Adobe 2015 Annual Report Download - page 25

Table of Contents
25
If we fail to process transactions effectively, our revenue and earnings may be harmed.
We process a significant volume of transactions on a daily basis in both our Digital Marketing and Digital Media businesses.
Due to the size and volume of transactions that we handle, effective processing systems and controls are essential, but even the
most sophisticated systems and processes may not be effective in preventing all errors. The systems supporting our business are
comprised of multiple technology platforms that may be difficult to scale. If we are unable to effectively manage these systems
and processes, we may be unable to process customer data in an accurate, reliable and timely manner, which may harm our customer
relationships or results of operations.
Failure to manage our sales and distribution channels and third-party customer service and technical support providers
effectively could result in a loss of revenue and harm to our business.
We contract with a number of software distributors, none of which is individually responsible for a material amount of our
total net revenue for any recent period. If any single agreement with one of our distributors were terminated, any prolonged delay
in securing a replacement distributor could have a negative impact on our results of operations.
Successfully managing our indirect channel efforts to reach various customer segments for our products and services is a
complex process across the broad range of geographies where we do business or plan to do business. Our distributors and other
channel partners are independent businesses that we do not control. Notwithstanding the independence of our channel partners,
we face potential legal risk and reputational harm from the activities of these third parties including, but not limited to, export
control violations, workplace conditions, corruption and anti-competitive behavior. We cannot be certain that our distribution
channel will continue to market or sell our products and services effectively. If our distribution channel is not successful, we may
lose sales opportunities, customers and revenue.
Our distributors also sell our competitors’ products and services, and if they favor our competitors’ products or services for
any reason, they may fail to market our products or services effectively or to devote resources necessary to provide effective sales,
which would cause our results to suffer. We also distribute some products and services through our OEM channel, and if our OEMs
decide not to bundle our applications on their devices, our results could suffer.
In addition, the financial health of our distributors and our continuing relationships with them are important to our success.
Some of these distributors may be adversely impacted by changes to our business model or unable to withstand adverse changes
in economic conditions, which could result in insolvency and/or the inability of such distributors to obtain credit to finance purchases
of our products and services. In addition, weakness in the end-user market could negatively affect the cash flows of our distributors
who could, in turn, delay paying their obligations to us, which would increase our credit risk exposure. Our business could be
harmed if the financial condition of some of these distributors substantially weakened and we were unable to timely secure
replacement distributors.
We also sell certain of our products and services through our direct sales force. Risks associated with this sales channel
include longer sales and collection cycles associated with direct sales efforts, challenges related to hiring, retaining and motivating
our direct sales force, and substantial amounts of training for sales representatives, including regular updates to cover new and
upgraded systems, products and services. Moreover, recent hires may not become as productive as we would like, as in most cases
it takes a significant period of time before they achieve full productivity. Our business could be seriously harmed if our expansion
efforts do not generate a corresponding significant increase in revenue and we are unable to achieve the efficiencies we anticipate.
In addition, the loss of key sales employees could impact our customer relationships and future ability to sell to certain accounts
covered by such employees.
We also provide products and services, directly and indirectly, to a variety of government entities, both domestically and
internationally. Risks associated with licensing and selling products and services to government entities include longer sales cycles,
varying governmental budgeting processes and adherence to complex procurement regulations and other government-specific
contractual requirements. Ineffectively managing these risks could result in various civil and criminal penalties and administrative
sanctions, including termination of contracts, payment of fines, and suspension or debarment from future government business,
as well as harm to our reputation.
We outsource a substantial portion of our customer service and technical support activities to third-party service providers.
We rely heavily on these third-party customer service and technical support representatives working on our behalf, and we expect
to continue to rely heavily on third parties in the future. This strategy provides us with lower operating costs and greater flexibility,
but also presents risks to our business due to the fact that we may not be able to influence the quality of support as directly as we
would be able to do if our own employees performed these activities. Our customers may react negatively to providing information
to, and receiving support from, third-party organizations, especially if the third-party organizations are based overseas. If we
encounter problems with our third-party customer service and technical support providers, our reputation may be harmed and we
could lose customers and associated revenue.