Management Science Associates Inc. is trying to do something new in the business world: make an e-commerce model for the metals industry that works.
After watching dozens of dot-coms go bust as they focused on initial public offerings instead of revenue streams, the Point Breeze-based company is picking up the pieces of failed dot-coms in hopes of turning a profit. MSA is not looking to the failed online pet stores and toy sellers, but instead leaning toward the less-sexy but potentially more profitable world of metals.
"There is some value in e-commerce if you do it intelligently," said Patrick J. Gallagher, president of MSA affiliate MSA MetalSite. "It's not going to be a panacea or solve all your woes, but there is the potential to develop this as an effective business tool."
MSA has been scooping up failed metal-selling dot-coms, including MetalSite and ScrapSite in October and Global Steel Exchange, or GSX, last month. All of the sites are geared to linking metal buyers with metal sellers.
MetalSite and ScrapSite work remarkably like online retailer Amazon.com or online auctioneer eBay. The metal sites allow buyers to either bid in closed or open auctions, or buy products directly from an online "catalog" of metal products.
GSX, which was originally founded as a partnership between a handful of the world's largest steel companies, went dormant after a year of operation in May, only to be resurrected by MSA in June. GSX is called a private market by the company, allowing steelmakers to sell their own products to buyers.
MetalSite and ScrapSite, meanwhile, deal mainly with steel distributors who cater to smaller buyers.
"If you're someone like General Motors, you deal directly with the steel company," said MSA founder and Chairman Alfred A. Kuehn. "But smaller buyers can't afford to buy in those quantities."
In addition to similar functions, all three sites share an added, more ominous similarity: all three failed under their previous ownership, allowing MSA to scoop up companies, once valued at hundreds of millions of dollars, for little more than the cost of their assets. Still, Gallagher and Kuehn said they are confident they will succeed where others have failed.
For starters, MSA already has the heavyweight Web servers in place to support the sites, avoiding web hosting fees of as much as $60,000 a month. Communications consultant Richard Heaton said most of the company's head-to-head competitors have gone belly up. And the recent uptick in the steel market, which is attributed to reduced capacity and federal tariffs on foreign imports, make it a good time to jump into the metal selling business.
Not to mention that MSA has been designing software to handle large, complex databases since 1963.
"One of the big advantages we have is that most steel companies are not interested in doing business with a company owned by a competitor. We're independent, so they're more willing to deal with us," Kuehn said in explaining why GSX failed in its previous incarnation. "The other advantage is we have 30-plus years of dealing with big, complex data systems."
Dean Swantek founded Nu-Tek Steel 18 months ago and has been using MetalSite and similar Web sites since then to sell hot-dipped galvanized coils to other metal dealers.
"To me, MetalSite is another sales person," Swantek said. "I designed my business so I wouldn't need sales people, and the Internet has allowed me to do just that."
Swantek uses MetalSite, SteelBoss and SteelSpider, as well as his own Web site to sell steel. Each site is "totally different" from the others, but Swantek said he is impressed thus far with MSA's resurrection of MetalSite.
"I think they're still trying to find their niche," Swantek said. "One of the things they do that I like is they have an inside staff that will call buyers and tell them what's on the site. They're prompting people to look at what's on the site."
Gallagher said he doesn't consider sites like SteelBoss and Pittsburgh-based SteelSpider to be competitors. Those sites merely allow people to post products, while MetalSite allows customers to negotiate prices, generate sales orders and track historical purchasing data.
"The whole thing takes an hour to put a deal together," Swantek said. "And you do it all over the Internet. You don't even have to talk to the buyer."
