It works and it's here to stay. Electronic data interchange (EDI) will still remain the mainstay for computer to computer exchange of business messages despite the development of new technologies. "I haven't come across anybody tearing down an existing EDI link," says IBM consultant Gary Cross (440-893-1905, www.ibm.com).

Although EDI remains the mainstay for corporate data communication, the up-and-coming technology known as extensible markup language (XML) is believed by many experts to be the future of computer communication among trading partners. "As the XML technology tools mature and as cross-industry XML standards become more available, we will see new implementations shifting into XML," believes Mark Crawford, a consultant with the Logistics Management Institute (703-917-9800, www.lmi.org).

An exclusive Cahners survey bears out that, despite solid support for EDI, interest in the XML alternative is growing (see sidebar below - Survey shows solid support for EDI ). Still, XML must overcome concerns about cost, data security, and conflicting standards before it gains a groundswell of users. For the moment, most operations managers, especially at larger companies, can expect to use EDI for computer-to-computer messages.

EDI is defined as the interchange of information from one company's computer to another's over communication circuits in standard formats. For example, a computer transmits a purchase order in a standard data format that is recognizable by another computer. Because companies often use different software programs and databases, message are generally sent to a central clearinghouse first – known as a value-added network (VAN). There, the message is translated so that it can be read by the computers of other trading partners. VANs tend to use their own private networks for data transmission.

Although EDI is now used to send general commercial messages ranging from purchase orders to advance shipment notices, the practice has its roots in transportation. In 1968, a handful of transportation companies formed the Transportation Data Coordinating Committee (TDCC.) Seven years later, that group published the first set of draft EDI transaction-set standards for documents used in air, motor, ocean and rail transportation.

Besides the TDCC, another group began its own EDI standardization effort. In 1979, the American National Standards Institute (ANSI) formed the Accredited Standards Committee X 12 (ASC X 12) with the task of developing uniform interindustry standards. Independent of TDCC, the X 12 group began developing standards for computer-to-computer interchange of general business documents like invoices, product specifications and promotion information. In the '80s, efforts got underway to reconcile the two organizations' standards and eventually TDCC merged into ANSI X 12. Today, the ANSI X 12 sets U.S. standards for EDI and works in conjunction with a global counterpart, known as EDIFACT (EDI for Administration, Commerce and Trade.)

It's estimated that some 100,000 U.S. corporations utilize EDI, said Mike Rawlins, a consultant in his own firm (972-783-9573). To engage in EDI with trading partners, companies need special software and a VAN. Although VANs offer different pricing deals, Rawlins says that on average a company pays about a nickel to transmit a document. "For a very large company, their VAN bill cold be tens of thousands a dollars a month," he notes.

The high cost of EDI has posed a deterrent to its adoption among smaller- and medium-size companies. Yet as companies embrace the concept of supply chain management, which requires trading partners to work in concert on production and distribution, there's been a growing information gap between the big corporations and their smallest suppliers.

Fortunately, the advent of the Internet provides an alternative medium for computer communications. Companies could send messages using the XML coding method. XML allows for the use of special tags to identify various types of messages. As a result, a standard Web browser can recognize an alphanumeric sequence – say A,B,C, 1,2,3 – as a specific message such as a purchase order or advance shipment notice. The XML-message can then be directed to an appropriate computer application to act upon that information. "XML will enable EDI to go to a broader audience," says Frank Kenney, a knowledge specialist at the Gartner Group, a market research firm (813-977-3490, www3.gartner.com). "Companies take that XML document and it can be displayed in their Web browser."

To exchange messages across the Internet, companies need only to agree upon standard definitions and load common designs for them into a Web browser. A number of industry groups have announced initiatives in this area. RosettaNet is developing message standards in the electronics industry. The Open Application Group has a similar effort underway. And the X12 has begun looking at ways to translate the standard EDI messages into an XML format. Ironically, multiple competing XML formats, however, will hinder rather than promote computer communication with trading partners. "Some of the biggest problems with XML is everyone agreeing on standards," points out Kenney.

Although operations managers in manufacturing and logistics can look forward to a day when companies will substitute XML messages for EDI, no one expects that switch to take place imminently. "The standards aren't there yet," says consultant Rawlins. "In the big picture, the XML technologies are immature. They haven't been implemented widespread enough by vendors so they present a realistic alternative to EDI."

For starters, XML has turned out not to be as simple to deploy as first thought. "We have a very complex set of syntax rules for building XML documents, not unlike the syntax rules of X 12," says Mark Crawford, a consultant who also serves as the vice chairman of the X12's XML working group.

In addition, many corporations have security concerns about using the public Internet as a conduit for their commercial messages. "People are concerned about sending documents in the clear over the public Internet," says Rawlins. "They're concerned about confidentiality. They want to make sure that the data isn't altered in transmission. It would take a sophisticated hacker to do that, but it's possible."

On top of that, most Fortune 500 companies have made a substantial investment in the systems that facilitate EDI messaging. "There has been a significant investment in assets in order to have EDI in place and they serve a purpose if you have lots of data to move," points out Cross. "So nobody's about to get rid of it."

In the meantime, while information technology experts work out the details of XML, companies interested in data exchange will have to use tried-and-true EDI. Although operations managers should keep an eye on XML, for the moment, though, they should realize that today most trading partners looking to exchange information will choose EDI over XML. "For the next couple of years, I would recommend EDI (for communications,)," Rawlins contends. "It's out there and it works. And there's a good chance my trading partner uses it."

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