Salesforce.com 2011 Annual Report Download - page 21

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ITEM 1A. RISK FACTORS
The risks and uncertainties described below are not the only ones facing us. Other events that we do not
currently anticipate or that we currently deem immaterial also may affect our results of operations, cash flows
and financial condition.
Risks Related to Our Business and Industry
Defects or disruptions in our service could diminish demand for our service and subject us to substantial
liability.
Because our service is complex and we have incorporated a variety of new computer hardware and software
which is developed in-house and acquired from third party vendors, our service may have errors or defects that
users identify after they begin using it that could result in unanticipated downtime for our subscribers and harm
our reputation and our business. Internet-based services frequently contain undetected errors when first
introduced or when new versions or enhancements are released. We have from time to time found defects in our
service and new errors in our existing service may be detected in the future. In addition, our customers may use
our service in unanticipated ways that may cause a disruption in service for other customers attempting to access
their data. Since our customers use our service for important aspects of their business, any errors, defects,
disruptions in service or other performance problems with our service could hurt our reputation and may damage
our customers’ businesses. If that occurs, customers could elect not to renew, or delay or withhold payment to us,
we could lose future sales or customers may make warranty or other claims against us, which could result in an
increase in our provision for doubtful accounts, an increase in collection cycles for accounts receivable or the
expense and risk of litigation.
Interruptions or delays in service from our third-party data center hosting facilities could impair the
delivery of our service and harm our business.
We currently serve our customers from third-party data center hosting facilities located in the United States
and Singapore. Any damage to, or failure of, our systems generally could result in interruptions in our service. As
we continue to add data centers and add capacity in our existing data centers, we may move or transfer our data
and our customers’ data. Despite precautions taken during this process, any unsuccessful data transfers may
impair the delivery of our service. Further, any damage to, or failure of, our systems generally could result in
interruptions in our service. Interruptions in our service may reduce our revenue, cause us to issue credits or pay
penalties, cause customers to terminate their subscriptions and adversely affect our renewal rates and our ability
to attract new customers. Our business will also be harmed if our customers and potential customers believe our
service is unreliable.
As part of our current disaster recovery arrangements, our production environment and all of our customers’
data is currently replicated in near real-time in a facility located on the east coast of the United States. Companies
and products added through acquisition may be temporarily served through alternate facilities. We do not control
the operation of any of these facilities, and they are vulnerable to damage or interruption from earthquakes,
floods, fires, power loss, telecommunications failures and similar events. They may also be subject to break-ins,
sabotage, intentional acts of vandalism and similar misconduct. Despite precautions taken at these facilities, the
occurrence of a natural disaster or an act of terrorism, a decision to close the facilities without adequate notice or
other unanticipated problems at these facilities could result in lengthy interruptions in our service. Even with the
disaster recovery arrangements, our service could be interrupted.
If our security measures are breached and unauthorized access is obtained to a customer’s data or our
data or our information technology systems, 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. These security
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