Salesforce.com 2005 Annual Report Download - page 18

Table of Contents
• reluctance by enterprises to trust third parties to store and manage their internal data; and
• adverse publicity about us, our service or the viability, reliability or security of on-demand application services generally from third party reviews,
industry analyst reports and adverse statements made by competitors.
Many of these factors are beyond our control. The inability of our on-demand application service to achieve widespread market acceptance would harm
our business.
Defects or disruptions in our service could diminish demand for our service and subject us to substantial liability.
Because our service is complex and we have incorporated a variety of new computer hardware and software, both developed in-house and acquired
from third party vendors, our service may have errors or defects that users identify after they begin using it that could result in unanticipated downtime for our
subscribers and harm our reputation and our business. Internet-based services frequently contain undetected errors when first introduced or when new versions
or enhancements are released. We have from time to time found defects in our service and new errors in our existing service may be detected in the future. In
addition, our customers may use our service in unanticipated ways that may cause a disruption in service for other customers attempting to access their data.
Since our customers use our service for important aspects of their business, any errors, defects, disruptions in service or other performance problems with our
service could hurt our reputation and may damage our customers' businesses. If that occurs, customers could elect not to renew, or delay or withhold payment
to us, we could lose future sales or customers may make warranty claims against us, which could result in an increase in our provision for doubtful accounts,
an increase in collection cycles for accounts receivable or the expense and risk of litigation.
Interruptions or delays in service from our third-party Web hosting facilities could impair the delivery of our service and harm our business.
As of January 31, 2006, we serve all of our customers from a single, third-party Web hosting facility located on the west coast of the United States,
operated by Equinix, Inc. As part of our current disaster recovery arrangements, all of our customers' data is currently replicated in near real-time in a separate
standby Equinix facility located on the east coast. We do not control the operation of any of these facilities, and they are vulnerable to damage or interruption
from earthquakes, floods, fires, power loss, telecommunications failures and similar events. They are also subject to break-ins, sabotage, intentional acts of
vandalism and similar misconduct. Despite precautions taken at these facilities, the occurrence of a natural disaster or an act of terrorism, a decision to close
the facilities without adequate notice or other unanticipated problems at both facilities could result in lengthy interruptions in our service. In addition to the
west coast and east coast facilities, we have an agreement with SunGard Data Systems, a provider of availability services, to provide access to a
geographically remote disaster recovery facility that would provide us with access to hardware, software and Internet connectivity in the event the Web
hosting facilities become unavailable. Even with the disaster recovery arrangements, our service could be interrupted.
As we continue to add data center capacity, we may move or transfer data. Despite precautions taken during this process, any unsuccessful data
transfers may impair the delivery of our service. Further, any damage to, or failure of, our systems generally could result in interruptions in our service.
Interruptions in our service may reduce our revenue, cause us to issue credits or pay penalties, cause customers to terminate their subscriptions and adversely
affect our renewal rates. Our business will also be harmed if our customers and potential customers believe our service is unreliable.
We rely on third-party computer hardware and software that may be difficult to replace or which could cause errors or failures of our service.
We rely on computer hardware purchased or leased and software licensed from third parties in order to offer our service, including database software
from Oracle Corporation. This hardware and software may not continue
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