Facebook's operations: A look at the IT risks

Facebook's operations: A look at the IT risks

Summary: Security, scaling, tweaking software and uptime keep Facebook's technology wonks up at night.

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Facebook's long-awaited initial public offering filing revealed the social network's financial picture, but the company also had to lift the kimono on its technology infrastructure. Simply put, there are technology risks that come with scaling enough to support 483 million daily active users.

Disclosure about technology infrastructure isn't new in IPO filings, but there are some key points worth noting about Facebook.

Among the key IT facts from Facebook's filing.

More: Facebook's IPO filing | Facebook files for IPO as Wall Street drools | Facebook files for $5 billion IPO | Facebook has over 845 million users |

Facebook's IPO: Is Zuckerberg-Page the new Jobs-Gates? | CNET: Facebook finally files for IPO | CBS News: Facebook seeks $5 billion IPO

Facebook is aware that security could hurt. "Computer malware, viruses, and computer hacking and phishing attacks have become more prevalent in our industry, have occurred on our systems in the past, and may occur on our systems in the future. Because of our prominence, we believe that we are a particularly attractive target for such attacks," said Facebook. Translation: We have a bull’s eye on us. Facebook is going to pull an Amazon and Google and sacrifice margins for data centers. Facebook said:

Historically, our costs have increased each year due to these factors and we expect to continue to incur increasing costs, in particular for servers, storage, power, and data centers, to support our anticipated future growth. We expect to continue to invest in our global infrastructure in order to provide our products rapidly and reliably to all users around the world, including in countries where we do not expect significant short-term monetization. Our expenses may be greater than we anticipate, and our investments to make our business and our technical infrastructure more efficient may not be successful.

Uptime matters---a lot. Facebook noted:

As our user base and the amount and types of information shared on Facebook continue to grow, we will need an increasing amount of technical infrastructure, including network capacity, and computing power, to continue to satisfy the needs of our users. It is possible that we may fail to effectively scale and grow our technical infrastructure to accommodate these increased demands.

Third parties need to deliver. Facebook relies on a series of third party providers---notably software as a service providers. Providers to Facebook include Salesforce.com, NetSuite and Oracle to name a few, we've been told.

Facebook has proprietary technology risks. Facebook said:

In 2011, we began serving our products from data centers owned by Facebook using servers specifically designed for us. We plan to continue to significantly expand the size of our infrastructure, primarily through data centers that we design and own. The infrastructure expansion we are undertaking is complex, and unanticipated delays in the completion of these projects or availability of components may lead to increased project costs, operational inefficiencies, or interruptions in the delivery or degradation of the quality of our products. In addition, there may be issues related to this infrastructure that are not identified during the testing phases of design and implementation, which may only become evident after we have started to fully utilize the underlying equipment, that could further degrade the user experience or increase our costs.

The big takeaway with that disclosure is that Facebook is wrestling with procurement. HP CEO Meg Whitman noted that Facebook has had issues procuring parts amid a hard drive shortage.

Software matters. Facebook's code is "highly technical and complex." "Any errors, bugs, or vulnerabilities discovered in our code after release could result in damage to our reputation, loss of users, loss of revenue, or liability for damages, any of which could adversely affect our business and financial results," said Facebook. Acquisitions and integration experience could hurt. Facebook noted that it may struggle integrating acquired companies on the technology front.

Related: Facebook open sources its server, data center designs: Hardware fallout to follow

Topic: Social Enterprise

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10 comments
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  • Risks, Schmisks...What About Disdain For Its Users?

    Invest in a company whose CEO calls its users "dumb f_cks"?

    Yeah, I know...Mr. Zuckerberg has since claimed it was a case of "youthful indiscretion". Sure, Mark.

    I think I'll pass on this one.
    slingzenarrowzuvowtrayjissforchin
  • RE: Facebook's operations: A look at the IT risks

    the figure is not happy

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    hengheng2011
  • RE: Facebook's operations: A look at the IT risks

    Titanic Traction or Tottering Flop? This IPO seems a little too pre-sucked by Goldman and the billionaires and then they're passing out a few high priced crumbs to the excited natives, don't you think? What a fantastic favor they're doing letting us buy into The Facebook Juggernaut as it becomes the electronic womb in which we live our new agey lives. I'll wait until people sort out that they actually don't have quite as much time as they thought for all the Facebook nonsense. There's not actually as much free money and credit to live off of any more for the next umpteen years and you can't spend quite as much time clicking thumbs up, etc. I'm sure it'll be a great business, but not quite the center of the universe that would fulfill its grandiose narrative.
    kelvinator222
  • RE: Facebook's operations: A look at the IT risks

    Facebook users are no more than suckerbergs for Zukerberg..count me out either way.
    Old Bat
  • RE: Facebook's operations: A look at the IT risks

    Facebook needs 5 billion to convert cash into new services and applications.

