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How Much Does EDI Cost?

Highlights

  • Cost of EDI depends on the type of software you want to buy-licensed or subscription based
    • Licensed EDI software may cost you as low as $3000 to thousands depending on the level of support whereas subscription based edi software can start from $6000 for 5 trading partners (depending on the number of trading partners) and go up. When based on number of transactions, EDI providers use a tiered model
      • EDI is not expensive if you take into account the EDI software and implementation costs. Any additional hidden costs like VAN services, data mapping, document translation, ERP integration bump the overall cost up.
        • Choose an EDI solution that best complements your internal infrastructure, affordability, skills and resources

        This is one of the most common questions that is asked by a company like yours that is evaluating different EDI solutions in the marketplace.

        There are different EDI solutions in the market place including in-house and web/cloud-based EDI solutions and these operate with different pricing models.

        You should choose an EDI solution that best complements your internal infrastructure, skills and resources

        Different EDI Pricing Models

        1. Licensing Model

        EDI Solutions that are machine licensed/on-premise fall under this category. You would pay for a single computer install of the EDI Solution.

        If you wanted to have multiple installs of the EDI solution you would pay for the number of licenses. You also pay a yearly subscription for the program fixes and updates usually it would be 20-30% of your purchase.

        Some solutions would include ongoing upgrades, support and annual maintenance and the price would increase if you want faster response times or extended hours of support. The EDI solution cost would go from a couple thousand dollars as low as $3000 to thousands of dollars depending on their level of support.

        1. Subscription Model

        • Based on Number of Trading Partners

        This model has been adopted mostly by SaaS or cloud based EDI solution companies. You are charged based on the number of trading partners you like to trade with.

        It could start at around $6000 per year for a specific no. of trading partners for e.g. 5 and includes base level support and increase as you add more trading partners

        • Based on Transaction Volume

        Under this model, you are charged based on the number of transactions per month or a yearly subscription. Your volume can go up and down and therefore your monthly or yearly pricing would too.

          Important Point to Remember: To learn about how much does EDI charge per transaction, you need to know what a transaction means. A transaction usually means an EDI document. Each document contains kilo-characters (KCs). EDI solution providers calculate pricing by total number of KCs. So, understand that 1 EDI document/transaction may or may not mean 1 KC, it could be multiple. So check with your EDI solution provider what is their record length of the characters to avoid any hidden costs.

          For e.g. if 1 EDI document/transaction accounts to 2 KC then you are paying the price for 2 KCs.

          Most of the companies give a range/tiered pricing in their quotes. For e.g. for 500-1000 transactions per month, you will be charged $0.50 or 0.30 per transaction so that comes out to $250 or $150 and so on.

          Here’s a video that explains EDI pricing models in detail:

          Pros and Cons of Licensed Pricing vs Subscription Pricing

          1. Licensed-Based EDI Pricing Model:

          Pros:

          1. Ownership: With a licensed-based model, your company will typically own the software license outright, providing a sense of control and autonomy over the system.
          1. Long-term Cost: While the initial upfront cost can be significant, over the long term, licensed-based pricing may be more cost-effective, especially for businesses with high transaction volumes.
          1. Customization: Licensed software often allows for greater customization to meet specific business needs, as there may be more flexibility in modifying the software according to requirements.
          Cons:
          1. Upfront Cost: The initial investment for purchasing software licenses can be substantial, which may pose a barrier for small or medium-sized businesses with limited budgets.
          1. Maintenance Expenses: Additional costs may arise for software updates, maintenance, and support services, adding to the total cost of ownership over time.
          1. Scalability Challenges: Scaling the system to accommodate growth may require purchasing additional licenses, which can lead to increased costs and complexity.
          1. Subscription-Based EDI Pricing Model:

          Pros:

          1. Low Initial Investment: Subscription-based models often have lower upfront costs since businesses pay a recurring fee for access to the software, making it more accessible to organizations with limited budgets.
          1. Predictable Expenses: With a fixed monthly or annual subscription fee, businesses can budget more effectively and avoid unexpected expenses related to software updates or maintenance.
          1. Scalability: Subscription-based models typically offer scalability, allowing businesses to easily adjust their subscription tier based on changing needs, such as increasing transaction volumes or adding new features.
          Cons:
          1. Dependency on Provider: Since businesses do not own the software outright, they are reliant on the EDI provider for ongoing access and support. If the provider experiences downtime or service disruptions, it can impact business operations.
          1. Long-term Cost: While subscription-based models may appear cost-effective in the short term, over the long term, cumulative subscription fees can exceed the cost of purchasing licenses outright.
          1. Limited Customization: Subscription-based software may offer less flexibility for customization compared to licensed software, as businesses must adhere to the features and functionalities provided by the provider.

