• Building an in-house EDI system offers full control over customization, allowing businesses to tailor it specifically to their needs.

• Developing and maintaining an in-house EDI system is resource-intensive, requiring ongoing maintenance, adherence to industry standards, and regular updates.

• Third-party EDI solutions provide quicker implementations, built-in compliance, security, and seamless integrations with other business systems like ERP or CRM platforms.

Is Building EDI Software In-House Right for Your Small Business?

If you are a small business experiencing growth and are now being asked to be EDI compliant by your customers, you must be facing the critical decision of whether to build EDI software in-house or invest in a third-party solution. EDI for small businesses is vital for automating data exchanges, ensuring compliance, and integrating with trading partners. While building a custom EDI solution offers control and customization, it comes with significant challenges and hidden costs.

There are some questions you should be asking yourself before starting to build your own EDI solution like—

In this blog, we’ll explore the pros and cons of building an EDI solution in-house versus choosing the right third party EDI provider for your business. Here is everything you need to know before making the decision.

The Pros of Building an EDI Solution In-House

EDI software benefits are often linked to the ability to design a solution tailored to your business needs. Building a custom EDI solution allows for full control over features, ensuring that the software integrates seamlessly with your existing systems, from ERP to inventory management. Unlike third-party solutions, building in-house gives you complete flexibility for EDI system customization, enabling your business to scale and adapt as it grows.

One of the biggest pros is the potential for cost control over time. Instead of paying ongoing fees to EDI providers, building in-house may seem more economical in the long run—especially for small and mid-sized businesses that need to control costs while expanding operations. Another major pro of building an EDI software in-house is you can avoid mandatory system upgrades imposed by third party EDI providers that may not be relevant to your small business. These upgrades often result in unnecessary downtime. Additionally, you would need to pay for any additional new services or purchasing extra licenses that can easily be built if needed within your in-house system.

The Cons: Challenges of Building Your Own EDI System

Despite the potential benefits, the EDI software development challenges are significant, particularly for small to mid-sized businesses with limited resources. The cost of developing an EDI system includes more than just initial development—it requires specialized expertise, time, and financial investment in infrastructure. Hiring developers and managing the necessary integrations can quickly become expensive and time-consuming.

It may be difficult for a custom-built EDI system to adhere to strict EDI standards like ANSI X12, EDIFACT, HIPAA, GDPR, and FSMA 204 to avoid regulatory penalties. Ensuring that your in-house EDI system meets these standards without third-party support is often a complex task, requiring constant updates and compliance checks. This can be especially challenging for businesses without an IT team dedicated to staying on top of regulations. One more thing to consider while planning to build a custom EDI solution is maintenance and scaling. As your business grows, your EDI system must evolve. Regular updates, integrations, and troubleshooting are challenging without a dedicated IT team. Cloud-based EDI solutions offer scalability and are continuously updated to meet evolving business needs. Also, look at the time and resources spent building and maintaining EDI in-house could be better invested in core business activities that drive growth and innovation.

Hidden Costs and Risks of In-House EDI

While the upfront EDI system costs might seem manageable, the hidden EDI costs can pile up over time. Maintenance and upgrades are ongoing expenses that often surpass the initial cost of development. Your IT team will need to constantly maintain the system to ensure it remains functional and compliant as industry standards change.

Moreover, EDI software security risks are always a concern, particularly for small businesses. Without dedicated security protocols, your custom-built system could be vulnerable to cyberattacks or data breaches, putting sensitive customer and business information at risk. Compliance failures due to security lapses can result in hefty fines and lost revenue.

Another hidden cost is the scalability of your solution. While you might have control over the initial build, custom EDI solutions often struggle to grow with your business. Adding new features or integrating with new partners can require expensive upgrades or re-architecting the entire system.

Alternatives: Off-the-Shelf or Third Party EDI Solutions

Rather than investing in building an in-house solution, many businesses choose off-the-shelf or third party EDI solutions. There are different types of EDI solutions that are ready-made for you and come with advantages of faster EDI implementation, achieving faster compliance with your trading partners and ongoing support. Companies like Boomi offer cloud-based EDI solutions that cater specifically to the needs of small businesses.

Choosing to buy EDI software instead of building it in-house can also reduce the burden on your internal IT team. Some off-the-shelf or third party EDI solutions like Boomi offer integration with other key systems like ERP, WMS, TMS or CRM platforms through APIs, providing seamless automation and reducing manual data entry errors.

The most significant advantage of these solutions is that they come with built-in compliance and security features, saving your business the headache of constantly updating the system to meet regulatory standards.

Key Considerations Before Making the Decision

When deciding between custom vs off-the-shelf EDI, small businesses need to weigh several factors, including budget, scalability, and long-term maintenance. While a custom EDI solution may offer more flexibility, the cost of developing an EDI system and maintaining it over time often outweighs the benefits for small companies.

On the other hand, off-the-shelf EDI solutions provide immediate scalability, security, and compliance, allowing your business to focus on growth instead of constantly managing EDI systems. Consider how much IT support you’ll need in the long term, how often you’ll need to update the system, and whether you can afford the ongoing costs associated with EDI development.

A key EDI integration challenge to think about is how easily your chosen solution can connect with your existing systems. Whether you’re building or buying, ensure the EDI solution integrates seamlessly with your ERP, CRM, and other critical software to avoid costly delays and inefficiencies.

Conclusion: Is In-House EDI Right for Your Business?

When deciding whether to build an EDI system in-house or invest in a ready-made solution, small businesses must carefully evaluate the pros and cons. While building in-house gives you complete control and potential long-term savings, the EDI software development challenges and hidden costs can quickly spiral out of control.

On the other hand, off-the-shelf/ third party EDI solutions provide an efficient, scalable option with ongoing support, making them an attractive choice for small businesses focused on growth and compliance. Weigh your options carefully, and consider EDI consulting services where you can consult with an EDI expert to make the best decision for your business.

Educate yourself and follow these steps to stay within your EDI budget and still trade with your trading partners effectively.