EDI Costs – Key Considerations
December 10, 2019
When choosing an EDI provider it is important to understand what your contract covers, how your EDI prices are calculated and what your future EDI costs are likely to be.
We are often approached by companies who say that their EDI costs are escalating or they are finding it hard to forecast EDI costs because of their provider’s complicated EDI pricing models and hidden costs that they were unaware of when they signed the contract.
Whilst it is clearly important to understand the different pricing models available when selecting an EDI solution and it is understandable that price will be part of the decision making process, it is important to note that price should not be the sole focus when choosing between EDI providers.
We have put together a list of key considerations that we recommend thinking about in terms of EDI pricing and costs.
EDI price and cost considerations
Are there any costs in terms of EDI software of hardware?
The answer to this question depends whether you opt for an in-house or outsourced solution. If you choose an in-house or on-premise EDI solution, your EDI costs will include an initial investment in software and hardware. There are no software or hardware EDI costs associated with an outsourced solution as it is hosted by the EDI provider.
What internal resources are required and what are the implications on total EDI costs?
It is important to think about the costs associated with the internal resources needed to support and maintain an EDI system. With an outsourced fully managed solution, the EDI provider will look after the day-to-day EDI requirements on your behalf, meaning your staff can be deployed elsewhere in the business. However, in the case of an in-house solution your EDI costs will include EDI specialists specialists for both the implementation of the solution, on-going maintenance and the daily EDI requirements.
It is worth asking the following questions:
- Do you have the technical expertise internally to handle the implementation process? If not, do you have the budget available for this and for the resource that will be required to maintain the EDI software and hardware, something which is particularly important from a security perspective? It is also worth considering the risk that is associated with having EDI managed in-house – if your EDI specialists leave, does this expose your business to risk as they take the knowledge of your system with them?
- Do you have the budget that is required for the successful onboarding of your trading partners? On-boarding, particularly supplier on-boarding is notoriously complex and requires a dedicated team of experts to guarantee the success of the project.
- Have you considered the cost of a team that will look after the day-to-day EDI message exchange – monitoring and resolving any message validation issues? With fully managed EDI services (not simply an outsourced solution), this is an area that is managed on your behalf with 24/7 support for any issues.
How are the EDI costs billed?
It is worth considering, for budgeting purposes, how your EDI costs will be billed. Many providers charge a set-up fee, followed by an annual fee.
Are EDI prices fixed or variable?
Many of our clients, prior to joining the TrueCommerce network were charged a high premium per transaction. This approach is not only costly, it causes difficulty in accurately forecasting EDI costs, as transaction volumes fluctuate.
How much does EDI cost to implement?
This is a very common EDI cost related question and often the first question a company asks when they are new to EDI. Whilst it is completely understandable that companies ask how much EDI software costs, it is not an easy question to answer due to the number of variables involved in EDI pricing. Also it depends whether the question just relates to the EDI implementation costs or on-going EDI costs?
As covered in some of the other questions, there are a range of EDI solutions available with different delivery models, which can have a huge impact on the cost. Whilst one solution may appear to be good value compared to another, it is important that you are comparing like for like solutions, or alternatively taking into account the key differences. For example, whilst an on-premise EDI solution may appear to have lower running costs compared to an outsourced managed service, it is important to factor in the additional costs involved in managing EDI in-house.
EDI costs can also vary according to the number of trading partners you will be using the EDI solution to trade with, what messages will be exchanged (for example, will it be just orders and invoices or additional EDI messages such as ASN’s) and whether the EDI solution is integrated with your back office system, or simply a web-EDI solution that is accessed through a web browser.
This isn’t to say that EDI pricing has to complicated, it just means that it’s not really possible to give a ball-park figure for how much EDI costs to implement. It can literally range from as little as a few hundred pounds to trade with one customer or supplier using a basic EDI solution, right up to hundreds of thousands of pounds for an integrated EDI managed service for trading with thousands of customers and suppliers across the globe.
TrueCommerce EDI Pricing Model
At TrueCommerce we recognise the importance of cost control and accurate budgeting and therefore operate a fixed price model. Our EDI pricing takes into consideration transaction fees and accommodates for mandated changes in message formats; with no hidden or variable EDI costs there are no nasty surprises when our clients receive their invoice.
You may also be interested in our ’10 Points to consider when choosing an EDI provider Checklist’.
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