Salesforce.com 2004 Annual Report Download - page 47

Table of Contents
by, such laws and regulations that are applicable to the businesses of our customers may limit the use and adoption of our service and reduce overall demand
for it. Furthermore, privacy concerns may cause our customers' customers to resist providing the personal data necessary to allow our customers to use our
service effectively. Even the perception of privacy concerns, whether or not valid, may inhibit market adoption of our service in certain industries. For
example, regulations such as the Gramm-Leach-Bliley Act, which protects and restricts the use of consumer credit and financial information, and the Health
Insurance Portability and Accountability Act of 1996, which regulates the use and disclosure of personal health information, impose significant requirements
and obligations on businesses that may affect the use and adoption of our service.
The European Union has also adopted a data privacy directive that requires member states to impose restrictions on the collection and use of personal
data that, in some respects, are far more stringent, and impose more significant burdens on subject businesses, than current privacy standards in the United
States. All of these domestic and international legislative and regulatory initiatives may adversely affect our customers' ability to collect and/or use
demographic and personal information from their customers, which could reduce demand for our service.
In addition to government activity, privacy advocacy groups and the technology and other industries are considering various new, additional or different
self-regulatory standards that may place additional burdens on us. If the gathering of personal information were to be curtailed in this manner, CRM solutions
would be less effective, which may reduce demand for our service and harm our business.
The success of our business depends on the continued growth and acceptance of the Internet as a business tool.
Expansion in the sales of our service depends on the continued acceptance of the Internet as a communications and commerce platform for enterprises.
The Internet could lose its viability as a business tool due to delays in the development or adoption of new standards and protocols to handle increased
demands of Internet activity, security, reliability, cost, ease-of-use, accessibility and quality-of-service. The performance of the Internet and its acceptance as
a business tool has been harmed by "viruses," "worms" and similar malicious programs, and the Internet has experienced a variety of outages and other delays
as a result of damage to portions of its infrastructure. If for any reason the Internet does not remain a widespread communications medium and commercial
platform, the demand for our service would be significantly reduced, which would harm our business.
Our business is subject to changing regulations regarding corporate governance and public disclosure that have increased both our costs and the
risk of noncompliance.
We are subject to rules and regulations by various governing bodies, including the Securities and Exchange Commission, New York Stock Exchange
and Public Company Accounting Oversight Board, that are charged with the protection of investors and the oversight of companies whose securities are
publicly traded. Our efforts to comply with these new regulations, most notably the Sarbanes-Oxley Act, or SOX, have resulted in, and are likely to continue
to result in, increased general and administrative expenses and a diversion of management time and attention to compliance activities.
By the end of fiscal 2006, we are required to comply with the SOX requirements involving the assessment of our internal controls over financial
reporting and our external auditors' audit of that assessment. Although we believe our on-going review and testing of our internal controls will enable us to be
compliant with the SOX requirements, we may identify deficiencies that we may not be able to remediate by the end of fiscal 2006. If we cannot assess our
internal controls over financial reporting as effective, or our external auditors are unable to provide an unqualified attestation report on such assessment, our
stock price could decline.
Moreover, because these laws, regulations and standards are subject to varying interpretations, their application in practice may evolve over time as new
guidance becomes available. This evolution may result in
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