Classmates.com 2004 Annual Report Download - page 56

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support systems could materially and adversely affect our business, financial position, results of operations and cash flows.
We are dependent on third parties for technical support and customer service and our business may suffer if they are unable to provide
these services, cannot expand to meet our needs or terminate their relationships with us.
Our business and financial results depend, in part, on the availability and quality of our customer support services. We outsource a majority
of the live technical and billing support functions to ClientLogic Corporation pursuant to an agreement that terminates in June 2005. As a result,
we maintain only a small number of internal customer service personnel. We are not equipped to provide the necessary range of customer service
functions in the event that ClientLogic becomes unable or unwilling to offer these services to us. At times, users seeking live customer support
have experienced lengthy waiting periods to reach support personnel who are trained to provide the technical or billing support they require.
ClientLogic has also experienced outages in the past where they were unable to support our users. Maintaining desired customer support levels
may require significantly more support personnel than are currently available to us, or significantly greater expense than we choose to incur. If
ClientLogic does not provide us with quality services, or if our relationship with ClientLogic terminates and we are unable to transition such
services in-house or to a replacement vendor in an orderly, cost-effective and timely manner, our reputation, business and results of operations
would suffer. In addition, we prepay significant amounts in advance to ClientLogic under our agreement with them, and any failure by them to
perform the services for which we have prepaid would negatively impact our financial position.
If our software or hardware contains errors or fails, if we fail to operate our services effectively or if we encounter difficulties
integrating our systems and technologies, our business could be seriously harmed.
Our services, and the hardware and software systems underlying our services, are complex. Our systems may contain undetected errors or
failures and are susceptible to human error. We have in the past encountered, and may in the future encounter, software and hardware errors,
system design errors and errors in the operation of our systems. This has resulted in, and may in the future result in, a number of adverse
consequences, which have included or may include:
• users being disconnected from our services or being unable to access our services;
•
loss of data or revenue;
•
injury to reputation; and
• diversion of development resources.
We have experienced technical and customer support issues associated with our services and software releases. These issues have resulted
in users discontinuing their service and have adversely impacted our revenues. A number of our material technologies and systems are based on
different platforms. To the extent we attempt to integrate these technologies and systems, we may experience a number of difficulties, errors,
failures and unanticipated costs. In addition, our business relies on third-party software including, without limitation, software licensed from
Oracle for our internal operations, software licensed from Portal and Remedy for billing and customer support, and software licensed from
SlipStream Data Inc. for our accelerated services. Any significant failure of this software could materially and adversely affect our business,
financial position, results of operations and cash flows. Our services also rely on their compatibility with other third-party systems, particularly
operating systems. Incompatibility with future changes to third-party software upon which our systems rely could
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