Priceline 2010 Annual Report Download - page 97

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There can be no assurance that we will be able to manage our expansion effectively. Our current and
planned personnel, systems, procedures and controls may not be adequate to support and effectively manage our
future operations, especially as we employ personnel in multiple geographic locations. We may not be able to hire,
train, retain, motivate and manage required personnel, which may limit our growth, damage our reputation,
negatively affect our financial performance, and harm our business.
Capacity constraints and system failures could harm our business.
We rely on certain third party computer systems and third party service providers, including the
computerized central reservation systems of the airline, hotel and rental car industries to satisfy demand for airline
tickets and priceline.com hotel room and rental car reservations. In particular, our priceline.com travel business is
substantially dependent upon the computerized reservation systems of operators of global distribution systems for
the travel industry. Any interruption in these third party services systems or deterioration in their performance could
prevent us from booking airline, hotel and rental car reservations and have a material adverse effect on our business.
Our agreements with some third party service providers are terminable upon short notice and often do not provide
recourse for service interruptions. In the event our arrangement with any of such third parties is terminated, we may
not be able to find an alternative source of systems support on a timely basis or on commercially reasonable terms
and, as a result, it could have a material adverse effect on our business, results of operations and financial condition.
We depend upon Chase Paymentech to process our U.S. credit card transactions; Global Collect and others
to process Agoda credit card transactions; and Wright Express to provide credit card numbers which we use as a
payment mechanism for merchant hotel transactions. If any of these providers were wholly or partially
compromised, our cash flows could be disrupted until such a time as a replacement process could be put in place
with a different vendor. As we add complexity to our systems infrastructure by adding new suppliers and
distribution, our total system availability could decline and our results could suffer.
A substantial amount of our computer hardware for operating our services is currently located at the
facilities of SAVVIS in New Jersey, AT&T in New York City, Equinix Europe Ltd. in London, England, Global
Switch Amsterdam B.V. in the Netherlands and certain other data centers. These systems and operations are
vulnerable to damage or interruption from human error, floods, fires, power loss, telecommunication failures and
similar events. They are also subject to break-ins, sabotage, intentional acts of vandalism and similar misconduct.
Despite any precautions we may take, the occurrence of any disruption of service due to any such misconduct,
natural disaster or other unanticipated problems at the SAVVIS facility, the AT&T facility, the Equinix Europe Ltd.
facility and the Global Switch Amsterdam B.V. facility, or other facilities could result in lengthy interruptions in our
services. In addition, the failure by SAVVIS, Verizon, AT&T, Equinix Europe Ltd., Colt Telecom Group Limited,
Verizon Business B.V., TrueServer B.V. or other communication providers to provide our required data
communications capacity could result in interruptions in our service. Any system failure that causes an interruption
in service or decreases the responsiveness of our services could impair our reputation, damage our brand name and
have a material adverse effect on our business, results of operations and financial condition.
We do not have a completely formalized disaster recovery plan in every geographic region in which we
conduct business. In the event of certain system failures, we may not be able to switch to back-up systems
immediately and the time to full recovery could be prolonged. Like many online businesses, we have experienced
system failures from time to time. In addition to placing increased burdens on our engineering staff, these outages
create a significant amount of user questions and complaints that need to be addressed by our customer support
personnel. Any unscheduled interruption in our service could result in an immediate loss of revenues that can be
substantial, increase customer service cost and cause some users to switch to our competitors. If we experience
frequent or persistent system failures, our reputation and brand could be permanently harmed. We have been taking
steps to increase the reliability and redundancy of our systems. These steps are expensive, may reduce our margins
and may not be successful in reducing the frequency or duration of unscheduled downtime.
We use both internally developed systems and third-party systems to operate our services, including
transaction processing, order management and financial systems. If the number of users of our services increases
substantially, or if critical third-party systems stop operating as designed, we will need to significantly expand and
upgrade our technology, transaction processing systems, financial and accounting systems and other infrastructure.
We do not know whether we will be able to upgrade our systems and infrastructure to accommodate such conditions
in a timely manner, and, depending on the third-party systems affected, our transactional, financial and accounting
systems could be impacted for a meaningful amount of time before repair.