8x8 2016 Annual Report Download - page 25

Any costs we incur as a result of fraudulent or disputed transactions could harm our business. In addition, the functionality of our current billing system relies on
certain third party vendors delivering services. If these vendors are unable or unwilling to provide services, we will not be able to charge for our services in a
timely or scalable fashion, which could significantly decrease our revenue and have a material adverse effect on our business, financial condition and operating
results.
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 and could degrade or impede our ability to offer
services.
Our "cloud-based" 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 software solutions 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.
Our infringement of a third party's proprietary technology could disrupt our business.
There has been substantial litigation in the communications, cloud communication 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
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