Internet-based corporate procurement systems are threatening electronic data interchange, International Data Corp. says.
For years EDI has been used by large manufacturing companies to buy essential materials.
"As an electronic means of ordering and paying, EDI was the only method before the Internet," said Joan-Carol Brigham, research manager of International Data's Internet and electronic commerce strategies program and author of a recent report.
For now, the investments that top-tier companies have made in expensive proprietary hardware, software, training, and maintenance for EDI are keeping Internet procurement systems at bay.
But the rigidities of EDI are being challenged by business-to-business electronic commerce.
"Compared with EDI, Web-enabled procurement systems are cheaper, easier to use, scalable, and more flexible," she said.
Web-based procurement systems are built on the open protocols of the Internet. They allow for the tracking of supplies and give access to new suppliers-both domestic and global.
The Internet systems "are easy to configure, and there is nothing to say you can't bolt on another module to do tracking or sales and marketing," Ms. Brigham said. "You can't do that with EDI."
Despite the advantages of Internet procurement, any defection by big companies from EDI will not be rapid, the researcher said.
"Many companies have a large investment in EDI, and that investment is not easily thrown away," Ms. Brigham said. Other challenges in deploying Web-based procurement systems revolve around getting product catalogs on- line in a usable format and being able to integrate with a variety of existing business systems.
EDI could rebound in a new way. DynamicWeb Enterprises Inc. of Fairfield, N.J., said that in February it processed more than 25,000 transactions through its EDIxchangeBuy service. EDIxchangeBuy uses the Internet as a complementary layer to EDI systems. The monthly volume of its service, which is aimed at Fortune 1000 companies, is growing at a double- digit rate.
"Although many so-called experts have declared EDI a dying technology, we have continuously maintained a position that EDI is the backbone of business-to-business electronic commerce," said Steven Vanechanos, DynamicWeb chairman and chief executive officer. "The most effective application for the Internet is as a ... robust complement to existing EDI programs."
IDC predicts that adoption of Web-enabled procurement will be fastest at small and midsize companies that do not have major commitments to EDI. Manufacturing companies may take the lead.
Ms. Brigham said that after manufacturing, "financial services is the next segment."
For essential office supplies, there is one software competitor to EDI, ClickInteractive of Chicago. And for non-essential supplies, there are Ariba Technologies, Clarus, Commerce One, Trade'ex, and Intelisys, an affiliate of Chase Manhattan Corp.