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In early 2010, Value Line reported on the innovation of cloud computing and what exactly this term meant. Since that time, cloud computing has grown from a buzz word to a technology that is currently being utilized, or will be within the near future, by approximately 50% of all organizations. This year, we expect business expenditures for cloud computing to rise by at least 10% and will likely witness a further shift of the technology into the mobile space.  

The primary advantage for adopting cloud computing remains the same; cost savings. That said, the ever-growing push toward on-the-go, on-demand access of information through the use of laptops, smart phones, and tablets has led to a greater need for reaching the cloud through these devices. The response has been swift especially from the major players in the industry like Amazon (AMZN), Google (GOOG) and Salesforce.com (CRM). Amazon software development kits built for Google’s Android and Apple’s iOS give users the ability to easily access the Amazon Web Services platform.  We believe that Google will pick up the pace in the mobile applications arena as it tries to lure more consumers, particularly those using its Android software, to its own cloud computing services. 

Public, private, and hybrid describe the three distinct faces of cloud computing. In the public cloud, resources are shared primarily via the Internet and managed by the company using the service and the third-party provider. In private cloud computing, the infrastructure and resources are managed and shared solely by the user entity. Hybrid is a combination of both of these services, where, for instance, the software of a company in the public cloud is accessed primarily and controlled by the company using the service. Although these terms have been around almost since the inception of cloud computing, it appears that greater emphasis is beginning to be placed on private and hybrid cloud computing.  Private cloud computing requires companies to invest in building the infrastructure and buying the necessary software, therefore reducing the cost advantages. That said, the information is more securely protected and managed by the organization, which lowers the threat of data loss.

Security and data protection are still the main concerns in the cloud computing space. Highlighting other potential risks, though, was the recent failure of Amazon Web Services when the company’s servers went down. Customers faced disruptions in their businesses and were unable to address the problems themselves because of the issue that arose from the cloud computing provider. This situation stressed the importance of having backup and recovery services in place to keep operations flowing in the event of shutdowns in remote servers, especially when a company is not exactly sure of the physical location where their information is being stored. There are issues in the mobile space as well, such as the limitations of the memory, computing power, and network speed related to these devices. The current computing deficiencies of smart phones and tablets may translate into slower access to information in the cloud and bandwidth constraints. We expect to see newer technologies emerging in the next few years to address these concerns, especially with the ongoing proliferation of mobile computing. 

From an investment standpoint, we think that the biggest names will prevail in the cloud computing space. Ongoing investments in research & development and acquisitions will likely aid the endeavors of companies like Google and IBM (IBM - Free IBM Stock Report) in the coming years. Meanwhile, Apple (AAPL) has been getting its feet wet in the cloud computing arena and recently announced its new service iCloud. We believe that in the coming years the company has the potential to take away some market share from pioneer Amazon, specifically with mobile applications. All told, these entities have the resources and hefty war chests to shape the future of cloud computing and drive its evolution from a relatively new technology to a necessary component of everyday business needs.

 

At the time of this article’s writing, the author did not have positions in any of the companies mention.