          What Are Other EDI Fees?

          When considering overall EDI costs, there are other fees/costs like-

          1. Setup and Implementation Costs:
            While many providers may advertise competitive transaction-based pricing or subscription fees, the upfront costs associated with setting up and implementing the EDI solution can vary widely. These costs may include software licensing fees, integration costs with existing systems, setup fees for trading partner connections, and consulting fees for customization and configuration. Failing to account for these upfront costs can lead to unexpected expenses down the line.
          1. Hidden Costs:
            Not to forget hidden costs like fees for EDI VAN (Value-Added Network) services, data mapping, ongoing maintenance and support of data translation, or compliance with industry standards and regulations. These fees can add up over time and should be factored into the total cost of ownership.

            Some providers may charge additional fees for processing certain document types or for handling complex transactions that require special handling or validation. It’s important to understand the full range of document types supported by the EDI solution and any associated costs to accurately compare pricing models.

          How to Select the Right EDI Provider Based on EDI pricing?

          At EDI Support, we suggest the following:
          1. Identify Your Requirements: Begin by understanding your specific EDI requirements. Consider factors such as the volume of transactions, the types of documents you need to exchange (e.g., purchase orders, invoices), integration with your existing systems, and any compliance requirements from your trading partners or regulatory bodies.
          1. Evaluate Pricing Models: Different EDI providers offer various pricing models, such as transaction-based pricing, subscription-based pricing, or tiered pricing based on usage levels. Evaluate each pricing model to determine which one aligns best with your business needs and budget constraints. Consider factors such as the predictability of costs, scalability, and any additional fees or charges.
          1. Compare Costs: Request quotes from multiple EDI providers and compare the costs of their services. Ensure that you understand what is included in each pricing plan and whether there are any hidden fees or additional charges. Consider not only the upfront costs but also the long-term costs of using the EDI solution, including implementation, maintenance, and support fees.
          1. Consider Total Cost of Ownership (TCO): In addition to the direct costs of the EDI solution, consider the total cost of ownership over time. This includes factors such as implementation costs, training expenses, ongoing maintenance and support fees, and any potential costs associated with upgrading or scaling the solution as your business grows as we discussed above.
          1. Anticipate growth or variability in usage: Some pricing models are based solely on the number of transactions processed, while others may take into account factors such as transaction volume tiers, peak usage periods, or seasonal fluctuations in demand. It’s essential to consider not only your current transaction volume but also any anticipated growth or variability in usage over time to ensure that the pricing model aligns with your business needs
          1. Review Customer Support: Evaluate the level of customer support provided by the EDI provider, including the availability of technical support, response times, and support channels (e.g., phone, email, live chat). Some providers may include support and maintenance as part of their pricing package, while others may charge additional fees for ongoing support services, software updates, or troubleshooting assistance. It’s crucial to understand the level of support provided and any associated costs to avoid unexpected expenses in the future.

          Conclusion

          Most people think that EDI is expensive. Traditionally, it is not. Some managed EDI providers will over charge you for trading partner connections that are mostly setup and done. It is because they have a leverage to do it by making you believe that EDI is a specialized technology. We at EDI Support, do not deny the fact that EDI needs special expertise but that does not mean that there is a need to rip off businesses by charging them hefty amounts based on number of transactions, monthly fees and tie a company like yours into long-term contracts. It is important you evaluate all the options keeping in mind all the above we talked about and then make an informed decision.

          At EDI Support, we have seen that small-medium sized businesses prefer to go with subscription model because they don’t have the skillset and resources to help guide them through the whole EDI process and would depend on a third party cloud-based EDI provider to help them source provider’s EDI solution and train their resources to carry out day-to-day software operation.

          Some companies which are established in the manufacturing, automotive and retail space, they still continue to use in-house solutions or legacy solutions because they have the infrastructure for it already for decades. Although, many are realizing the importance of cloud-based EDI software and outsourcing.

          Want to know how much an EDI software may cost for you?

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