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In Post-Holiday Online Surge, Success--And Some Turkeys
December 1, 2007, Information Week
A Web site overhaul helped Overstock.com avoid the transaction slowdowns that plagued some other sites.
Online shopping jumped during the four days following Thanksgiving. The holiday traffic spike was expected--it happens every year at this time. Some online retailers were prepared, while others bogged down.
Sears.com suffered the worst glitch. The site was inaccessible to some consumers for more than seven hours on Nov. 23, so-called Black Friday. Sears blamed the outage on "a combination of higher-than-anticipated peak volumes and technical issues" but declined to say more.
Sites with slow response times included Buy.com, Costco, Eddie Bauer, Kmart, Lowe's, and Toys "R" Us, according to Web monitoring firms Keynote Systems and WebSitePulse. The most serious slowdowns involved home page connections and product searches that took up to 60 seconds and transactions that dragged on for two minutes. No problems were reported at Amazon (NSDQ: AMZN).com or Wal-Mart, both of which had significant outages last year during the holidays.
Overstock.com not only survived but thrived amid the traffic spike. Overstock was among the 10 busiest retail sites on Cyber Monday, along with Amazon, Best Buy, Target, and Wal-Mart, according to site tracker ComScore. Overstock ranked second, behind Blockbuster, in a four-week measure of availability and response time by site monitoring firm Gomez. The Gomez assessment concluded on Cyber Monday. Online sales that day rose 21% over last year to $733 million, according to ComScore.
CHANGE IN PHILOSOPHY
Overstock CEO Patrick Byrne credits a Web site overhaul performed by the company's in-house programmers--and specifically not by outsourced developers--for the strong performance. Overstock built up its internal team of Java developers from a handful a few years ago to about 40 today. Those coders spent the past year remaking the site around a service-oriented architecture in order to be more responsive to customer activity. The refurbished site went live last month.
Overstock employed the concept of agile development, where teams of developers work with business units to create new functionality. It moved away from offshore development, which the company had used with little success. "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 says, adding, "We found it's worth it to pay up for more expensive and more serious people."
In the process, Overstock moved away from C++ development and toward Java and SOA. Developers also built a memory-caching layer using Oracle (NSDQ: ORCL)'s Coherence middleware (acquired through Oracle's purchase of Tangosol earlier this year) to ensure smooth and rapid searches on the site.
Overstock hasn't always performed well. Two years ago, Byrne blamed poor quarterly results in part on a rocky transition to a new ERP system that wouldn't let customers find the status of orders or shipping information. Overstock continues to struggle financially, reporting a $4.7 million net loss for the quarter ended Sept. 30 on revenue of $161.9 million, up 3% from the same period last year.
The Web site overhaul won't solve all of Overstock's business challenges, but it can't hurt. "The cost advantage we got overseas didn't make up for the fact that we [didn't] have business users on site at the same time," says CTO Sam Peterson, who joined the company as its first developer eight years ago. "We've always come back to hiring good-quality, highly talented people."
In fact, Overstock is hiring. What kind of skills? Not surprisingly, more Java developers.