Overstock.com Divulges Secret To Its Cyber Monday Success
CEO Patrick Byrne credits the success of his new Web site to a move away from offshore outsourcing and the investment in "expensive" Java developers.
Overstock.com was one of the most heavily hit Web sites by the crush of holiday shoppers looking for bargains during the four day span from Black Friday through Cyber Monday. It also was among those that performed exceptionally well under pressure.
Was the success due to investments in technology? Sure, that helped. But the biggest investment and benefit, said CEO Patrick Byrne, is a newly expanded internal workforce of Java developers that rehauled the site around a Web service-oriented architecture to allow for rapid upgrades in response to consumer activity. The new site went live last month after about a year of development.
"We had three developers on staff three or four years ago; now we have over 40 developers," Byrne said in an interview. "We found it's worth it to pay up for more expensive and more serious people."
Overstock.com was among the top 10 retail sites in terms of traffic on Cyber Monday, according to market research firm comScore (others included Amazon, Wal-Mart, Target, and Best Buy). It also ranked second, after Blockbuster, in a four-week measure of availability and response time among online retailers' sites conducted by Web site monitoring firm Gomez. The survey concluded on Cyber Monday.
The Monday after Thanksgiving got that name since it's presumed that after the long holiday weekend, consumers sit down at their computers, sometimes at work, and start their holiday shopping. Even though market research has shown that the busiest online shopping days typically don't happen until early-to-mid-December, online sales on Cyber Monday rose 21% over last year to $733 million, according to comScore.
About a year ago, Byrne and Overstock.com CTO Sam Peterson decided to rehaul the Web site around the concept of "agile development," where small teams of developers would work with each business unit to develop and improve functionality and roll out new releases as needed. That included moving away from offshore software development, which the company had used with little success, and toward a much bigger in-house staff. "Our experience with outsourcing has not been good," said the ever-outspoken Byrne, who is probably best known for his controversial allegations of wide-ranging Wall Street conspiracy involving "naked short selling" of Overstock.com stock.
"I was the biggest proponent -- as a stupid, Dilbert management kind of guy -- saying let's outsource. Now I've come completely 180 degrees to the agile approach," Byrne said. "Programmers sitting side-by-side with businesspeople designing functionality -- that's one trend," Byrne said. "The other is taking your software development and moving it to China or India. You see those two trends are antithetical to each other."
In rebuilding the site, Overstock moved away from C++ development to create a site based on Java. That allowed for a service-oriented architecture, rather than "having one big application talk to one big database," said Peterson, who joined as the company's first developer in 1999. Peterson also is the son of Pete Peterson, the former CEO and a co-founder of Word Perfect, a popular word processing software prior to Microsoft's rise to domination in the 1990s.
Developers also built a new memory-caching layer using Oracle Coherence, middleware that Oracle got with its acquisition of Tangosol earlier this year, to ensure smooth and rapid site searches for customers at the site.
Overstock.com's site hasn't always performed well. In late 2005, Byrne blamed a poor financial quarter partly on Overstock's rocky transition to a new ERP system that wouldn't let customers find the status of their orders or shipping information for close to a week. The company continues to struggle financially, reporting a $4.7 million net loss for its third fiscal quarter ended Sept. 30 on revenue of $161.9 million, up 3% from the same period last year.
A speedy new Web site may not be the key to reversing Overstock.com's slow growth and losses, but it certainly can't hurt. And good technical talent working with businesspeople, Peterson insists, is critical to the Web site's success.
"The cost advantage we got overseas didn't make up for the fact that we don't have business users on site at the same time," Peterson said. "We've always come back to hiring good quality, highly talented people." In fact, he said, the Salt Lake City-based company is currently on the hunt for more Java developers to add to its staff.
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