If you are looking to implement an EDI system for the first time, or you are looking to migrate to another EDI system, one of the questions you will naturally be asking is about the price. The right EDI pricing model is an important factor in your selection. There are a few EDI pricing models on the market, but how much will you ultimately wind up paying?
Scott Hulme, VP of Services, Sourcing, and Software at REMEDI, provides answers to these questions in an exclusive interview. Read on to learn what EDI pricing models exist, what the differences are between them, and which ones are right for you.
Understanding Your EDI Tool Choices
There is an almost dizzying array of EDI pricing model options available. With all that is out there, how do you know what is best for you?
The first step is determining which EDI tools are right for you. From there, you can figure out which pricing model makes the most sense.
“The first step is determining which EDI tools are right for you.”
Four EDI deployment choices exist:
On-premise software is installed on-site, while the hosted option involves implementing the software at an off-site location. Cloud EDI tools are delivered over the Internet, and a hybrid approach is a mix of two or more of the above approaches. For the purposes of this article, we’ll focus on the first three deployment choices.
What EDI Pricing Models Exist?
Now that your EDI tool choices are clear, it is time to explore EDI pricing models. There are a number of pricing models available, which can cause confusion for customers. You might ask why there is a need for a variety of pricing models. Hulme explains that EDI pricing models offer vendors a competitive advantage; providing customers with an option that meets their needs is an attractive way to get new business.
He cites the example of on-premise EDI tools. Vendors offer several options available for on-premise deployments:
- Price per seats (number of users)
- Price per number of trading partners
- A price based on server usage
- Price per document
“The variety of pricing models gives vendors a competitive advantage.”
REMEDI’s VP of Services, Sourcing, and Software noted that some vendors offer a la carte pricing, allowing you to choose a basic package, then add services that best meet your needs.
Generally, the wider variety of on-premise EDI pricing models is available to smaller firms. Hulme notes that vendors offer larger companies enterprise packages, which are comprehensive in scope. These packages provide a variety of services, making it a more affordable and inclusive option for companies of midmarket and enterprise size.
“Vendors offer larger companies enterprise packages, which are comprehensive in scope.”
There are two other forms of deployment discussed in this article: hosted (also known as managed services) and cloud. Hosted services mean that you do not have EDI software on-premise; a third party implements EDI tools on its servers and manages them for you. Cloud EDI tools, on the other hand, are delivered over the Internet.
To a certain extent, there are similarities between EDI pricing models for on-premise deployments and hosted services, at least at the small business level. Pricing for managed services is also based upon factors such as the volume of documents traveling over the network and the number of trading partners a company has. In addition, hosted services firms also charge for labor because their staff members are managing an EDI system on a day-to-day basis.
“Hosted services mean that you do not have EDI software on-premise, while cloud EDI tools are delivered over the Internet.”
The EDI pricing model for cloud services is much like the pricing model for other types of cloud software. You typically pay for the number of seats that you use.
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Asking the Right Questions about EDI Tools and Pricing Models
With all of this in mind, the next question would seem to be which EDI pricing model is the right one for you. However, what you really want to ask yourself is, what type of EDI tools are right for you – managed services or an on-premise deployment?
The reason that should be the first question you ask is that it helps you determine what the right EDI tools are for you. Yes, pricing does matter, but you need to make sure that what you are paying for is really in your best interests.
“Asking what EDI tools are right for you is important because it ensures you make the right choice.”
Hulme suggests that companies think about the reasons for investing in EDI tools. Some firms need EDI software so that they can work with larger trading partners. (Walmart is a great example). Yet, they do not believe it offers them a competitive advantage; in fact, they are only implementing EDI tools out of necessity. Furthermore, they do not have the resources, human or financial, to devote to operating and managing an EDI system.
In this scenario, the best choice is a managed services provider. The hosted services provider will operate and manage EDI tools so that the customer doesn’t have to worry about expending the time or resources to do so. For companies that see EDI requirements as a burden, it is the best of both worlds; they can still do business with their trading partners without the hassle.
“A hosted services provider operates and manages EDI tools so that the customer does not have to do so.”
What about businesses that find themselves in the opposite situation, the ones who believe that EDI tools allow them to differentiate themselves to their customers? Hulme recommends that these firms select an on-premise deployment of EDI tools.
An on-premise deployment makes the most sense for these companies because it allows them the greatest amount of control over their EDI software. Suppose that they need to add a trading partner. It might take the managed services provider a while to fulfill that request (even with a service-level agreement). When you have control over your own EDI tools, you can complete tasks on your own timeframe, not someone else’s.
“An on-premise deployment allows the greatest amount of control over EDI software.”
Moreover, businesses that view EDI tools as a differentiator, rather than a hassle, are more willing to invest the time and resources into ensuring they have a team to operate and manage EDI tools. Either these firms have such a team in place, or they are willing to build one.
Another question to ask is whether you need EDI tools or B2B integration software. Not only is there a significant difference in functionality, but there is also a difference in pricing.
“Do you need EDI tools or B2B integration software?”
The biggest difference between EDI tools and B2B integration software is that EDI tools are basic; they are meant to translate information into EDI standards. B2B integration software, in contrast, provides more sophisticated functionality. Many B2B integration tools offer EDI translation, but Hulme comments that many firms start off with EDI tools to meet trading partner requirements, then shift toward B2B integration software when they are ready for it.
What Is the Best EDI Pricing Model for You?
With all of this in mind, what is the best EDI pricing model for you? The answer to that will depend on your situation.
Companies that need control over their EDI systems, yet have a tight budget, might find that an on-premise deployment might be the best fit for them. Conversely, firms that are only implementing an EDI system because they want to do business with larger trading partners would be better off with a managed services provider that offers a comprehensive package.
“The best EDI pricing model for you will depend on your situation.”
Every firm’s situation is different. What will work well for one company is not the solution for another. That is why you need an expert to guide you through the process of choosing the right EDI tools, as well as the right EDI pricing model.
You need a company with decades of experience in the EDI space, a firm that understands your needs, your workflows, and your culture. The goal is to match you with EDI tools that will boost your productivity and your profits and make it easier for your trading partners to do business with you. When you find the right consultant, you will form a partnership that will strengthen your firm, rather than merely enrich the consultant.
“You need a company with decades of experience in the EDI space.”
Since 1994, REMEDI has been helping clients find the right EDI and integration solutions for them. Our consultants are trained to work closely with companies to gain a competitive advantage and to ensure integration projects are smooth and seamless. These consultants uphold our values (integrity, a strong work ethic, teamwork, competitiveness, and coachability) in everything that they do.
Working with REMEDI guarantees that you’ve got experts to help you make the right choice for your business. Calculate your cost. Download our free EDI Calculator to see how much you can save.