Overstock.com's BI Bang

Byrne, CEO of Overstock.com is chuffed about his business intelligence system, which gives him a broad, up-to-the-minute vista of his operations

Patrick Byrne has biked across the U.S. four times. On a recent journey, he pedaled a recumbent bicycle. It's better than a road bike, he says, because "unlike a road bike, where your head is down and you're looking eight feet in front of you, you're sitting up on a recumbent, and you can see everything."

Byrne, CEO of Overstock.com, a Salt Lake City-based online discount retailer of brand-name goods, is equally enthusiastic about his business intelligence system, which gives him a broad, up-to-the-minute vista of his operations. He claims that BI lets him view his entire business at a glance so he can make both long-range strategic and immediate tactical decisions that are grounded in solid data.

Savvy CIOs know that their bosses thrive on up-to-the-minute, data-driven insights into the company's condition, which is why BI projects always rank high on our readers' lists of priorities. In 2006, IT leaders placed BI third on Computerworld's list of things to do, and in our January 2007 Forecast issue, data warehouses ranked in the top four of "big-bang projects" for CIOs - even those with tight budgets.

Byrne says the data warehouse and analytic software from Teradata, a division of NCR, has transformed his business from one where managers received reports week to week to one where "we push intelligence out to the front lines day to day, hour to hour." He also brags that the company is "on the brink of a system that can get intelligence out second to second."

But Overstock.com isn't overloading its workers with esoteric information, Byrne argues. The information has pragmatic, bottom-line implications. For example, he credits the Teradata software with helping to reduce inventory levels to US$16 million from US$80 million without affecting sales, giving a huge boost to cash flow.

It has also improved business processes because the information is granular and better understood. Without it, Byrne says, "costs get spread around like peanut butter and evenly allocated" - and that's bad business.

For example, before Overstock.com's BI tools were in place, United Parcel Service's oversize-package charges were equally distributed across all shipments. Now, the shipping department knows exactly which products will incur those extra costs and can either apply them to a specific shipment or adjust the packaging to achieve lower mailing rates.

With BI, Byrne says, the company "is flushing all those extra costs out of the system."

The success of BI has also changed the way Overstock.com views new hires. "People need to be able to work with data," he says.

Numbers drive the company now. As Byrne puts it, "the math team" that works with the Teradata analytic software "is our frontal cortex."

But maybe the most important change is the way BI has helped raise the company's value in customers' eyes. According to the most recent annual National Retail Federation/American Express Customer Service Survey, Overstock.com was ranked No. 4 in a poll of 8,000 consumers who were asked, "Which retailer delivers the best customer service?"

Byrne attributes that stellar satisfaction rating to the business intelligence applications and how "they transformed our business processes."

He pities any retailer that's not knee-deep in business intelligence. "If they don't use it, they're in the buggy-whip business," he cracks.

In fact, when asked whether he considers Overstock.com a retail operation or a tech company, he replies, "Neither. We're a BI company."

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