Support.com 2005 Annual Report Download - page 18

• longer sales cycles;
• dependence on local vendors and consultants;
• difficulties in staffing and managing international operations, including the difficulty in managing a geographically
dispersed workforce in compliance with diverse local laws and customs and difficulty in motivating and retaining qualified
individuals;
• potential adverse tax consequences;
• changes in currency exchange rates and controls;
• difficulties in maintaining effective internal control over financial reporting as a result of a geographically-dispersed
workforce and customers;
• longer collection cycles for accounts receivable; and
If we do not expand our professional services organization, especially internationally, our customers may become dissatisfied
and our operating results could suffer. Also, as we expand our professional services organization, it may not operate in a
profitable manner.
• the effects of external events such as terrorist acts and any related conflicts or similar events worldwide.
Clients that license our software typically engage our professional services organization to assist with installation and
implementation of our software and related consulting services. Revenue from professional services has increased from 2004 to 2005
by 29% and represented a substantial portion of our total revenue. We plan to further increase the number of services personnel,
especially internationally, to meet customer needs. We may not be able to recruit the services personnel we need or retain our current
services personnel because competition for qualified services personnel is intense. New services personnel will require training and
education and take time to reach full productivity.
In addition, we cannot be certain that our professional services business will operate in a profitable manner. We have generally
billed our customers for professional services on a time and material basis using an agreed upon daily rate. However, increasingly
customers have requested various contract structures. If unanticipated factors in a project are encountered and the contract structure
prevents us from billing additional amounts, the profitably of our professional services business would suffer.
Our failure to establish and expand third-party alliances would harm our ability to sell our real-time service management
software.
We have several alliances with third parties that are important to our business. Our existing relationships include those with
software and hardware vendors, and relationships with companies who provide outsourced support and service capabilities to
enterprise customers. If these relationships fail, we may have to devote substantially more resources to the sales and marketing of our
products and services than we would otherwise, and our efforts may not be as effective. For example, companies that provide
outsourced support and services often have extensive relationships with our existing and potential customers and significant input in
the purchase decisions of these customers. In addition, we intend to establish relationships with third party resellers and other sales
partners as we expand into geographic regions such as Europe and Asia. Our failure to maintain existing relationships, or to establish
new relationships with key third parties, could significantly harm our ability to sell our products and services.
Our exposure to the credit risks of our customers and resellers may make it difficult to collect receivables and could adversely
affect our operating results and financial condition.
Industry and economic conditions have weakened the financial position of some of our customers and the cable and
telecommunications industries, from which we derive a substantial portion of our total revenue, have
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