Shutterfly 2010 Annual Report Download - page 15

We may be unable to accomplish one or more of these requirements, which could cause our business to suffer. Accomplishing one or more of
these requirements might be very expensive, which could harm our financial results.
If we are not able to reliably meet our data storage and management requirements, customer satisfaction and our reputation could be
harmed.
As a part of our current business model, we offer our customers free unlimited online storage and sharing of photographs and, as a result,
must store and manage many petabytes of data. This policy results in immense system requirements and substantial ongoing technological
challenges, both of which are expected to continue to increase over time. If we are not able to reliably meet these data storage and management
requirements, we could have disruptions in services which could impair customer satisfaction and our reputation and lead to reduced net
revenues and increased expenses. Moreover, if the cost of meeting these data storage and management requirements exceeds our expectations,
our results of operations would be harmed.
Our data storage system could suffer damage or interruption from human error, fire, flood, power loss, telecommunications failure, break-
ins, terrorist attacks, acts of war and similar events. In addition, our primary storage facilities are located near a major fault line, increasing our
susceptibility to the risk that an earthquake could significantly harm our data storage system. If we experience disruption to our redundant
systems located at our data storage center, such disruption could result in the deletion or corruption of customer stored images.
Interruptions to our website, information technology systems, print production processes or customer service operations could damage our
reputation and brand and substantially harm our business and results of operations.
The satisfactory performance, reliability and availability of our website, information technology systems, printing production processes and
customer service operations are critical to our reputation, and our ability to attract and retain customers and maintain adequate customer
satisfaction. Any interruptions that result in the unavailability of our website or reduced order fulfillment performance or customer service could
result in negative publicity, damage our reputation and brand and cause our business and results of operations to suffer. For example, in the
second quarter of 2008, we experienced website performance issues in conjunction with a large release of additional website functionality which
impacted our key metrics and revenue. This risk is heightened in the fourth quarter, as we experience significantly increased traffic to our
website during the holiday season. Any interruption that occurs during such time would have a disproportionately negative impact than if it
occurred during a different quarter.
We depend in part on third parties to implement and maintain certain aspects of our communications and printing systems. Therefore many
of the causes of system interruptions or interruptions in the production process may be outside of our control. As a result, we may not be able to
remedy such interruptions in a timely manner, or at all. Our business interruption insurance policies do not address all potential causes of
business interruptions that we may experience, and any proceeds we may receive from these policies in the event of a business interruption may
not fully compensate us for the revenues we may lose.
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successfully execute our business and marketing strategy;
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continue to develop and upgrade our technology and information processing systems;
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continue to enhance our service to meet the needs of a changing market;
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provide superior customer service;
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respond to competitive developments; and
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attract, integrate, retain and motivate qualified personnel.
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