Salesforce.com 2005 Annual Report Download - page 19

Table of Contents
to be available on commercially reasonable terms, or at all. Any loss of the right to use any of this hardware or software could result in delays in the
provisioning of our service until equivalent technology is either developed by us, or, if available, is identified, obtained and integrated, which could harm our
business. Any errors or defects in third-party hardware or software could result in errors or a failure of our service which could harm our business.
If our security measures are breached and unauthorized access is obtained to a customer's data, our service may be perceived as not being secure,
customers may curtail or stop using our service and we may incur significant liabilities.
Our service involves the storage and transmission of customers' proprietary information, and security breaches could expose us to a risk of loss of this
information, litigation and possible liability. If our security measures are breached as a result of third-party action, employee error, malfeasance or otherwise,
during transfer of data to additional data centers or at any time, and, as a result, someone obtains unauthorized access to one of our customers' data, our
reputation will be damaged, our business may suffer and we could incur significant liability. Because techniques used to obtain unauthorized access or to
sabotage systems change frequently and generally are not recognized until launched against a target, we may be unable to anticipate these techniques or to
implement adequate preventative measures. If an actual or perceived breach of our security occurs, the market perception of the effectiveness of our security
measures could be harmed and we could lose sales and customers.
The market in which we participate is intensely competitive, and if we do not compete effectively, our operating results could be harmed.
The market for CRM applications is intensely competitive and rapidly changing, barriers to entry are relatively low, several of our competitors are
larger and have more resources than we do, and with the introduction of new technologies and market entrants, we expect competition to intensify in the
future. If we fail to compete effectively, our operating results will be harmed. Some of our principal competitors offer their products at a lower price, which
has resulted in pricing pressures. If we are unable to maintain our current pricing, our operating results could be negatively impacted. In addition, pricing
pressures and increased competition generally could result in reduced sales, reduced margins or the failure of our service to achieve or maintain more
widespread market acceptance, any of which could harm our business.
Our current principal competitors include:
• enterprise software application vendors including Amdocs Limited, SSA Global Technologies, Inc., which recently acquired E.piphany, Inc.,
Epicor, IBM Corporation, Microsoft Corporation, SAP AG, and Oracle Corporation, which recently acquired Siebel Systems, Inc.;
• packaged CRM software vendors, some of whom offer hosted services, such as FrontRange Solutions, Inc., Onyx Software Corp., Pivotal
Corporation, which is owned by CDC Software Corporation, a subsidiary of chinadotcom corporation, Sage Group plc, and SugarCRM;
• on-demand CRM application service providers such as Oracle, SAP, NetSuite, Inc., RightNow Technologies, Inc., and Salesnet, Inc.; and
• enterprise application service providers including British Telecom and IBM.
In addition, we face competition from businesses that develop their own CRM applications internally, as well as from enterprise software vendors and
online service providers who may develop and/or bundle CRM products with their products in the future. For small business customers, we also face
competition from companies whose offering is based on Microsoft Outlook and Excel for limited contact management functionality.
We also face competition from some of our larger and more established competitors who historically have been packaged CRM software vendors, but
who also have directly competitive on-demand CRM application services offerings, such as Siebel Systems' Siebel CRM OnDemand, which was acquired by
Oracle. Our
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