Author: Tina Gasperson
Obviously, Overstock has huge technology needs. How best to keep the Web site running and running without hang-ups?
The company has used Linux in some form since the beginning. At first, it was Red Hat combined with HP-UX, but Schwegman realized early on that with Overstock.com’s forecasted growth it would be advantageous to explore more possibilities with Linux. “We made the jump and commitment to be 100% Linux, as much as possible, especially with our production environment,” he said.
Schwegman did a heavy bake-off between the different Linux flavors, putting them through the “wringer,” looking at support and pricing, and testing load capacities. “We’d emulate our existing load and check the performance and response times.”
That, coupled with a “general feel from the administration standpoint” led to a decision for SUSE — even before Novell bought it.
Schwegman said it couldn’t have been easier to make the switch to SUSE Linux. “I don’t think we really had any challenges. By the time we’d been through the bake-off, the implementation was a breeze.
“Typically any implementation is going to have multiple problems, but with SUSE it really was just a breeze. We’ve found Linux to be stable on the Web server and application server side.”
Schwegman admits that Windows Server 2003 is “really nice, they have come a long way.” But he believes the real push is toward Linux. “At our level, we are working directly with engineers from SUSE and Red Hat to architect bug fixes and patches, and you can’t really get better support than that.
“I’ve never called up Microsoft and talked to one of the developers. It’s just hard to get the kind of attention from them that you get at a smaller company.”
Steve Briggs, the director of network engineering at Overstock.com, is thrilled with SUSE’s performance. “We’ve been able to scale up so fast because it’s very easy to clone a Linux box and get a new one online,” he said.
Briggs said the performance is “better than anything” and it keeps getting better. He’s happy with the release schedule and said that since they upgraded to SUSE 9.1, the Web site is “extremely fast.”
One of the things Briggs and Schwegman are most proud of is the compactness of their IT department, both in terms of hardware and manpower.
They boast that they’re running a farm of only 30 Web servers, manned by a team of four network engineers, for one of the top trafficked sites in the world. The entire IT staff has grown from 15 people last year to 40 now.
Briggs summed up their satisfaction with Linux: “We’ve engineered this site to run really fast, on a lot less hardware than many other sites that get a lot less traffic.”
When Patrick Byrne launched Overstock.com in 1999, he figured the Internet would be a perfect place to bring together consumers looking for deeply discounted merchandise and wholesalers looking to get rid of excess inventory. The company’s most recent quarterly financial results, released last month, showed he was right; the company had $87.8 million of total revenue, though it is not yet profitable, with a net loss of $2.3 million.
It’s not too much of a stretch to think that shoppers might flock to a true bargain. The genius behind Overstock.com is the market Byrne created for manufacturers.
These days, it’s not the retailer who gets stuck much with returns and unsold merchandise, because suppliers have taken to providing generous allowances for that kind of thing. Shop owners simply send the stuff back and get a credit, leaving the manufacturer with the burden.
Other times, manufacturers overestimate the numbers and make much more than they end up shipping to the retailers. They don’t like to drop the prices through normal channels, because it’s hard to raise them again when supply and demand begins to weigh in the other direction. So they turn to a liquidator. In the past, that’s been the function of outlet stores.
Overstock’s advantage is that they can collect liquidation stock from all over the country and ship it anywhere from their warehouse in Salt Lake City, Utah. Since they buy in huge quantities, making it convenient for the manufacturer, their cost is well below wholesale. They then pass that savings on to consumers, who can pick up retail goods literally at wholesale prices.
It’s an idea that has created a surge of interest and income for Overstock.com. The Web site is currently ranked in the top 150 in the world for visitors, according to Schwegman, and sales have doubled every year since the company was founded.