Salesforce.com 2004 Annual Report Download - page 41

Table of Contents
• adverse publicity about us, our service or the viability or security of on-demand application services generally from third party reviews, industry
analyst reports and adverse statements made by competitors.
Many of these factors are beyond our control. The inability of our on-demand application service to achieve widespread market acceptance would harm
our business.
The market for our technology delivery model and on-demand application services is immature and volatile, and if it does not develop or develops
more slowly than we expect, our business will be harmed.
The market for on-demand application services is new and unproven, and it is uncertain whether these services will achieve and sustain high levels of
demand and market acceptance. Our success will depend to a substantial extent on the willingness of enterprises, large and small, to increase their use of on-
demand application services in general, and for CRM in particular. Many enterprises have invested substantial personnel and financial resources to integrate
traditional enterprise software into their businesses, and therefore may be reluctant or unwilling to migrate to on-demand application services. Furthermore,
some enterprises may be reluctant or unwilling to use on-demand application services because they have concerns regarding the risks associated with security
capabilities, among other things, of the technology delivery model associated with these services. If enterprises do not perceive the benefits of on-demand
application services, then the market for these services may not develop at all, or it may develop more slowly than we expect, either of which would
significantly adversely affect our operating results. In addition, as a new company in this unproven market, we have limited insight into trends that may
develop and affect our business. We may make errors in predicting and reacting to relevant business trends, which could harm our business.
We do not have an adequate history with our subscription model to predict the rate of customer subscription renewals and the impact these renewal
rates will have on our future revenue or operating results.
Our customers have no obligation to renew their subscriptions for our service after the expiration of their initial subscription period and in fact, some
customers have elected not to do so. In addition, our customers may renew for a lower priced edition of our service or for fewer subscriptions. We have
limited historical data with respect to rates of customer subscription renewals, so we cannot accurately predict customer renewal rates. Our customers' renewal
rates may decline or fluctuate as a result of a number of factors, including their dissatisfaction with our service and their ability to continue their operations
and spending levels. If our customers do not renew their subscriptions for our service, our revenue will decline and our business will suffer.
Our future success also depends in part on our ability to sell additional features or enhanced editions of our service to our current customers. This may
require increasingly sophisticated and costly sales efforts that are targeted at senior management. If these efforts are not successful, our business may suffer.
Our growth could strain our personnel resources and infrastructure, and if we are unable to implement appropriate controls and procedures to
manage our growth, we may not be able to successfully implement our business plan.
We are currently experiencing a period of rapid growth in our headcount and operations, which has placed, and will continue to place, to the extent that
we are able to sustain such growth, a significant strain on our management, administrative, operational and financial infrastructure. We anticipate that further
growth will be required to address increases in our customer base, as well as our expansion into new geographic areas.
Our success will depend in part upon the ability of our senior management to manage this growth effectively. To do so, we must continue to hire, train
and manage new employees as needed. If our new hires perform poorly, or if we are unsuccessful in hiring, training, managing and integrating these new
employees, or if we are not successful in retaining our existing employees, our business may be harmed. To manage the expected growth of our operations
and personnel, we will need to continue to improve our operational, financial and
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