Salesforce.com 2007 Annual Report Download - page 20

Table of Contents
to be available at reasonable prices or on commercially reasonable terms, or at all. Any loss of the right to use any of this hardware or software could result in
delays in the provisioning of our service until equivalent technology is either developed by us, or, if available, is identified, obtained and integrated, which
could harm our business. Any errors or defects in third-party hardware or software could result in errors or a failure of our service which could harm our
business.
If our security measures are breached and unauthorized access is obtained to a customer's data or our data, our service may be perceived as not
being secure, customers may curtail or stop using our service and we may incur significant legal and financial exposure and liabilities.
Our service involves the storage and transmission of customers' proprietary information, and security breaches could expose us to a risk of loss of this
information, litigation and possible liability. If our security measures are breached as a result of third-party action, employee error, malfeasance or otherwise,
during transfer of data to additional data centers or at any time, and, as a result, someone obtains unauthorized access to our data or our customers' data, our
reputation could be damaged, our business may suffer and we could incur significant liability. Additionally, third parties may attempt to fraudulently induce
employees or customers into disclosing sensitive information such as user names, passwords or other information in order to gain access to our data or our
customers' data, which could result in significant legal and financial exposure and a loss of confidence in the security of our service that would harm our
future business prospects. Because the techniques used to obtain unauthorized access, or to sabotage systems, change frequently and generally are not
recognized until launched against a target, we may be unable to anticipate these techniques or to implement adequate preventative measures. If an actual or
perceived breach of our security occurs, the market perception of the effectiveness of our security measures could be harmed and we could lose sales and
customers. In addition, our customers may authorize third party technology providers, whose applications are available through our AppExchange directory,
to access their customer data. Because we do not control the transmissions between our customers and third-party AppExchange technology providers, or the
processing of such data by third-party AppExchange technology providers, we cannot ensure the complete integrity or security of such transmissions or
processing.
If our on-demand application service is not widely accepted in markets where we have few customers, our future growth and success will be limited.
We derive substantially all of our revenue from subscriptions to our on-demand application service, and we expect this will continue for the foreseeable
future. As a result, widespread acceptance of our service by companies located outside the United States or in industries where we currently have few
customers is critical to our future growth and success. Factors that may affect market acceptance of our service include:
• reluctance by enterprises to migrate to an on-demand application service;
• a limited number of service offerings and risks associated with developing new service offerings;
• the price and performance of our service;
• the level of customization we can offer;
• the location of our data centers;
• the availability, performance and price of competing products and services;
• reluctance by enterprises to trust third parties to store and manage their internal data; and
• adverse publicity about us, our service or the viability, reliability or security of on-demand application services generally from third party
reviews, industry analyst reports and our 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.
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