U.S. Steel: Selling Tech—Or Selling Out?By Mel Duvall | Posted 2002-06-18 Print
Online exclusive: Despite its anachronistic image, the steelmaker has made good money selling its IT innovations to the competition.
U.S. Steel is often painted as part of a group of century-old steelmakers that are too inefficient and backward to compete with the rest of the world.
Yet U.S. Steel sells its own technology to many of the world's largest steelmakers, including some of the very same companies it is often compared against, including a steelmaker that is now part of Arcelor, the world's largest steel company.
In fact, U.S. Steel created USX Engineers and Consultants, or UEC, as a wholly owned subsidiary back in 1969 to capitalize on technology and services the steelmaker developed in-house. While U.S. Steel won't provide a financial breakdown of the unit's operations, UEC President Chris Navetta, who has been at U.S. Steel for 32 years, says the venture has been "a highly profitable contributor to the company."
Not that selling one's technology isn't without controversy. But Chairman Usher says U.S. Steel isn't giving away a competitive edge. He contends UEC is selling technology two or three generations old. Navetta—who must sell the stuff—says the technology is only one generation behind what U.S. Steel itself uses.
"Look, we're not being stupid about this—we know who are our competitors, and we're not about to give away an advantage," says Navetta. "But at the same time, U.S. Steel realizes that if we don't do it, somebody else is going to do it."
UEC's sales are concentrated on three applications. It offers an order-fulfillment system aimed at customers in the metals, glass, and pulp and paper industries, with capabilities to manage customer orders from entry, through distribution, to shipping. Competitors using the order fulfillment system include Inland Steel; National Steel; and Beta Steel, a mini-mill operator based in Portage, Ind.
The second product comes out of work U.S. Steel performed internally when it worked with i2 Technologies to develop a series of tools, modules, and adapters to manage relationships with suppliers. UEC and i2 now jointly market a supply chain platform and tool sets to other steel companies. Customers on that front include National Steel, Kaiser Aluminum, and Aceralia Corporación Siderúrgica. Arceralia is a Spanish steelmaker that was recently merged with two other European steel companies, Arbed and Usinor, to form Arcelor—now the world's largest steelmaker.
The third application suite sold by UEC is an iPortal product that essentially allows companies to set up an extranet for customers to place orders, check status, provide shipping information and exchange electronic contract documents. The product was launched in the summer of 2001 and was leveraged from the development of U.S. Steel's own extranet.
The biggest benefit of all three systems is that they come with hooks into most of the computer systems and databases used by the steel industry. UEC's consultants also have had plenty of hands-on experience making the systems work.
While sales of the company's supply-chain and order-fulfillment systems have been strong, sales of the portal product have been slow to take off. Navetta believes that is primarily because it was released at time when steel prices had sunk to 20-year lows, at about $210 a ton.
"The only thing worse than being in the steel industry at a time like that," jokes Navetta, "is being a consultant to the steel industry."
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