    1) VEVO. Facebook will sign a deal with VEVO worth hundreds of millions maybe billions to switch VEVO from youtube and host the service in Facebook.

    2)Music. Facebook will sign deals with many music record industry labels to provide music using the social network.

    3) New applications designed for the PostPC era, Windows 8 will support Kinect, meaning it will need skilled engineers to build motion applications for Facebook and Kinect on laptops, tablets, HTPC's and All In One PCs.

    I'm sure this expensive investment Facebook will make after the IPO will attract more than 1 billion of users at summer of 2012. It will be the 1st social network to reach a billion of users, and that are a lot of users.
    Gabriel Hernandez
  • RE: Facebook's operations: A look at the IT risks

    Facebook needs IPO to convert cash into new services and applications.

    1) VEVO. Facebook will sign a deal with VEVO worth hundreds of millions maybe billions to switch VEVO from youtube and host the service in Facebook.

    2)Music. Facebook will sign deals with many music record industry labels to provide music using the social network.

    3) New applications designed for the PostPC era, Windows 8 will support Kinect, meaning it will need skilled engineers to build motion applications for Facebook and Kinect on laptops, tablets, HTPC's and All In One PCs.

    I'm sure this expensive investment Facebook will make after the IPO will attract more than 1 billion of users at summer of 2012. It will be the 1st social network to reach a billion of users, and that are a lot of users.
    Gabriel Hernandez
  • RE: Facebook's operations: A look at the IT risks

    Kids are all over it. So are their friends and their friends' friends. What they post will be with them forever, like tattoos.
    nhpollack@...
  • Facebook's operations, risks, and IPO:

    Can you say "bubble"? And we know what THOSE do. <br><br>They are inflated with lighter-than-air "H" ("Hype", first element of the PR table), which ignites spontaneously in contact with reality and burns through any valuata it touches. If you follow the chain far enough, the 'opportunity' presented consists of a closed circle of pickpockets passing wallets around (of course, the people who have already made an emotional commitment will argue, but then that is a recognized symptom, or maybe 'diagnostic indicator' would be a better word).

    Decline invitations to JOIN that circle -- life is too short.

    And (of course) I could be wrong. "Can't win if you don't enter" and all that. And "Look at what happened with Microsoft" -- although THAT isn't really pertinent, being part of a boundary condition, instead of the "phase change" which Facebook is wave-riding.
    flared0ne
  • RE: Facebook's operations: A look at the IT risks

    The IPO will not be for us mere mortals unless you purchase a mutual fund that re-sells IPOs. When the IPO is offered it will skyrocket for a couple months then come back down to Earth. Is it a good investment? I dunno??? Facebook has become a necessary evil for corporations so you can get their coupons and to learn what your kids are up to, other than that it is nothing more than a black hole that you post your most intimate movements on to have glued where everyone can see forever and ever!
    I would like to get in on the IPO for the first wave, and then I would bail very quickly before it tanks and the next security or privacy issue hits.
    Yes, they have (on paper) generated some good growth over the past couple years, but ??? and a BIG BUT ??? what is the point of Facebook? Where is the future of Facebook going? Pay service? I don???t think so. Another Amazon shopping network ??? I don???t think so ??? a great search engine? I don???t think so. I know when I go on it I am pi$$.d to have all the ads popping up, all the warnings about 3rd party applications getting my data and making stupid posts that I just won 3,000 tokens on Blind Farmers of Fishville.
    Personally I deleted my account over a year ago when I tired of the privacy issues, then to get a coupon for liking a company I re-upped??? behold ALL OF MY FRIENDS, POSTS, DATA remained although I deleted my account. I smell a law suit happening somewhere down the road for this crap.
    Psoup1965
  • Dotcom bubble

    those who will not learn from history are condemned to repeat it.
    oldbaritone