8x8 2014 Annual Report Download - page 19

another network service provider, if available, and qualifying this new service provider could have a material adverse effect on our business,
financial condition or operating results. The rates we pay to our network service providers may also increase, which may reduce our profitability
and increase the retail price of our service.
While we believe that relations with our current service providers are good, and we have contracts in place, there can be no assurance that these
service providers will be able or willing to supply cost-effective services to us in the future or that we will be successful in signing up alternative
or additional providers. Although we believe that we could replace our current providers, if necessary, our ability to provide service to our
subscribers could be impacted during this any such transition, which could have an adverse effect on our business, financial condition or results
of operations. The loss of access to, or requirement to change, the telephone numbers we provide to our customers also could have a material
adverse effect on our business, financial condition or operating results.
Due to our reliance on these service providers, when problems occur in a network, it may be difficult to identify the source of the problem. The
occurrence of hardware and software errors, whether caused by our service or products or those of another vendor, may result in the delay or loss
of market acceptance of our products and any necessary revisions may force us to incur significant expenses. The occurrence of some of these
types of problems may seriously harm our business, financial condition or operating results.
Our physical infrastructure is concentrated in a few facilities and any failure in our physical infrastructure or services could lead to
significant costs and disruptions and could reduce our revenue, harm our business reputation and have a material adverse effect on our
financial results.
Our leased network and data centers are subject to various points of failure. Problems with cooling equipment, generators, uninterruptible power
supply, routers, switches, or other equipment, whether or not within our control, could result in service interruptions for our customers as well as
equipment damage. Because our services do not require geographic proximity of our data centers to our customers, our infrastructure is
consolidated into a few large data center facilities. Any failure or downtime in one of our data center facilities could affect a significant
percentage of our customers. The total destruction or severe impairment of any of our data center facilities could result in significant downtime
of our services and the loss of customer data. Because our ability to attract and retain customers depends on our ability to provide customers with
highly reliable service, even minor interruptions in our service could harm our reputation. Additionally, in connection with the expansion or
consolidation of our existing data center facilities from time to time, there is an increased risk that service interruptions may occur as a result of
server relocation or other unforeseen construction-related issues.
We have experienced interruptions in service in the past. While we have not experienced a material increase in customer attrition following these
events, the harm to our reputation is difficult to assess. We have taken and continue to take steps to improve our infrastructure to prevent service
interruptions, including upgrading our electrical and mechanical infrastructure. However, service interruptions continue to be a significant risk
for us and could materially impact our business.
Any future service interruptions could:
4 cause our customers to seek damages for losses incurred;
4 require us to replace existing equipment or add redundant facilities;
4 affect our reputation as a reliable provider of hosting services;
4 cause existing customers to cancel or elect to not renew their contracts; or
4 make it more difficult for us to attract new customers.
Any of these events could materially increase our expenses or reduce our revenue, which would have a material adverse effect on our operating
results.
We may also be required to transfer our servers to new data center facilities in the event that we are unable to renew our leases on acceptable
terms, or at all, or the owners of the facilities decide to close their facilities, and we may incur significant costs and possible service interruption
in connection with doing so. In addition, any financial difficulties, such as bankruptcy or foreclosure, faced by our third-party data center
operators, or any of the service providers with which we or they contract, may have negative effects on our business, the nature and extent of
which are difficult to predict. Additionally, if our data centers
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