Cost Considerations
As a company that offers both EDI Managed Services and On-Premises Software, we are often asked if we recommend a company handle their EDI via the cloud with a Software as a Service (SaaS) model or if companies should purchase and implement an on-premises solution. As is to be expected with such a question, we do not give the same answer to every company. There are several factors to be considered and one size does not fit all.
The first variable is your primary goal. For some organizations it is to keep costs as low as possible. Some allow past experience to be their guide. Still others base the decision on doing what would most satisfy their customers or enhance their internal processes. This post will consider costs.
Costs to Consider with On-Premises EDI
With an on-premises solution, an EDI server will be added to your infrastructure. Many of the support services you provide to your other servers will be required, such as back-ups, network access, etc. Some of the up-front costs include:
- EDI translations/communication software
- Server, may be virtualized in some cases
- Database (although most will run on your existing SQL Server or Oracle database)
- Installation costs
- Mapping costs
- Integration costs
Once the system is up and running, there are on-going costs, including:
- Maintaining the system
- Monthly communication fees
- Person to manage the system
- Person to handle EDI exceptions and work with internal departments
- Costs associated with upgrades
- Annual maintenance and support
Costs to Consider with Hosted EDI
With a hosted solution the software and hardware reside in the cloud and many of the direct up-front costs are removed. However, there are typically up-front costs such as:
- Mapping costs
- Integration costs
- Person to manage the relationship
- Person to handle EDI exceptions and work with internal departments
Once the system is up and running, there are on-going monthly fees, including:
- Processing fees
- Communication fees
Communications via Hosted EDI versus On-Premises EDI
If your trading partners require you to most of your communications via Value Added Networks (VAN’s) you will pay by the character. These fees are often cheaper with a hosted solution.
If you do most of your communications via FTP, there are no character-based fees with an on-premises solution and many EDI translation/communication solutions include some ability to communicate via FTP. In this case you may be better off with an on-premises solution.
Some On-premises EDI translation/communication software include AS2 functionality. Many do not. Like FTP, AS2 differs from VAN communications in that there is not a character-based fee for the on-premises option. However, there is almost always an additional up-front cost to get the functionality of AS2. If you intend to communicate via AS2, these costs will have to be evaluated. Depending upon your volumes and number of trading partners, one solution may save you money in the long run.
Exception Handling via Hosted EDI versus On-Premises EDI
A hosted solution will notify you whenever there is an exception. If it is a translation error, the cost of resolving it may already be included in the monthly fee, resulting in no extra cost to you. However, if the issue is in integrating with your internal system, there may be a fee to modify the map. Some, but not all, on-Premises EDI solutions can also notify you if there is an issue. We offer an EDI Monitoring system that is used for our hosted solution and is also available on-premises. For the on-premises solution there is an extra cost but it may also integrate with your ERP, creating a tightly integrated end-to-end solution. For some organizations this functionality is well worth the extra cost.
Summary of Cost Factors
A major consideration is the period of time you use to make your analysis. For example, you may find that total cost of ownership favors the hosted solution over a 2 year period, but not after 3 years. You also need to evaluate your current infrastructure and personnel to see what the incremental cost of adding and maintaining an additional server means to your organization.
As a provider of both hosted and on-premises solutions, we hope this information will help you evaluate the cost of owning and EDI solution versus an EDI managed services model. There are many other factors to consider, including:
- Trading partner requirements
- Past experience
- Internal integration and business process requirements
These will be covered in subsequent entries at this location. Please check back often. In the meantime, please contact us at 877-375-2023 to learn more about our solutions.
