JCPenney 2015 Annual Report Download - page 10

Table of Contents
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We sell merchandise over the Internet through our website, www.jcpenney.com, and through mobile applications for smart phones and tablets. Our Internet
operations are subject to numerous risks, including rapid technological change and the implementation of new systems and platforms; liability for online and
mobile content; violations of state or federal laws, including those relating to online and mobile privacy and intellectual property rights; credit card fraud;
problems associated with the operation and security of our website, mobile applications and related support systems; computer viruses; telecommunications
failures; electronic break-ins and similar disruptions; and the allocation of inventory between our online operations and department stores. The failure of our
website or mobile applications to perform as expected could result in disruptions and costs to our operations and make it more difficult for customers to
purchase merchandise online. In addition, our inability to successfully develop and maintain the necessary technological interfaces for our customers to
purchase merchandise through our website and mobile applications, including user friendly software applications for smart phones and tablets, could result in
the loss of Internet sales and have an adverse impact on our results of operations.
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Our operations are dependent upon the integrity, security and consistent operation of various systems and data centers, including the point-of-sale systems in
the stores, our Internet website and mobile applications, data centers that process transactions, communication systems and various software applications
used throughout our Company to track inventory flow, process transactions, generate performance and financial reports and administer payroll and benefit
plans.
We have implemented several products from third party vendors to simplify our processes and reduce our use of customized existing legacy systems and
expect to place additional applications into operation in the future. Implementing new systems carries substantial risk, including implementation delays, cost
overruns, disruption of operations, potential loss of data or information, lower customer satisfaction resulting in lost customers or sales, inability to deliver
merchandise to our stores or our customers, the potential inability to meet reporting requirements and unintentional security vulnerabilities. There can be no
assurances that we will successfully launch the new systems as planned, that the new systems will perform as expected or that the new systems will be
implemented without disruptions to our operations, any of which may cause critical information upon which we rely to be delayed, unreliable, corrupted,
insufficient or inaccessible.
We also outsource various information technology functions to third party service providers and may outsource other functions in the future. We rely on
those third party service providers to provide services on a timely and effective basis and their failure to perform as expected or as required by contract could
result in disruptions and costs to our operations.
Our vendors are also highly dependent on the use of information technology systems. Major disruptions in their information technology systems could result
in their inability to communicate with us or otherwise to process our transactions or information, their inability to perform required functions, or in the loss or
corruption of our information, any and all of which could result in disruptions to our operations. Our vendors are responsible for having safeguards and
procedures in place to protect the confidentiality, integrity and security of our information, and to protect our information and systems against unauthorized
access, disclosure or acquisition. Any failure in their systems to operate or in their ability to protect our information or systems could have a material adverse
impact on our business and results of operations.
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We are in the process of insourcing certain business functions and may also need to continue to insource other aspects of our business in the future in order to
effectively manage our costs and stay competitive. We may also seek from time to time to relocate certain business functions to countries other than the
United States to access highly skilled labor markets and further control costs. There is no assurance that these efforts will be successful. Further, these actions
may cause disruptions that negatively impact our business. If we are ultimately unable to perform insourced functions better than, or at least as well as, our
current third party providers, our operating results could be adversely impacted.
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