Why cloud computing is changing the IT industry and key players

Market Realist

A must-read investor's guide to cloud computing innovations (Part 4 of 8)

(Continued from Part 3)

The changing IT landscape

“Cloud computing” refers to the delivery of IT resources—hardware, computer applications, services, or infrastructure—over the Internet. In traditional IT, demand for applications and capacity is forecasted. Time and money are then invested to develop those resources in-house or purchase them and operate them in-house. With cloud computing, clients aren’t required to own their own infrastructure. This helps them avoid significant capital expenditure and complexities.

In 2013, according to IDC, Amazon (AMZN) and Salesforce (CRM) were market leaders in the cloud computing space. Google (GOOG), Microsoft (MSFT), and Oracle (ORCL) are the other key players.

The chart below shows the differences between on-premise software and cloud computing. The cloud’s rapid growth is clear. In 2009, spending on IT cloud services modestly accounted for 4% of overall spending. That figure is forecast to reach 12% in 2014.

Cloud computing is preferred since it’s:

  1. Scalable, providing unlimited processing and storage capacity
  2. Reliable, enabling access to applications and documents anywhere in the world via the Internet
  3. Efficient, freeing up resources to focus on innovation and product development

Though cloud computing has been heralded as cost-efficient, it’s its business agility that makes it stand apart. By “business agility,” we mean its ability to adapt rapidly in a cost-efficient manner to changing business needs.

Unlike software licensing or the IT-associated service model, cloud computing works on a paid “web-based” model. It uses the Internet to deliver software and services to end users. Its revenue model is based on a monthly pay-as-you-use basis.

Control and security issues surrounding the cloud

Data stored on third-party servers is subject to the cloud provider’s standards and not the company’s standards. On-premise IT resources give clients greater control over their applications and data.

Poor control and security issues are the chief concerns hampering the cloud’s growing popularity.

Continue to Part 5

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