Assignment 1 Question 3

Four Years and $13 Million Later

In 2008, executives restated their earnings for the previous five-and-a-half years. This led to a $12.9 million decrease in revenue and $10.3 million increase to cumulative net loss. What caused this mess? A rushed Oracle Enterprise Resource Planning (ERP) rollout that started in 2005. Leading up to the rushed rollout was a separate $14.2 million loss as well as a customer service meltdown.

Over the course of the next few years, CEO Patrick Byrne wrote letter after letter to the shareholders, detailing why things were going the way they were, all leading back to the rushed ERP rollout.

Why did it fail?

Poor planning, not enough resources, and a rushed sense of urgency. When Overstock was upgrading their system, they did not hook up some "accounting wiring" because there were supposed to be manual fixes in place to take care of it. However, those same manual fixes missed some "wires", causing the wildly inconsistent performance in the ERP system, meaning issues like some customers would not receive a shipping confirmation, somtimes orders would become stuck in the system, and sometimes the order would become misrouted and go off to the wrong place.

To avoid such a mess, careful planning and care must be taken when dealing with such mission-critical systems as ERPs.

Where are they now?

Overstock seems to be doing well and Patrick Byrne is still CEO. In fact, Overstock just recently partnered with Coinbase to begin accepting Bitcoins as a form of payment.

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