Oracle 2007 Annual Report Download - page 24

Table of Contents
Our periodic workforce restructurings can be disruptive. We have in the past restructured or made other
adjustments to our workforce, including our direct sales force on which we continue to rely heavily, in response to
management changes, product changes, performance issues, acquisitions and other internal and external
considerations. In the past, sales force and other restructurings have generally resulted in a temporary lack of focus
and reduced productivity. These effects could recur in connection with future acquisitions and other restructurings
and our revenues could be negatively affected.
Oracle On Demand and CRM On Demand may not be successful. We offer Oracle On Demand outsourcing
services for our applications and database technology, delivered either at our data center facilities, at select partner
data centers or at customer facilities. We also offer CRM On Demand, which is a subscription service offering that
provides our customers with our CRM software functionality delivered via a hosted, web-based solution that we
manage. These business models continue to evolve and we may not be able to compete effectively, generate
significant revenues or develop them into profitable businesses. We incur expenses associated with the infrastructures
and marketing of our Oracle On Demand and CRM On Demand businesses in advance of our ability to recognize the
revenues associated with these offerings. These businesses are subject to a variety of risks including:
• demand for these services may not meet our expectations;
• we may not be able to operate these businesses at an acceptable profit level;
• we manage critical customer applications, data and other confidential information through Oracle On Demand
and CRM On Demand; accordingly, we face increased exposure to significant damage claims and risk to future
business prospects in the event of system failures, inadequate disaster recovery or loss or misappropriation of
customer confidential information;
• we may face regulatory exposure in certain areas such as data privacy, data security and export compliance, as
well as workforce reduction claims as a result of customers transferring their IT functions to us;
• the laws and regulations applicable to hosted service providers are unsettled, particularly in the areas of privacy
and security and use of global resources; changes in these laws could affect our ability to provide services from
or to some locations and could increase both the costs and risks associated with providing the services;
• demand for these services may be affected by customer and media concerns about security risks, international
transfers of data, government or other third-party access to data, and/or use of outsourced services providers
more generally; and
• our offerings may require large fixed costs such as for data centers, computers, network infrastructure and
security and we may not be able to generate sufficient revenues to offset these costs and generate acceptable
operating margins from these offerings.
We might experience significant errors or security flaws in our products and services. Despite testing prior to their
release, software products frequently contain errors or security flaws, especially when first introduced or when new
versions are released. The detection and correction of any security flaws can be time consuming and costly. Errors in
our software products could affect the ability of our products to work with other hardware or software products,
could delay the development or release of new products or new versions of products and could adversely affect
market acceptance of our products. If we experience errors or delays in releasing new products or new versions of
products, we could lose revenues. In addition, we run our own business operations, Oracle On Demand, CRM On
Demand and other outsourcing services, support and consulting services, on our products and networks and any
security flaws, if exploited, could affect our ability to conduct internal business operations. End users, who rely on
our products and services for applications that are critical to their businesses, may have a greater sensitivity to
product errors and security vulnerabilities than customers for software products generally. Software product errors
and security flaws in our products or services could expose us to product liability, performance and/or warranty
claims as well as harm our reputation, which could impact our future sales of products and services. In addition, we
may be legally required to publicly report security breaches of our services, which could adversely impact future
business prospects for those services.
We may not receive significant revenues from our current research and development efforts for several years, if at
all. Developing and localizing software is expensive and the investment in product development often involves
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Source: ORACLE CORP, 10-K, July 02, 2008 Powered by Morningstar® Document Research℠