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.
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.