Tuesday, October 14, 2014

To In-House or Outsource... that is the question?

Two years ago I would have had a very different and completely one-sided answer to this question.  I had always been a one woman show.  I ran entire EDI departments by myself.  I believed EDI should always be done in-house and in some cases, I still do; however, in recent years, I have changed my tune and I will explain why.

To in-house or outsource your EDI solution is a question that almost every company has to answer at one time or another regardless of your size.  When you look at the options available out there on the market it can be overwhelming, but what you really need to look at are the true pros and cons of keeping your EDI In-house or outsourcing it?

Depending on your company size, response time expectations of trading partners, how EDI is perceived as a necessity within your industry, and other considerations specific to your own business, some of these may be more or less important to you but they will all factor into your decision. 

This is not an exhaustive list of the pros and cons to be considered, but a short list with many additional considerations as you examine one route or another for what would work best for your business.  Also realize there are many that use a hybrid EDI and MFT (Managed File Transfer) strategy, taking an in-house approach for some components of their business integration solutions and an outsource approach for other components of their solutions.

Keeping EDI In-house Pros:

  • Control - You have total control of your own system and trading partners
  • Speed - You have the ability to make changes quickly without having to wait or open a ticket to make an update
  • Understanding – You know your needs and requirements better than a 3rd party provider.  Often times you don’t have a dedicated support tech so you’re left to explain your business requirements and needs over and over each time they arise.
  • Reputation - Your reputation with your trading partners is important in business, they know they can call you when there's an issue and it will be resolved because it's a priority to you, they may not always be a priority to a 3rd party.

Keeping EDI In-house Cons:

  • Staff - Do you have adequately trained EDI personnel that can address issues in a timely manner
  • Maintenance - You are responsible for software maintenance, upgrades, etc. which takes time and money and can take time away from other projects
  • Monitoring - Having the staff to monitor your EDI system 24/7 and being available when issues arise with nightly transactions

Outsourced EDI Pros:

  • Technology - You don't have to worry about requirements and software/hardware, companies that specialize in Outsourced EDI have all you need
  • Requirements - There is no need to worry when a trading partner has special requirements, these companies are set up to handle a wide variety of special needs and circumstances.
  • Expertise - This is what they do, it's their focus and they have the experience and knowledge that your in-house team may not have.

Outsourced EDI Cons:

  • Lack of Control - You are leaving a major component of your business in the hands of a 3rd party with virtually no visibility into the EDI system
  • Cost - Outsourcing can be expensive and if you have a large volume of trading partners and transactions, those costs can add up quickly
  • SLA Issues - If you're dealing with an off shore company with a major time differential different from many of your partners or company prone to service errors and transmission failures this can be an issue and affect your relationship with your customers in some cases, resulting in fines from SLA violations.
  • Migrations - What happens when you are unhappy with the service you are receiving?  Migrating from one EDI Outsourcing company to another can be very expensive, time consuming, and complex with the risk of lost orders etc. in the transition.

While some of the pros and cons can overlap, there are still plenty of things to think about. Ultimately the decision has to be about what's best for your company.  Whether you decide you want to take the hands off approach, have total control of your EDI system, or something in between, you’ll definitely want to make sure you hire a consultant that can help you navigate and negotiate on your behalf.

With all that said above, I still haven’t told you where I land on the whole in-house vs. outsource question.  The truth is I think in general going with an in-house EDI solution is always the best option.  Sure initially the expense up front is a bit more but long term the payoff is so much greater.  There is just no price you can put on having that level of control over your own data. It's the initialization, setup, prep work and integration that takes the most time and expense but once EDI is up and working it should be all gravy after that. If your EDI system was setup correctly, it will run automated and unattended and if it doesn’t then it wasn’t done correctly. 

I have setup seven EDI systems from scratch.  All with 12 or more customers trading four or more documents each.  I still support all of them, remotely I might add, to this day.  EDI, if done right, is only a full-time job at the on-set…after that, it’s an outsourced piece of cake!

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