Digital River 2002 Annual Report Download - page 22

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Many of our competitors have, and potential competitors may have, more experience developing Internet-based software, services and electronic
commerce solutions, larger technical staffs, larger customer bases, more established distribution channels and customer relationships, greater
brand recognition and greater financial, marketing and other resources than us. In addition, competitors may be able to develop services that are
superior to our services, achieve greater customer acceptance or have significantly improved functionality as compared to our existing and
future products and services. Our competitors may be able to respond more quickly to technological developments and changes in customers’
needs. Our inability to compete successfully against current and future competitors could cause our revenue to decline.
Failure to properly manage and sustain our expansion efforts could strain our management and other resources.
Our ability to successfully offer services and implement our business plan in a rapidly evolving market requires an effective planning and
management process. We have rapidly and significantly expanded the depth and breadth of our services offerings. Failure to properly manage
this expansion could place a significant strain on our managerial, operational and financial resources. To manage this expansion, we are
required to continually:
• improve existing and implement new operational, financial and management controls, reporting systems and procedures;
• install new management information systems; and
• train, motivate, retain and manage our employees.
We may be unable to install management information and control systems in an efficient and timely manner, and our current or planned
personnel, systems, procedures and controls may be inadequate to support our operations.
Failure to develop our technology to accommodate increased traffic could reduce demand for our services and impair the growth of our
business.
We periodically enhance and expand our technology and transaction-processing systems, network infrastructure and other technologies to
accommodate increases in the volume of traffic on our technology platform. Our inability to add software and hardware or to develop and
upgrade existing technology, transaction-processing systems or network infrastructure to manage increased traffic on this platform may cause
unanticipated systems disruptions, slower response times and degradation in client services, including impaired quality and speed of order
fulfillment. Failure to manage increased traffic could harm our reputation and significantly reduce demand for our services, which would impair
the growth of our business. We may be unable to improve and increase the capacity of our network infrastructure sufficiently or anticipate and
react to expected increases in the use of the platform to handle increased volume. Further, additional network capacity may not be available
from third-party suppliers when we need it. Our network and our suppliers’ networks may be unable to maintain an acceptable data transmission
capability, especially if demands on the platform increase.
We have started migrating our current clients from CNS version 3 to our new CNS version 4 platform. Failure of the CNS version 4 to perform
as expected could lead to client dissatisfaction and loss of business.
Our industry is characterized by rapid technological change that may make our technology and systems obsolete or cause us to incur
substantial costs to adapt to these changes.
To remain competitive, we must continue to enhance and improve the responsiveness, functionality and features of the CNS platform and the
underlying network infrastructure. If we incur significant costs without adequate results, or are unable to adapt rapidly to technological changes,
we may fail to achieve our business plan. The Internet and the electronic commerce industry are characterized by rapid technological change,
changes in user and client requirements and preferences, frequent new product and service introductions embodying new technologies and the
emergence of new industry standards and practices that could render our technology and systems obsolete. To be successful, we must adapt to
rapid technological change by licensing and internally developing leading technologies to enhance our existing services, developing new
products, services and technologies that address the increasingly sophisticated and varied needs of our clients, and responding to technological
advances and emerging industry standards and practices on a cost-effective and timely basis. The development of our CNS technology platform
and other proprietary technologies involves significant technical and business risks. We may fail to use new technologies effectively or fail to
adapt our proprietary technology and systems to client requirements or emerging industry standards.