8x8 2015 Annual Report Download - page 20

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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:
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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 are unable to keep up with our increasing needs for capacity, our ability to grow
our business could be materially and adversely impacted.
Failure of our information technology systems to function properly could result in significant business disruption.
We rely on IT systems to manage numerous functions of our internal operations. Our third party ERP software is not operating on the vendor's
most updated version of the software. Furthermore, we have internally developed IT systems that are not integrated with our ERP system.
These IT systems require specialized knowledge for which we have to train new personnel, and if we were to experience an unusual increase in
attrition of our IT personnel, we may not be adequately equipped to respond to an IT system failure. Although we have never experienced
significant disruption of our IT systems based on the current infrastructure, any failure of our IT systems could result in a significant business
disruption.
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