The cloud computing market is expected to grow 23.5% or five times faster over the next four years than the entire rest of the IT market -- from its current value of $47 billion all the way up to $107 billion, according to a new forecast from International Data Corp. (IDC).
IDC also expects that by 2017, 17% of all IT expenditures will be invested in the public cloud and 59% will go to cloud services in general.
And our Canadian friends to the north are in a position to potentially steal billions of dollars in business away from cloud providers in the good ol' U.S.
In fact, snooping by the National Security Agency is already costing the U.S. cloud industry a whole lot of business. Soon after the initial leaks, 10% of foreign companies said they had already cancelled a project with a US cloud provider and 56% said they'd be less likely to use one.
A study by the Information and Technology Innovation Foundation (ITIF) showed that if American providers lose between 10% and 20% of foreign business over three years, the wreckage could total as much as $35 billion.
You'll recall, last June, whistleblower Edward Snowden, revealed that the government agency collected and reviewed sensitive data banks stored over the Internet. As a result, businesses -- both foreign and domestic -- and entire countries want to wash their hands of anything red, white and blue.
The Toronto Star recently reported that the Canadian Cloud Council, an association representing data center firms in Canada, is looking to profit from Snowden's latest snitch on the NSA.
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Canada is rolling out the welcome wagon, wooing the likes of American tech giants Google and Facebook to pack and set up shop across the border. And they're encouraging foreign companies with operations in the U.S. to do the same.
The pilgrimage north has already begun from European banking and insurance firms in the U.S. to American oil and gas companies and retail outlets -- Robert Hart, founder of the Canadian Cloud Council, told The Toronto Star, without outing specific companies.
Many are looking elsewhere to protect confidential information that now resides in giant climate-controlled warehouses on computer servers in the U.S.
Hart also told The Star, "I would say there's a lot of movement right now at a political level to convince some of these larger software companies… to host their software in Canada to get that data away from the NSA for optical reasons."
While the council tries to sell "Project Damage Control" to U.S. cloud industry behemoths, one British Columbia-based company has already added "less snooping" to its sales pitch to foreigners looking for a non-U.S. data hosting provider.
The new marketing message has already begun to pay dividends for Telus Corp. (TU). The Canadian telco has had more inquiries in the past 12 months from companies outside North America than in the entire previous decade.
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The opening of its $75-million, 20,000-square-meter Internet Data Centre in Kamloops, British Columbia in February, couldn't have come at a more opportune time. One of eight data centers in Quebec, Ontario, Alberta and B.C, it will provide services for thousands of Canadian businesses and has room for six more modules of expansion to accommodate businesses that want out of the U.S.
The Kamloops facility is part of $3 billion in infrastructure and facilities upgrades Telus is making across the province through 2014, adding to the $29 billion it has already invested in operations and technology since 2000.
In light of the NSA revelation, this segment of Telus's business may be an unexpected but very welcome gold mine. Keep in mind that much of the revenue funneled into its Internet data centers will come from the IT world, which has a voracious appetite for all things cloud.
While massive opportunities in data storage are sure to fuel Telus' growth, its bread-and-butter actually comes from being the "Comcast/Time Warner Cable" of Canada.
For 2013, Telus took in $11.4 billion in revenue serving 13.3 million customer connections through wireless, data, Internet, TV, entertainment and video services. Next year is looking promising as well, with revenue expected to increase by 4% to 6%.
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Another great quality of Telus: It has paid a dividend every quarter since 1999 and increased the payout consistently since 2004. The $22 billion company currently yields 3.7% and wants to increase it's dividend by at least 10% per year until 2016. Supported by strong free cash flow, Telus also aims to repurchase $500 million in shares each year through that date.
Considering the amount of distrust and continued angst toward the U.S. government for snooping by the NSA, we may be on the brink of a widespread migration north. Telus certainly has the bandwidth to support companies seeking privacy outside the U.S.
Risks to consider: Quebecor's Videotron has elbowed its way into Telus territory and may sway British Columbia customers away with lower wireless service prices. I'd expect minimal fallout though, considering Telus had less than a 1% rate of cancellation in the last quarter.
Action to take --> Shares of TU are up 5% in the past month, trending above its 200-day moving average and near a 52-week-high. I'd be a buyer at the current price of $35.31, especially when it also kicks in a 3.7% dividend.