administrative, operational and financial infrastructure. Our success will depend upon our ability to manage this growth effectively. If we do not increase our revenues commensurate to our increased spending, we may not be profitable. To manage the expected growth of our operations and personnel, we will need to continue to improve our operational, financial and management controls and our reporting systems and procedures. Failure to effectively manage growth could result in difficulty in filling customer orders, declines in product quality or customer satisfaction, increases in costs, production and distribution difficulties, and any of these difficulties could adversely impact our business performance and results of operations.
The gross margins on our products and offerings may decrease due to competitive pressures or otherwise, which could negatively impact our profitability.
It is possible that the gross margins on our products and/or services will decrease in the future in response to competitive pricing pressures, including the bundling of more offerings included in a base price, new product introductions by us or our competitors, increases in data center costs, changes in the costs of components or telecommunications costs, manufacturing issues, the shift in our channel distribution model towards more value-added distributors, royalties we need to pay to use certain intellectual property, growth of our international business, or other factors. The margins on our hosted telephony service are also impacted by the fact that we also sell the broadband connection, which is typically a lower-margin business. In addition, until we achieve a sufficient base of cloud-based customers, the gross margins on our cloud services will tend to be lower. If we experience decreased gross margins and we are unable to respond in a timely manner by introducing and selling new, higher-margin solutions successfully and continually reducing our product and hosting costs, our gross margins may decline, which will harm our business and results of operations.
If we fail to respond to technological changes and evolving industry standards, our solutions could become obsolete or less competitive in the future.
Our industry is highly competitive and characterized by rapidly changing technologies and standards. Accordingly, our operating results depend upon, among other things, our ability to develop and introduce new solutions and our ability to reduce production costs of existing products and costs of providing our hosted services. Our long-term success will depend on our ability to stay ahead of these changes and avoid obsolescence of our solutions.
In addition, as industry standards evolve, it is possible that one standard becomes predominant in the market. This could facilitate the entry into the market for competing products and services, which could result in significant pricing pressure. Additionally, if one standard becomes predominant and we adopt that standard, enterprises may be able to create a unified, integrated system by using phones, switches, servers, applications, or other telecommunications products produced by different companies. Therefore, we may be unable to sell complete systems to enterprise customers because the enterprise customers elect to purchase portions of their telecommunications systems from our competitors.
We rely on third-party resellers and distributors to sell our solutions, and disruptions to, or our failure to develop and manage our distribution channels could adversely affect our business.
A significant portion of our hosted and product, support and services revenue is generated through indirect channel sales. These indirect sales channels include third-party resellers and distributors that market and sell other solutions to customers. We expect indirect channel sales will continue to generate a significant portion of our revenue in the future. Therefore, our success is highly dependent upon establishing and maintaining successful relationships with third-party resellers and distributors, and the financial health of these resellers and distributors.
Recruiting, launching and retaining qualified channel partners and training them in our solutions requires significant time and resources. In order to develop and expand our distribution channel, we must continue to recruit larger and more productive channel partners. We must also scale and improve our processes and procedures that support our channel, including investment in personnel, systems and training, and those processes and procedures may become increasingly complex and difficult to manage.
We have no long-term contracts with any of our channel partners, and our contracts with these channel partners do not prohibit them from offering products or services that compete with ours. Our competitors may be effective in providing incentives to existing and potential channel partners to favor their products or to prevent or