8x8 2013 Annual Report Download - page 25

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goods and services. Our liability risk will increase if a larger fraction of our 8x8 transactions involve fraudulent or disputed
credit card transactions. Any costs we incur as a result of fraudulent or disputed transactions could harm our business. In
addition, the functionality of our current billing system relies on certain third party vendors delivering services. If these
vendors are unable or unwilling to provide services, we will not be able to charge for our 8x8 services in a timely or scalable
fashion, which could significantly decrease our revenue and have a material adverse effect on our business, financial condition
and operating results.
We have experienced losses due to subscriber fraud and theft of service.
Subscribers have, in the past, obtained access to the 8x8 service without paying for monthly service and international toll calls
by unlawfully using our authorization codes or by submitting fraudulent credit card information. To date, such losses from
unauthorized credit card transactions and theft of service have not been significant. We have implemented anti-fraud
procedures in order to control losses relating to these practices, but these procedures may not be adequate to effectively limit
all of our exposure in the future from fraud. If our procedures are not effective, consumer fraud and theft of service could
significantly decrease our revenue and have a material adverse effect on our business, financial condition and operating results.
Natural disasters, war, terrorist attacks or malicious conduct could adversely impact our operations that could degrade
or impede our ability to offer services.
As a provider of “cloud-based” services, our services rely on uninterrupted connection to the Internet through data centers and
networks. Any interruption or disruption to our network, or the third parties on which we rely, could adversely impact our
ability to provide service. Our network could be disrupted by circumstances outside of our control including natural disasters,
acts of war, terrorist attacks or other malicious acts including, but not limited to, cyberattacks. Should any of these events occur
and interfere with our ability to operate our network even for a limited period of time, we could incur significant expenses, lose
substantial amounts of revenue, suffer damage to our reputation, and lose customers. Any of these events could have a
material adverse impact on our business.
Vulnerabilities to security breaches, cyber intrusions and other malicious acts could adversely impact our business.
Critical to our provision of service is the storage, processing, and transmission of confidential and sensitive data. We store,
process and transmit a wide variety of confidential and sensitive information including credit card, bank account and other
financial information, proprietary, trade secret or other data that may be protected by intellectual property laws, customers’ and
employees’ personally identifiable information, as well as other sensitive information. We, along with others in the industry,
will be subject to cyber threats and security breaches, either by third parties or employees, given the nature of the information
we store, process and transmit. Our continued ability to securely store, process and transmit data is essential to our business.
We are aware of the risks associated with cyber threats and we have implemented a number of measures to protect ourselves
from cyber attacks. Specifically, we have redundant servers such that if we suffer equipment or software failures in one
location or on one set of servers, we have the ability to provide continuity of service. We actively monitor our network for
cyber threats and implement protective measures periodically. We conduct vulnerability assessments and penetration testing
and engage in remedial action based on such assessments. Depending on the evolving nature of cyber threats and the measures
we may have to implement to continue to maintain the security of our networks and data, our profitability may be adversely be
impacted or we may have to increase the retail price of our services that may make our offerings less competitive with other
communications providers.
But, like all other companies in the marketplace, there is no guarantee that we will not be adversely impacted by cyberattacks.
If our employees or third parties obtain unauthorized access to our secure network, or if our network is penetrated, our service
could be disrupted, sensitive information could be lost, stolen or disclosed that could have variety of negative impacts
including legal liability in form of class action lawsuits, investigations by federal and state law enforcement agencies, could
expose us to fines or penalties, and could harm our business reputation where any of these eventualities could have a material
negative impact on our business.