Overstock.com 2009 Annual Report Download - page 31

Table of Contents
We use internally developed systems for our Website and certain aspects of transaction processing, including personalization databases utilized for
internal analytics, recommendations and order verifications. We have experienced periodic systems interruptions due to server failure and power failure,
which we believe will continue to occur from time to time. If the volume of traffic on our Website or the number of purchases made by customers increases
substantially, we will need to further expand and upgrade our technology, transaction processing systems and network infrastructure. We have experienced
and expect to continue to experience temporary capacity constraints due to sharply increased traffic during sales or other promotions and during the holiday
shopping season. Capacity constraints can cause unanticipated system disruptions, slower response times, delayed page presentation, degradation in levels of
customer service, impaired quality and delays in reporting accurate financial information.
Our transaction processing systems and network infrastructure may be unable to accommodate increases in traffic in the future. We may be unable to
project accurately the rate or timing of traffic increases or successfully upgrade our systems and infrastructure to accommodate future traffic levels on our
Website. In addition, we may be unable to upgrade and expand our transaction processing systems in an effective and timely manner or to integrate any newly
developed or purchased functionality with our existing systems. For example, in the past we have experienced difficulties with our implementation of
infrastructure upgrades, which resulted in our inability to upload new products to our Website for a period of time. Any such difficulties with our transaction
processing systems or other difficulties upgrading, expanding or integrating various aspects of our systems may cause unanticipated system disruptions,
slower response times, and degradation in levels of customer service, additional expense, impaired quality and speed of order fulfillment or delays in reporting
accurate financial information.
If the facility where substantially all of our computer and communications hardware is located fails, our business, results of operations and financial
condition will be harmed.
If the facility where substantially all of our computer and communications hardware is located fails, our business, results of operations and financial
condition will be harmed.
Our success, and in particular, our ability to successfully receive and fulfill orders and provide high-quality customer service, largely depends on the
efficient and uninterrupted operation of our computer and communications systems. Substantially all of our computer and communications hardware is
located at a single co-location facility in Salt Lake City, Utah, with a partially redundant back-up system located less than six miles from the co-location
facility. In the event of an earthquake or major local disaster, both our primary and back-up sites could be affected. Although we have designed our back-up
system in an effort to minimize service interruptions in the event of a failure of our main facility, our systems and operations are vulnerable to damage or
interruption from fire, flood, power loss, telecommunications failure, terrorist attacks, acts of war, break-ins, earthquake and similar events. In the event of a
failure of our primary facility, the failover to our back-up facility would take at least several hours, during which time our Website would be completely shut
down. Our back-up facility is designed to support sales at a level slightly above our average daily sales, but is not adequate to support sales at a high level.
The back-up facility may not process effectively during time of higher traffic to our Website and may process transactions more slowly and may not support
all of the functionality of our primary site. These limitations could have an adverse effect on our conversion rate and sales. Our disaster recovery plan may be
inadequate, and we do not carry business interruption insurance sufficient to compensate us for losses that could occur. Despite the implementation of
network security measures, our servers are vulnerable to computer viruses, physical or electronic break-ins and similar disruptions, the occurrence of any of
which could lead to interruptions, delays, loss of critical data or the inability to accept and fulfill customer orders. The occurrence of any of the foregoing risks
could harm our business, prospects, financial condition and results of operations.
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