Case Study: Backcountry.com Bets the Shop on Open Source - ' Using Tech for Fast '

"We want to become the Amazon of sporting goods," Jenkins says. Of course, selling books and CDs online is entirely different from selling clothing and outdoor gear—most people want to test out the equipment before they buy it. "I don't know if it's really possible for an online sporting-goods retailer to gain significant market share without some physical retail stores," says Edward Weller, a managing director with ThinkEquity Partners LLC, a San Francisco-based analyst firm. Christopher Svezia, an analyst at Bala Cynwyd, Pa.-based Susquehanna International Group LLp, agrees. "E‑commerce isn't a real focal point for most sporting-goods businesses. Most of the big players—like Cabela's, Sports Authority and Dick's Sporting Goods—are focusing on branching out their physical retail operations."

Jenkins admits that Backcountry.com cedes lots of business to brick-and-mortar competitors—the company has only one retail store, at its warehouse in Salt Lake City. But Backcountry finds innovative ways to overcome that inherent limitation. Jenkins says the company has an open-door policy with customers. "We count on our customers to share their experiences with us and with each other," he says. The company pays close attention to customer service—in fact, every employee spends one day every eight weeks answering customer calls via telephone, e‑mail and instant message. Backcountry also rewards loyal customers who write product reviews for the site with discount coupons.

Though still a tadpole compared with some of the brick-and-mortar bullfrogs (e.g., Sidney, Neb.-based Cabela's Inc., and Kent, Wash.-based cooperative Recreational Equipment Inc., both of which took in more than $1 billion in sales in 2005), Backcountry.com is content to mine the online vein, and has even enjoyed some pretty healthy financial success of its own. In 2005, revenues nearly doubled, to $52 million, from $27 million in 2004. And the company just opened a new 210,000-square-foot warehouse in Salt Lake City, about a half hour drive from corporate headquarters. Last year, the company doubled its workforce, from 130 to 260—nearly 10 percent of whom are open-source engineers devoted to in-house programming.

Open source is a strategy that helps level the playing field, says Eric Von Hippel, a professor and head of the innovation and entrepreneurship group at the MIT Sloan School of Management. "Open source is a great way for a small, hungry company to build on a sophisticated platform and get a competitive edge—an edge that's precisely tailored to their specific needs—far more cheaply than it could with proprietary software," he says.

But along with any growth spurt comes the pain of maturity, and Backcountry.com is no exception. While it may be cheaper to create code in-house than to buy proprietary licenses, managing such a large team of in-house developers is a responsibility many companies hesitate to undertake—especially in an age when so many companies are outsourcing IT development, or opting for hosted software models. "To be honest," says Bresee, "we wouldn't be doing the development we do if someone had an offering that brought everything together as cost effectively."

One of the biggest risks of devoting so much of a company's resources to customizing software is that "you effectively become your own software company," says Mark Driver, an analyst at Gartner. "People often see the success of Google and assume they can do it, too," Driver says. "The difference is that Google hires every Ph.D. out of Berkeley, and can maintain a skills level that most IT shops can't."

Jenkins knows he can't compete with Google for developers. But what the company lacks in salary, it makes up for in lifestyle, he says. "On any given day, my guys can say they are taking off to go skiing or hiking, and it's no big deal. We want our people to spend time out of the office. It's our biggest sell, and frankly, if you don't love the gear, it's no fun working here." Because of the company's laid-back atmosphere, Jenkins says engineers are willing to work for far less than they'd be paid at Google Inc. or Amazon.com.

As a way of offsetting some of the costs of all the custom development, the company may consider selling some of its customized software. But Bresee says the company will remain steadfastly focused on the firm's primary objective—selling outdoor gear. "I didn't imagine we would have this many programmers," says Bresee. "We never set out to be a technology company, we always aimed to be a retailer. But we didn't have a choice. No one was making the products we needed."