Thanks for the memories EDI and OCR. Enjoy your retirement!

April 10, 2015 Tradeshift Editorial Team

Obsolescence is good. It reminds us of what was once considered the next great “thing” and, at the same time, it’s the harbinger of a new generation of innovation. EDI and OCR are well down the path of obsolescence. They exited Geoffrey Moore’s Tornado long ago, fully crossed his Chasm and have landed squarely in the Laggards category depicted by Sociologist Everett Rogers’ Diffusion of innovations bell curve.

Both technologies have roots in the first half of the last century and have been in commercial production since the early 1970’s making them older than Mark Zuckerberg, Elon Musk and Christian Lanng.

EDI and OCR have no chance of supporting business imperatives that are now driven by digitization and a Millennial workforce. There’s evidence why we should urgently plan retirement parties for both. They’re:

  • Not collaborative
  • Not intuitive
  • Not mobile friendly
  • Not fast or cost effective
  • Not built to support agile change

Leaders in the B2B world have already moved on from transactional cost reduction and rationalization, the traditional hallmarks of EDI and OCR, to focus on agility and their capacity to leverage change. They see it as not only a competitive advantage, but in many cases, a prerequisite for survival. Recent research from The Hackett Group revealed that leaders who have transformed P2P into a high-value process drive up to 14x more value than cost reduction. There is no shareholder value in shaving a fraction of a penny off your kilo-character EDI VAN rate or reducing your OCR click count.

Long live paper (and PDF)

Consider OCR software companies, three of which (Brainware, Readsoft and Kofax) have recently taken umbrage under the Lexmark Perceptive umbrella. What motivation do any of these companies have to eliminate paper and PDF documents once and for all? None. Their entire business model and revenue stream is predicated on the permanent perpetuation of paper. Once paper goes away so do they.

Today, OCR in P2P serves a single purpose: Drive event-based onboarding for digital transformation initiatives such as e-invoicing. OCR should be a means to an end (of paper) not a technology to deploy or invest in moving forward. Its effectiveness peaked more than five years ago and the costs to increase character recognition rates one or two percentage points are absurd compared with conversion to a 100% electronic platform. Banking your 2020 digital agenda and future on the optimization of paper document processing is a fool’s errand.

Point to Point is Pointless

With all due respect to the USPS, serial delivery of information to dedicated mailboxes will soon be extinct for all business documents and processes. With EDI, the relationship is always 1:1 and never 1:many meaning the opportunity to capture and capitalize on a Network Effect is unattainable. EDI VAN’s (Value Added Networks) only add “value” to the service providers like OpenText (GXS or EasyLink) or IBM (Sterling Commerce) and not to the buyer or supplier. Check Gartner’s IT Market Clock for B2B Solutions, 2014 to see where EDI VAN’s appear (hint: start after the “dusk of obsolescence” hour and move later in the day).

And if you don’t use a VAN to trade EDI documents, buyers and suppliers both still pay a heavy cost to establish and maintain EDI services with expensive, proprietary integration software, the infrastructure to run it and the specialized IT resources to implement and support it. The fully burdened cost of an EDI transaction is misunderstood and in many cases may far exceed its manual equivalent. But, again, cost is not the big issue. EDI only addresses a subsegment of your value chain introducing avoidable barriers. If you try to adopt change with EDI, be prepared to measure in months and quarters not minutes or hours.

The After Party

I’ll make the first donation to an appropriate retirement gift for EDI and OCR. If enough of you join me we can shoot for an Apple Watch – Edition, the 18 karat gold one that retails for $10,000. After the party we can sit down and talk about today’s reality. One where cloud based, open source platforms create compelling and intuitive experiences for all resulting in exponential network growth of connected buyers and suppliers. Here creativity, collaboration and agility have no boundaries. Instead, they’re catalysts for change at rates our dear old friends, EDI and OCR, never dreamed of.

About the Author

Tradeshift connects buyers, suppliers, and all their processes in one global network. We help you transform the way you work with suppliers today – and adapt to whatever the future brings.

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