Chegg 2014 Annual Report Download - page 58

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may, in the future, establish alliances or relationships with other competitors or potential competitors. To the extent such
alliances are terminated or new alliances and relationships are established, our business could be harmed.
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. For example, our operations in Visakhapatnam, India were disrupted for several days following the landfall of
cyclone Hudhud in October 2014. Our facilities 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 (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 day
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.
Increased activity during peak periods places substantially increased strain on our operations and any failure to deliver our
products and services during these periods will have an adverse effect on our operating results and financial condition.
We expect a disproportionate amount of activity to occur on our website at the beginning of each academic term as
students search our textbook catalog and place orders for course materials. If too many students access our website within a