as train their employees how to run their new system. I did this week after week for years. They would need help for a while after I left but soon they’d stop calling. Comparing this quite common practice in the old days of EDI with what goes on today is unbelievable.
The current trend of outsourcing is also quite expensive. When I have seen it done in the last years of my career I did not see anything to make me think is was less expensive than in house. It certainly was not faster. One would expect at least savings on employees after the outsourcing is complete. But unless employees are let go, nothing is actually saved.
So, to answer the final question of my trilogy; “Why does EDI cost so much?”
- No Standard
- It takes too long
- Software Licensing and Maintenance