Russia's metals industry is ahead of other sectors in terms of Internet activity. The industry's Web resources see over 60,000 visitors every month, comparable to the number of hits recorded by Websites containing stock-market data. The importance of bringing the Net's enormous potential to bear is obvious for Russian metals producers. First, Russia is a very big country with numerous metallurgical facilities scattered over its vast territory, and sometimes the Internet is the sole means of announcing what one wants to buy or sell. Secondly, a seemingly minor savings on paperwork grows into a giant economy if applied to a metallurgical combine, not to mention the whole sector. E-trade in the sector has yet to come into existence, and it is high time for Russia's metals sector to introduce electronic forms of business.

The number of industry-related Web resources is increasing with every passing day, mainly thanks to the addition of corporate Websites. Most popular are the information sites – producers' sites being visited half as often – and least popular are sites of trading outlets, which record two to three times fewer hits than producers' sites.

Some six metal e-trading sites have been set up, but thus far they have functioned in the virtual mode: No real transactions have taken place, though, potentially, the sites allow buying and selling by way of offer as well as by catalogue and organizing auctions and open tenders. Most frequented, however, are the "announcement boards," which account for some 90 percent of the segment's traffic.

In November 2001, analysts from Metalcom.ru conducted research to figure out the degree of Russian metals producers' interest in e-trade and their readiness for practical changes. Some 70 percent of the 280 companies that make up Russia's metallurgical segment have expressed a willingness to buy and sell rolled steel on the Web, but only 10 percent have taken specific steps in this direction. The latter are companies that have Internet access, are connected to the Internet banking system and have well-developed warehouse networks that allow promptly finding the required items and offering them to potential buyers. As things stand today, the "electronic part" of a transaction is limited to information exchange and bargaining, while the act of sale/purchase is made in the conventional way.

The main problem lies in managers' lack of readiness to trade via the Internet. In a poll conducted among top managers in the metals sector, 80 percent of the respondents said they do not trust the Internet. In order to build up their confidence, it is necessary to create a reliable system providing for transparency and security of transaction and commercial information. Such a system should enable its users to save on paperwork and make a real profit. Only after enterprise heads see for themselves that trading on the Internet allows one to get a real profit that exceeds expenses on system maintenance and personnel training will it be possible to expect the proportion of e-trade in metals to increase.

What particular business stages are metals producers ready to do on the Internet? Almost nobody doubts that the Internet is good for looking for customers (79 percent; see graph) as well as for offering goods for sale or finding goods to buy (77 percent). But less than one-half are ready to entrust other operations to the World Wide Web: order formulation (43 percent), deal coordination (31 percent), payment-account opening (24 percent), making delivery documents (20 percent), preparing deliveries (18 percent); and money transfer and receiving (16 percent). The majority still prefers to do these operations through conventional means of communication such as telephone, fax or post.

The reasons for this are obvious:

No system exists at the moment whereby it would be possible to do all these operations via the Internet. Available at this point are information resources, brief company reviews, announcement boards and forums;

There exists no unified payment system which could serve as an "electronic alternative" for the traditional one;

Top managers are prejudiced against any "deep" introduction of the Internet in the sphere of trade. Lacking special education, they perceive the Net as a porous medium that cannot be trusted when it comes to client information, money flows, etc.;

The state of development of local-area corporate networks is poor. In many companies, only marketing and advertising departments have access to the Internet, and managers in charge of sales and supplies often use the Internet only as a corporate information search engine or post advertisements on announcement boards.

The absence of specific laws to regulate e-trade and the ambiguous position of judicial bodies produce a negative psychological effect on corporate decision-makers. Thus, referring to the peculiarities of the Russian legislation in the fields of customs and foreign-currency regulation, Norilsk Nickel refused to take part in e-trade and put the project of creating its corporate trading site on hold.

Nevertheless, there are some grounds for optimism. Division of property in the metals sector is nearing completion and not many big enterprise remain outside the control of one or another holding. When they were too preoccupied battling for control, the sector's oligarchs did not have time to consider the issue of management efficiency and the use of information technologies.

The owners do not need information technologies to boost their investment attraction. Their poor financial transparency does not stop them from receiving enough in credits and investments from both domestic and foreign sources. But the poor transparency of financial flows is a big problem for the holdings' management companies. Lacking truthful information about the financial status of the holding's enterprises, managers often fail to direct money in the right direction at the right moment. This gives reason to expect metals holdings to direct sizable investments into the development of information technologies.

Metal holdings are rather young and embrace companies with incongruous information systems. The Internet represents the sole universal information medium on the basis of which it is possible to establish unified information systems for such holdings. The development of information technologies within the holdings will eventually promote the Internet's further expansion into other fields of application, including e-trade.

The United Metallurgical Company has already begun creating a corporate gateway that will eventually embrace its entire workflow, as well as archives, document drafting and coordination, etc. The gateway will integrate automatic layout systems for the company's other Internet resources and enable the managers to update all information directly from their PCs and will not require special skills to operate. The gateway's launch is scheduled for the first quarter of this year.

(The author is Executive Director at Metalcom.ru)