Computerworld - Citing problems with an Oracle ERP implementation, Internet retailer Overstock.com Inc. last week announced that it is restating its financial results for a five-and-a-half-year period.
The company blamed itself, not Oracle Corp., for the problems. Oracle declined to comment.
"Our first commandment is 'maintain a bulletproof balance sheet,' but while the spirit is strong, the flesh made a mistake," Overstock CEO Patrick Byrne said in an Oct. 24 letter to shareholders.
He said Overstock personnel made mistakes during the installation of the Oracle ERP software. "We didn't hook up some of the accounting wiring" and then tried to fix the problems manually, Byrne said. "We've since found that these manual fixes missed a few of the unhooked wires."
The ERP errors forced the company to restate its earnings from 2003 through the second quarter of this year, Byrne said. The company cut its reported $3.5 billion in revenue over the period by $12.9 million and boosted its reported $184.7 million net loss by $10.3 million, he added.
Kevin Moon, director of investor relations at Salt Lake City-based Overstock, said the company rushed to launch the Oracle ERP software before the Christmas shopping season in 2005.
"Honestly, it didn't have anything to do with Oracle per se; it was the implementation," he said. "We had consultants and we had help, but it was all driven by Overstock."
In a letter to shareholders, David Chidester, senior vice president of finance, said the problems during what he called "a major system upgrade" included mistakes in Overstock's process of accounting for customer refunds and order cancellations.
Once the problems were discovered, Overstock "reexamined [its] procedures for testing and verification of the balance sheet [and] put into place processes to record all refunds in our financial system," he said.
Ray Wang, an analyst at Forrester Research Inc., said that such ERP problems can be avoided with adequate internal planning and design efforts.
"The ERP system will do what you design it to do," Wang added, "which is why we often say it's very important to spend time on design and mapping."
This version of this story originally appeared in Computerworld's print edition.
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