Electronic data interchange (EDI) is a system that enables business entities to exchange information at low administrative costs. A company wishing to install an EDI system has to procure the required software and hardware. EDI software is available for all types of computers ranging from the single PC to mainframes. EDI software basically translates business documents into a digital format complying with the ANSI X12 or EDIFACT standard. The exchange of these digital documents is then handled by the communication software.

The hardware necessary for supporting EDI software depends on requirements such as speed and the extent that the EDI system has to be integrated into other systems of the company. EDI software that facilitates proper interface with the internal systems is preferred over software where data has to be retyped in the standard format. In an ideal EDI system, business documents are automatically converted into a standard digital form and exchanged between the partner companies. This automation eliminates the need of an operator to retype the data, which saves the company considerable expenses in the long run. Quality EDI software is designed to run 24 hours a day, seven days a week, and 365 days a year without being manually handled.

EDI systems that were traditionally operated on private networks, are now increasingly utilizing the power of the Internet. EDI software employs open standards such as Web Forms, XML and Internet EDI (AS2). Good EDI software features self-monitoring tools, automatic notifications and emergency alerts. Additionally, this software handles the translation of EDI documents into various file formats used over the Internet. The communication component of the EDI software should efficiently handle the different types of protocols that are employed.