Chegg 2013 Annual Report Download - page 69

We rely heavily on our proprietary technology to process deliveries and returns of our textbooks and to
manage other aspects of our operations. The failure of this technology to operate effectively, particularly
during peak periods, could adversely affect our business.
We use complex proprietary software to process deliveries and returns of our textbooks and to manage other
aspects of our operations, including systems to consider the market price for textbooks, general availability of
textbook titles and other factors to determine how to buy textbooks and set prices for textbooks and other content
in real time. We rely on the expertise of our engineering and software development teams to maintain and
enhance the software used for our distribution operations. We cannot be sure that the maintenance and
enhancements we make to our distribution operations will achieve the intended results or otherwise be of value to
students. If we are unable to maintain and enhance our technology to manage the shipping of textbooks from and
returns of textbooks to our warehouse in a timely and efficient manner, particularly during peak periods, our
ability to retain existing students and to add new students may be impaired.
Any significant disruption to our computer systems, especially during peak periods, could result in a loss of
students and a decrease in revenue.
We rely on computer systems housed in two facilities, one located on the East Coast and one located on the
West Coast, to manage our operations. We have experienced and expect to continue to experience periodic
service interruptions and delays involving our systems. While we maintain a live fail-over capability that would
allow us to switch our operations from one facility to another in the event of a service outage, that process could
still result in service interruptions. These service interruptions could have a disproportionate effect on our
operations if they were to occur during one of our peak periods. Our facilities are vulnerable to damage or
interruption from earthquakes, floods, fires, power loss, telecommunications failures and similar events. They
also are subject to break-ins, sabotage, intentional acts of vandalism, the failure of physical, administrative and
technical security measures, terrorist acts, natural disasters, human error, the financial insolvency of our third-
party vendors and other unanticipated problems or events. The occurrence of any of these events could result in
interruptions in our service and unauthorized access to, theft or alteration of, the content and data contained on
our systems. We also rely on systems and infrastructure of the Internet to operate our business and provide our
services. Interruptions in our own systems or in the infrastructure of the Internet could hinder our ability to
operate our business, damage our reputation or brand and result in a loss of students, colleges or brands which
could harm our business, results of operations and financial condition.
We rely on third-party software and service providers, including Amazon Web Services, or AWS, to provide
systems, storage and services for our website. Any failure or interruption experienced by such third parties
could result in the inability of students to use our products and services and result in a loss of revenue.
We rely on third-party software and service providers, including AWS, to provide systems, storage and
services for our website. Any technical problem with, cyber-attack on, or loss of access to such third parties’
systems, servers or technologies could result in the inability of our students to rent or purchase print textbooks,
interfere with access to our digital content and other online products and services or result in the theft of end-user
personal information. For example, AWS experienced a service disruption during the second quarter of 2012,
which affected some aspects of the delivery of our products and services for approximately one day. While this
particular event did not adversely impact our business, a similar outage of a longer duration or during peak
periods could.
Our reliance on AWS makes us vulnerable to any errors, interruptions, or delays in their operations. Any
disruption in the services provided by AWS could harm our reputation or brand or cause us to lose students or
revenue or incur substantial recovery costs and distract management from operating our business. AWS may
terminate its agreement with us upon 30 days notice. Upon expiration or termination of our agreement with
AWS, we may not be able to replace the services provided to us in a timely manner or on terms and conditions,
including service levels and cost, that are favorable to us, and a transition from one vendor to another vendor
could subject us to operational delays and inefficiencies until the transition is complete.
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