ANNUAL REPORT 2008 | 2009 - SinnerSchrader AG

Joint Status Report of SinnerSchrader AG35SinnerSchrader processes a major part of its revenueswithin the framework of fixed price agreements.Because of the complexity and the high technicaldemands, the originally calculated costs may beexceeded, resulting in unplanned losses. Furthermore,SinnerSchrader assumes standard guarantee andliability stipulations within the framework of projectcontracts which can result in considerable follow-upcosts for individual projects.• Personnel RisksThe success of SinnerSchrader is heavily dependenton the qualification and motivation of its staff.Particular importance is attached to some employeesin key positions. If SinnerSchrader does not succeedin keeping these employees in the company or incontinuously hiring qualified employees, the successof SinnerSchrader could be significantly impairedbecause of the loss of expertise.The projects that SinnerSchrader undertakes for renownedcustomers sometimes have a considerableeffect in the public sphere. Quality deficiencies inproviding the service can therefore result in negativepublicity, which could significantly impair the sale ofservices and thus future business development.Within the context of providing its services, Sinner-Schrader sometimes has access to the personaldata of its customers’ customers. This data couldbe abused as a result of deliberate or negligent actsby its employees. In addition to the directly resultantdamage, if such an incident were to become known,the associated loss of confidence in SinnerSchraderwould make the sale of its services much moredifficult.In the new segment of Interactive Commerce, Sinner-Schrader offers to develop, maintain, and operateonline sales channels for companies in return for ashare of the revenues; this service includes fulfilment,payment transactions, customer care, and, whereappropriate, online marketing. Since the establishmentand start-up costs are completely or largely borne bySinnerSchrader, contracts lasting several years areconcluded with customers, in the course of whichSinnerSchrader can cover its initial investment andgenerate a positive overall income from the project.Negative developments on the part of the customer,e.g. a deterioration in the perception of the customer’sbrand, a deterioration in the relative competitive positionof the customer in its industry or a bankruptcycan mean that SinnerSchrader cannot earn back itsinitial investment with an adequate return.• Technological RisksThe market for IT and Internet services is characterisedby a high speed of change in the basic technologiesused and by a level of standardisation which remainslow. The future market success of SinnerSchraderdepends on the extent to which the breadth anddepth of the technological expertise can be kept at anadequate level and technological dead-ends can beavoided in view of the high employee orientation costswith limited resources.In the new business field of ad serving, Sinner-Schrader basically develops and markets a softwareproduct. Keeping this product competitive in the longterm requires annual development expenditure of aconsiderable level. It is decisive to the success of theproduct on the market that these further developmentssatisfy market needs in terms of content andtime. If this is not successful, the preliminary developmentwork could no longer be covered by incomefrom marketing.Competitors in this market have bigger developmentteams, more financial resources, and maybe also theopportunity to position their ad serving product withan attractive price due to cross-subsidies. If Sinner-Schrader does not succeed in establishing anadequate cost-benefit ratio by means of differentiation,preliminary development work may not be covered.