8x8 2016 Annual Report Download - page 22

If our software fails due to defects or similar problems, and if we fail to correct any defect or other software problems, we could lose customers, become
subject to service performance or warranty claims or incur significant costs.
Our customers use our service to manage important aspects of their businesses, and any errors, defects, disruptions to our service or other performance problems
with our service could hurt our reputation and may damage our customers' businesses. Our services and the systems infrastructure underlying our cloud
communications platform incorporate software that is highly technical and complex. Our software has contained, and may now or in the future contain, undetected
errors, bugs, or vulnerabilities. Some errors in our software code may only be discovered after the code has been released. Any errors, bugs, or vulnerabilities
discovered in our code after release could result in damage to our reputation, loss of users, loss of revenue, or liability for damages, any of which could adversely
affect our business and financial results. We implement bug fixes and upgrades as part of our regularly scheduled system maintenance, which may lead to system
downtime. Even if we are able to implement the bug fixes and upgrades in a timely manner, any history of defects, or the loss, damage or inadvertent release of
confidential customer data, could cause our reputation to be harmed, and customers may elect not to purchase or renew their agreements with us and subject us to
service performance credits, warranty claims or increased insurance costs. The costs associated with any material defects or errors in our software or other
performance problems may be substantial and could materially adversely affect our operating results.
Our inability to use software licensed from third parties, or our use of open source software under license terms that interfere with our proprietary
rights, could disrupt our business.
Our technology platform incorporates software licensed from third parties, including some software, known as open source software, which we use without charge.
Although we monitor our use of open source software, the terms of many open source licenses to which we are subject have not been interpreted by U.S. or foreign
courts, and there is a risk that such licenses could be construed in a manner that imposes unanticipated conditions or restrictions on our ability to provide our
platform to our customers, content creators and brand advertisers. In the future, we could be required to seek licenses from third parties in order to continue
offering our platform, which licenses may not be available on terms that are acceptable to us, or at all. Alternatively, we may need to re-engineer our platform or
discontinue use of portions of the functionality provided by our platform. In addition, the terms of open source software licenses may require us to provide
software that we develop using such software to others on unfavorable license terms. Our inability to use third party software could result in disruptions to our
business, or delays in the development of future offerings or enhancements of existing offerings, which could impair our business.
Our business depends on continued, unimpeded access to the Internet by us and our users, but Internet access providers and Internet backbone providers
may be able to block, degrade or charge for access to or bandwidth use of certain of our products and services, which could lead to additional expenses
and the loss of users.
Our products and services depend on the ability of our users to access the Internet, and certain of our products require significant bandwidth to work effectively. In
addition, users who access our services and applications through mobile devices, such as smartphones and tablets, must have a high-speed connection, such as Wi-
Fi, 3G, 4G or LTE, to use our services and applications. Currently, this access is provided by companies that have significant and increasing market power in the
broadband and Internet access marketplace, including incumbent telephone companies, cable companies and mobile communications companies. Some of these
providers offer products and services that directly compete with our own offerings, which give them a significant competitive advantage. Some of these broadband
providers have stated that they may exempt their own customers from data-caps or offer other preferred treatment their customers. Other providers have stated that
they may take measures that could degrade, disrupt or increase the cost of user access to certain of our products by restricting or prohibiting the use of their
infrastructure to support or facilitate our offerings, or by charging increased fees to us or our users to provide our offerings, while others, including some of the
largest providers of broadband Internet access services, have committed to not engaging in such behavior. These providers have the ability generally to increase
their rates, which may effectively increase the cost to our customers of using our cloud software solutions.
On March 12, 2015, the Federal Communications Commission, or FCC, released an order that would prevent broadband Internet access providers from degrading
or otherwise disrupting a broad range of services provisioned over consumers' and enterprises' broadband Internet access lines. A number of providers and trade
organizations have appealed the FCC's order. We cannot predict the ultimate outcome of this rulemaking or predict whether the FCC's rules will be upheld on
appeal. Although we believe interference with access to our products and services is unlikely, broadband Internet access provider interference has occurred in
limited circumstances in the United States and could result in a loss of existing users and increased costs, and could impair our ability to attract new users, thereby
negatively impacting our revenue and growth.
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