How a Private Blockchain Can Enhance Your Existing EDI/API Infrastructure
How a Private Blockchain Can Enhance Your Existing EDI/API Infrastructure
Despite some pessimistic predictions over the past decade as to EDI’s future, questioning whether it would survive the internet era, electronic data interchange standards remain the major protocols for B2B interactions. Today EDI is a powerful and stable system with a developed support network – in fact, EDI systems and transaction volumes continue to grow. According to a recent study by Forrester, “EDI continues to prove its worth as an electronic message data format…the annual volume of global EDI transactions exceeds 20 billion per year and is still growing.”
One major reason enterprises will continue using EDI – and will invest in its further development – is that too much has been spent building properly working EDI systems worldwide. It took literally years, and in many cases tens of millions of dollars, for any large enterprise to implement what became a reliable and cost-efficient transactional system. This, in addition to the time and effort required to build a mature business ecosystem with numerous trading partner connections. Consequently, for most CIOs the strategic nature of EDI is now transitioning from one of implementation to that of protecting and even enhancing their investment.
Though it’s expected EDI will be around for decades to come, that’s not to say EDI is without its challenges and limitations:
- Security and lack of trust with trading partners
- Deficiencies of sensitive, high volume transaction processes
- Data quality, including error detection and correction
- Poor partner communication and transparency
- Timely and accurate data sharing
- Integration with internal systems and processes
- Cumbersome partner or customer on-boarding
- Lack of standards with common data formats agreed to by all parties
- Lack of internal IT resources, as well as rising costs of outsourcing
Though not considered a panacea for all EDI shortcomings, there’s a growing interest in blockchain technologies by progressive enterprises looking to enhance their established B2B infrastructure to address inefficient processes and enable new innovative B2B services.
Current B2B Infrastructures
EDI is inherently a system-to-system (or app-to-app) technology, however, most B2B processes are much more complex than what this type of network topology can sufficiently handle. Though the A2A world has benefited from modern advances over the past couple of decades (e.g., SOA), no equally significant improvements have occurred on the B2B side. This is mostly because B2B is inherently more challenging than A2A, since there is much less control when the process extends beyond the edge of the enterprise.
There have been many initiatives in the past that have attempted to address these EDI challenges. Various standards and middleware technologies such as XML, X12, AS1 (as well as AS2, 3 and 4), API management, FTP, MFT, BPMN, to name just a few. Though these efforts where intended to ease the pain of EDI, including such areas as customer/partner on-boarding and system interoperability, the problem is they are all designed to operate point-to-point.
Fact is, EDI remains ill-equipped to handle exchanging documents, manual interactions, etc. Moreover, EDI is not designed to support many-to-many interactions involving multiple parties to a business transaction – and because EDI is fundamentally point-to-point, system interoperability and on-boarding is still challenging.
Benefits of a Private Blockchain
There are a number of key areas where a private blockchain, like that of the Sky Republic Platform, that can add significant value to existing B2B infrastructures:
- Distributed workflow automation and visibility
- Improved data quality
- Transaction auditability
- Real-time transaction settlement and compliance
- Interoperability and data sharing
- Digital asset management
- Securing sensitive, high-volume transactions
In contrast to current EDI solutions, a private blockchain can establish a shared, secured record of information flows, as well as a ‘shared version of events’ across B2B networks that encompass transactions, processes and partners. A private blockchain is engineered to be used at the edge of the enterprise, where it can record all B2B transactions. It can therefore improve auditability by providing an immutable record of any related events, contractual changes or party interactions. Using smart contracts, it can also be relied upon to manage digital assets such as tokens, digital twins, etc.
This ‘shared version of events’ not only provides improved traceability and product integrity, but also greater process efficiencies, better multi-party collaboration, and streamlined resolution processes when exceptions or disputes occur that require manual intervention. The Platform can also automatically send real-time alerts to all parties to the transaction to keep everyone in the loop when requirements are met, or things change, thereby facilitating compliance and expediting transaction settlement.
With a private blockchain, better data governance could be achieved by using Sky contracts to implement business rules that can monitor business transactions. This could include checking for important data such as price differences, valid POs and product availability dates. This data validation and error detection would occur before the transaction can be processed, allowing parties to make corrections to avoid unnecessary and costly delays further downstream.
To facilitate interoperability with internal systems and processes the Sky Republic Platform uses APIs to enable an enterprise’s internal systems to interact with Sky contracts, as well as enabling all parties to the transaction. This alleviates the need to incorporate the use of costly enterprise application integration solutions that could be overkill for this type of integration pattern.
A fundamental problem with EDI security is that once you send EDI documents to a trading partner, you cannot control what your trading partner will do with that data. Nor do you control any of the other points along the chain of transmission – you only control what is going on in your own organization.
With the use of a ledger that is distributed on multiple servers and shared by all parties to the transaction, the risk of losing any transaction data is virtually eliminated. Furthermore, the inherent nature of blockchain – with its immutability, encrypted data and requirement that any contractual changes must be agreed to by all parties – means it would make it next to impossible for anyone to fraudulently manipulate the data.
Not All Blockchain Platforms are Alike
Public blockchain brought a fresh perspective to the corporate world, and many have come to realize their business ecosystems could benefit from new ways of transacting business and sharing data. However, as enterprises have begun to test the waters with early POCs they’re discovering not all blockchain platforms were optimized to effectively manage the complexities of B2B transactions. Potential issues have also come to light involving privacy, interoperability, scalability and control that the first wave of private blockchain had intended to solve.
The market is now seeing significant investment in private blockchain networks, and these projects seem poised for real short-term impact. Some organizations are tackling specific problems in transactions across boundaries with localized applications. Companies in manufacturing and transportation/logistics are already using private blockchain to track items through complex supply chains, for instance. Increasing interest in private blockchains is beginning to span the financial services, insurance, healthcare, life sciences and pharmaceutical sectors as well.
A key difference of the Sky Republic private blockchain – versus other blockchain platforms like Hyperledger and Ethereum – is its ability to power complex B2B processes using a pure peer-to-peer model while providing the scalability, privacy and control required for mission-critical transactions. With our Platform, the notary (operated by either the user or through Sky Republic) oversees all transactions. Though business transactions demand a high degree of transparency with participating parties, not every party to the transaction requires the same degree of visibility. Our smart contracts can control who sees what using proper authorization mechanisms.
The Sky Republic Platform was built from the ground up using a unique approach that leverages similar design principles found in B2B/API middleware, while also exploiting the advantages of emerging technologies like blockchain as well as the cloud. Optimized to be deployed as a private blockchain, it’s been engineered to help enterprises embrace the modern B2B world.
Though technically speaking a private blockchain could potentially replace EDI, this would probably not provide any return on investment. Instead, a private blockchain should be viewed as a significant value-add that can provide a shared state of the business. By using a shared distributed ledger designed for many-to-many interactions, it should be considered as a well-suited option to fix deficient B2B processes, as well as a platform for delivering new innovative B2B services.