Overstock.com's failed ERP implementation and frontline reporting challenges

¶ … Front Line Change Experiences

The implementation of new enterprise computer software to run the entire website and distribution network of Overstock.com and the resulting financial reporting inaccuracies and potential fines from the Securities and Exchange Commission (SEC) is the basis of this analysis. Overstock.com purchased an Enterprise Resource Planning (ERP) suite of applications from Oracle and found that the frontline experiences of accounting, financial and sales teams did not improve in accuracy or profitability (Kanaracus, 2008).

Analysis of Frontline Experiences

The front line change experience for Overstock.com initially began with the ERP system they had purchased from oracle being configured for a specific order management workflow that captured approximately 60% of total sales. This left 40% not counted, in addition to orders being lost on occasion (Kanaracus, 2008). The Chief Information Officer (CIO) reported the situation accurately and completely to the sales teams, erring on the side of blatant honesty instead of attempting to cover the front-line situation up (Kanaracus, 2008). This caused the CIO to nearly get fired for telling the truth with such unswerving commitment, and eventually led to Oracle having to fix the inaccuracies of the system as the industry press jumped on the story and reported it in depth.

Overstock.com had relied on the professional services teams at Oracle to complete a thorough installation and also had provided a test suite to complete quality assurance of the ERP implementation (Kanaracus, 2008). The initial phases of the implementation were completed on time and under budget. As the implementation progressed, the need for Enterprise Application Integration (EAI) and application server expertise became apparent. Due to Oracle's acquisition of BEA, a leading provider of EAI and application server technologies, the team working on the Overstock.com implementation was required to go and review the BEA applications for quality assurance (Financial Times, 2008). This left the Overstock.com implementation team in need of expertise in the areas most critical to order management implementation. As a result, the installation for Overstock.com failed and the costs associated with the financial errors were assigned to the Oracle consulting contract rates. The net result was that Overstock.com's CIO had to explain that the lack of system integration was also slowing down many of the key reporting functions of the company and as a result there would be a lag time in sales reporting and analysis (Kanaracus, 2008). The net effect of all this was to sent the Overstiock.com share price into a tumble which eventually impacted the company's market evaluation.

Conclusion

From a front-line change standpoint, this process of choosing and ERP system and the resulting inaccuracy of reports showed that the most critical aspects of new system implementation, the process redefinition aspects, need to be planned out and executed well. Second, the fact that Oracle was so diffused in focused is an excellent lesson for any CIO in terms of choosing an enterprise software company as well. The front lien change experience was made more effective due to the CIO being as honest and forthright as he was about reporting inaccuracies, which saved errors from being generated with bad data.