8x8 2011 Annual Report Download - page 4

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The 8x8 Virtual Office suite of business phone services offers small and medium-sized businesses feature-rich, HD (high
definition) audio-enhanced communications services that provide superior functionality and capabilities relative to traditional
telecommunications services and business phone systems at competitive prices. The 8x8 Virtual Office solution essentially
replaces an on-premise PBX telephone system with a hosted, Internet-based business phone service that is delivered over a
managed or unmanaged Internet connection. We sell pre-programmed IP telephones with speakerphones and a display screen,
in conjunction with our Virtual Office service plans, which enable our business customers to access additional Virtual Office
features through on-screen phone menus. The 8x8 Virtual Office Pro unified communications solution, introduced in January
2010, bundles the 8x8 Virtual Office hosted PBX phone service with essential businesses communications services such as
web conferencing, call recording and archiving, Internet fax, chat, voicemail and presence management and a mobile extension
in a competitively priced offering. 8x8 Virtual Office Pro takes the functionality of an already powerful hosted PBX phone
service to a superior feature set with remote accessibility via any web browser or smart phone, call recording, Internet fax,
Virtual Meeting and integration with vital phone management and collaboration tools. In October 2010, we began selling the
Virtual Office Pro service on a standalone basis so that a business customer would no longer be required to buy a physical IP
telephone to access our Virtual Office services instead such access is provided by a web-based softphone and/or a mobile
extension. All of our services are sold on a subscription basis at price points that are disruptive to legacy solutions because our
services are implemented using our proprietary software on servers in leased data center space that are monitored and managed
by us.
Available Information
We were incorporated in California in February 1987 and reincorporated in Delaware in December 1996. We maintain a
corporate Internet website at the address http://www.8x8.com. The contents of this website are not incorporated in or otherwise
to be regarded as part of this Annual Report. We file reports with the Securities and Exchange Commission, or SEC, which are
available on our website free of charge. These reports include annual reports on Form 10-K, quarterly reports on Form 10-Q,
current reports on Form 8-K and amendments to such reports, each of which is provided on our website as soon as reasonably
practical after we electronically file such materials with or furnish them to the SEC. You can also read and copy any materials
we file with the SEC at the SEC’ s Public Reference Room at 100 F Street, NE, Washington, DC 20549. You can obtain
additional information about the operation of the Public Reference Room by calling the SEC at 1.800.SEC.0330. In addition,
the SEC maintains a website (www.sec.gov) that contains reports, proxy and information statements, and other information
regarding issuers that file electronically with the SEC, including 8x8.
Industry Background
The technology we employ to deliver our service, known as Voice over Internet Protocol (“VoIP”), enables communications
over the Internet through the compression of voice, video and/or other media into data packets that can be efficiently
transmitted over data networks and then converted back into the original media at the other end. Data networks, such as the
Internet or local area networks, or LANs, have always utilized packet-switched technology to transmit information between
two communicating terminals (for example, a PC downloading a page from a web server, or one computer sending an e-mail
message to another computer). IP is the most commonly used protocol for communicating on these packet switched networks.
VoIP allows for the transmission of voice, video and data over these same packet-switched networks, providing an alternative
to traditional telephone networks which use a fixed electrical path to carry voice signals through a series of switches to a
destination.
As a result of the potential cost savings and added features of VoIP, many consumers, enterprises, traditional
telecommunication service providers and cable television providers view VoIP as the future of telecommunications. VoIP has
experienced significant growth in recent years due to:
• Demand for lower cost telephone service;
• Improved quality and reliability of VoIP calls due to technological advances, increased network development and
greater bandwidth capacity; and
• New product innovations that allow VoIP providers to offer services not currently offered by traditional telephone
companies.
The traditional telephone networks maintained by many local and long distance telephone companies, known as the public-
switched telephone networks, or PSTN, were designed solely to carry low-fidelity audio signals with a high level of reliability.
Although these traditional telephone networks are very reliable for voice communications, we believe these networks are not
well-suited to service the explosive growth of digital communication applications for the following reasons: