8x8 2014 Annual Report Download - page 23

We must maintain Payment Card Industry Data Security Standard, or PCI DSS, compliance to bill our customers via credit card. If we fail to
meet minimum-security standards for PCI DSS compliance, credit card providers such as American Express Company or Visa Inc. could refuse
to process credit card transactions on our behalf and our ability to collect payments from our customers would be adversely impacted.
We may also experience losses due to subscriber fraud and theft of service. Subscribers have, in the past, obtained access to our 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. In addition, software and security flaws in
our software can result in unauthorized access to our core network resulting in damages such as fraudulent toll usage on our network.
Additionally, third parties have attempted in the past, and may attempt in the future, to fraudulently induce domestic and international
employees, consultants or customers into disclosing sensitive information, such as user names, passwords or customer proprietary network
information, or CPNI, or other information in order to gain access to our customers' data or to our data. CPNI includes information such as the
phone numbers called by a consumer, the frequency, duration, and timing of such calls, and any services/features purchased by the consumer,
such as call waiting, call forwarding, and caller ID, in addition to other information that may appear on a consumer's bill.
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, cyber attacks. Our headquarters, global networks operations center and one of our third- party data center
facilities are located in the San Francisco Bay Area, a region known for seismic activity. 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. Such an event may also impede our customers' connections to our network, since these
connections also occur over the Internet, and would be perceived by our customers as an interruption of our services, even though such
interruption would be beyond our control. Any of these events could have a material adverse impact on our business.
We license technology from third parties that we do not control and cannot be assured of retaining.
We rely upon certain technology, including hardware and software, licensed from third parties. There can be no assurance that the technology
licensed by us will continue to provide competitive features and functionality or that licenses for technology currently utilized by us or other
technology which we may seek to license in the future, will be available to us on commercially reasonable terms or at all. The loss of, or inability
to maintain, existing licenses could result in delays or reductions in the installation and deployment of our cloud communications and
collaboration services until equivalent technology or suitable alternative products could be developed, identified, licensed and integrated, and
could harm our business. Software defects in the core IP and networking hardware we license from vendors, over which we have little or no
control, can adversely affect our ability to deliver services to our customers and could harm our business. These licenses are on standard
commercial terms made generally available by the companies providing the licenses. The cost and terms of these licenses individually are not
material to our business.
Our infringement of a third party's proprietary technology could disrupt our business.
There has been substantial litigation in the communications, cloud telephony services, semiconductor, electronics, and related industries
regarding intellectual property rights and, from time to time, third parties may claim that we, our customers, our licensees or parties' indemnified
by us are infringing, misappropriating or otherwise violating their intellectual property rights. Third parties may also claim that our employees
have misappropriated or divulged their former employers' trade secrets or confidential information. Our broad range of current and former
technology, including IP telephony systems, digital and analog circuits, software, and semiconductors, increases the likelihood that third parties
may claim infringement by us of their
19