There are several definitions of EDI one might find. But, to put it plainly, EDI is the electronic exchange of essential documents (also referred to as messages) between businesses using a standardized format. Therefore, it replaces the practice of sending out paper-based documents that were earlier sent out by post, fax, and/or email. The use of EDI streamlines the communication process with the use of a standardized format.
One of the older definitions of EDI by the National Institute of Standards and Technology still stands true – “the computer-to-computer interchange of strictly formatted messages that represent documents. EDI implies a sequence of messages between two parties, either of whom may serve as originator or recipient.”
It is important to note that this exchange of important information between computers in a standardized format can occur not only between two business partners but also within an organization. Therefore, EDI facilitates the process of businesses communicating vital information using structured data, and agreed upon message standards, from one computer system to another.