Salesforce.com 2011 Annual Report Download - page 26

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In addition, if we finance acquisitions by issuing equity or convertible debt securities, our existing
stockholders may be diluted which could affect the market price of our common stock. Further, if we fail to
properly evaluate and execute acquisitions or investments, our business and prospects may be seriously harmed
and the value of your investment may decline.
We rely on third-party computer hardware and software that may be difficult to replace or which could
cause errors or failures of our service.
We rely on computer hardware purchased or leased and software licensed from third parties in order to offer
our service, including database software from Oracle Corporation. This hardware and software may not continue
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 significantly increase our expenses and otherwise 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. 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 the market for our technology delivery model and enterprise cloud computing services develops more
slowly than we expect, our business could be harmed.
The market for enterprise cloud computing application services is not as mature as the market for packaged
enterprise software, 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 enterprise cloud computing 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 an enterprise
cloud computing application service. Furthermore, some enterprises may be reluctant or unwilling to use
enterprise cloud computing 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 enterprise cloud computing 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, we may make errors in predicting and reacting to
relevant business trends, which could harm our business. Our success also depends on the willingness of third-
party developers to build applications that are complementary to our service. Without the development of these
applications, both current and potential customers may not find our service sufficiently attractive. In addition, for
those customers who authorize third-party technology partner access to their data, we do not warrant the
functionality, security and integrity of the data transmission or processing. Despite contract provisions to protect
us, customers may look to us to support and warrant the third-party applications, which may expose us to
potential claims, liabilities and obligations for applications we did not develop or sell.
The market in which we participate is intensely competitive, and if we do not compete effectively, our
operating results could be harmed.
The market for enterprise CRM business applications and development platforms is highly competitive,
rapidly evolving and fragmented, and subject to changing technology, shifting customer needs and frequent
introductions of new products and services. We compete primarily with vendors of packaged CRM software and
companies offering on-demand CRM applications. We also compete with internally developed applications and
face, or expect to face, competition from enterprise software vendors and online service providers who may
develop toolsets and products that allow customers to build new applications that run on the customers’ current
infrastructure or as hosted services. Our current competitors include:
• enterprise software application vendors;
• on-demand CRM application service providers;
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