According to Gartner, the global cloud computing market will continue growing at a 17.5% annual rate over the next decade. Given its current size of $397 billion, this means it will be more than a trillion-dollar industry within the next 5 years. For investors…
this type of growth and scale means there are many different investment opportunities:
- Mega-cap tech companies building the cloud infrastructure layer.
- Companies building their own cloud-based platforms. These platforms have their own ecosystem in terms of users and developers building apps for them.
- Companies building more targeted, software-based services on top of these platforms and infrastructure.
This type of growth means there are plenty of opportunities for investors in cloud computing. This report will provide a broad overview of the industry, examine some of the most promising niches, and then provide some insight on some of the most intriguing stocks in the sector: Google (GOOGL – Get Rating), Microsoft (MSFT – Get Rating), Workday (WDAY – Get Rating), Veeva Systems (VEEV – Get Rating), and SAP (SAP – Get Rating).
What is Cloud Computing?
At one time, heavy computing power was an expensive and rare asset only available to big corporations and universities. Heavy computing power is a term used to describe all the processing power from servers in data centers that are necessary to operate the cloud. And, technologies of the future like AI, ML, virtual reality will all require even more processing power.
As costs have fallen over the past couple of decades, it’s increasingly become a commodity in that the cost of distribution is more than the cost of production. Now, even distribution costs have also declined while capacity is improving.
Due to these developments, any business can access this heavy computing power and leverage technology to achieve their goals at much less cost. All types of applications requiring computing power are now done through the cloud. Examples include web and application hosting on AWS or Azure, customer relationship management salesforce with Salesforce, or storing photos and videos with Google Drive or Dropbox.
As the costs have dropped, the market has expanded. And, it’s enabled developers to build applications on top of these cloud platforms and applications.
It’s also had notable real-world impacts. For example, the majority of apps and services on smartphones are enabled by cloud computing. The cost of startups has also precipitously declined. Previously, companies would have to invest significant sums in buying or renting servers. Now, companies can access these on a “per-use” basis, turning IT into a flexible cost rather than a fixed cost.
Benefits of Cloud Computing
Cloud computing makes a company’s IT, technology, and operations more powerful, agile, and flexible by enabling the delivery of enterprise-level solutions on demand to increase customer engagement and improve operational efficiency.
Cloud computing encompasses a wide variety of categories. Now, all types of IT services are available on the cloud, from basic infrastructures such as compute and storage to application development platforms and specific software applications. These services are hosted remotely and accessible through the Internet.
loud computing enables companies to scale their IT stack with minimal difficulty. Before, IT services required servers, equipment, and people to operate and manage which was a capital and time-intensive process. For many firms, this constrained growth due to the cost, complexity, and challenge of scaling IT resources.
Now, these services can be scaled according to need in a frictionless manager. As a result, employees can use and operate enterprise-level software on a per-user or per-use basis. Future disruptive technologies are being built on top of and integrated with existing cloud services. Notable examples include…
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