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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. Features added through acquisition are 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 measures may be breached as a result of third-party action, including
intentional misconduct by computer hackers, employee error, malfeasance or otherwise, during transfer of data to additional data centers or at
any time, and result in someone obtaining unauthorized access to our customers’ data or our data, including our intellectual property and other
confidential business information, or our information technology systems. 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
customers’ data or our data, including our intellectual property and other confidential business information, or our information technology
systems. 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. 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. Any security breach could result in a loss of confidence in the security of our service, damage our reputation,
disrupt our business, lead to legal liability and negatively impact our future sales.
Because we recognize revenue from subscriptions for our service over the term of the subscription, downturns or upturns in sales may
not be immediately reflected in our operating results.
We generally recognize revenue from customers ratably over the terms of their subscription agreements, which are typically 12 to 24
months, although terms can range from one to 60 months. As a result, most of the revenue we report in each quarter is derived from the
recognition of deferred revenue relating to subscription agreements entered into during previous quarters. Consequently, a decline in new or
renewed subscriptions in