and improved trading partner relations. The indirect benefits of EDI result from a
closer integration among related functions within different organizations and as a re-
sult of the restructuring of activities that often result when EDI is introduced. As
DeLuca et al. observe,
It is not the replacement of paper by electronic messaging which provides EDI’s strate-
gic capabilities, but the associated changes in operation and function within and be-
tween organizations which EDI links make possible.^20For example, Levi Strauss, through its LeviLink system, has vertically integrated the
company’s entire apparel manufacturing and marketing cycle (including inventory
replenishment, management and reconciliation of purchase orders, receipt of goods,
processing and payment of invoices, capture of point-of-sale information, and the
analysis of market trends). It is this focus on integration across organizational func-
tions and between firms that distinguishes EDI from other forms of electronic com-
munication.^21
Two trends are apparent with EDI: desourcing andpartnering.Desourcing refers
to the tendency of firms using EDI to reduce the number of suppliers they deal with
because of improved reliability of suppliers that results from better information
flows. Partnering is tighter vertical integration (alliances) among corporations.
EDI STANDARDS. The standardization of documents (i.e., business transactions) is a
necessary accompaniment to the replacement of physical transport of paper and mag-
netic media by electronic transmission. The X12 standard, developed by the Ameri-
can National Standards Institute (ANSI), and the GTDI standard developed in Eng-
land and Europe are being replaced by the EDIFACT (Electronic Data Interchange
for Administration, Commerce and Transport) standard currently under development
by a United Nations Joint European and North American (UN-JEDI) working party.
A full range of structured business documents (e.g., purchase order, invoice, bill of
lading, etc.) is being developed.
(iii) Outsourcing. Traditionally, firms have provided their IT resources internally.
That is, they create a group, within their firm, to provide the needed computing and
communications services for the remainder of their company. Recently, there has
been a move to outsource much of this activity. For example, both Eastman Kodak
and Continental Bank have outsourced their completeIT functions.
Firms outsource their IT services (or portions of them) for several reasons. First,
a firm can often obtain equivalent or better IT service from an outside provider be-
cause of lower production costs that come about through economies of scale, or just
as a result of competition. Second, a firm may outsource as an incentive alignment
mechanism. That is, to send a signal to internal providers of service that they need to
become more competitive. Third, a firm may outsource in order to acquire technical
skills or capability that do not exist internally. Fourth, a firm may outsource IT so it
may focus its internal resources on its core competencies. When IT is not a core busi-
ness activity, it may be outsourced so that management attention and other scarce re-
sources can be focused on business activities that are central to the mission of the
28 • 14 INTERNATIONAL INFORMATION SYSTEMS(^20) DeLuca et al., 1992, p. 279.
(^21) Id.