Worried About Hurricane Isaac Hurting the Cloud? Read This First!

Cloud computing is the buzzword of the millennium. Here at the Fool, we know it as a tremendous driver of current and future success, spread across multiple industries. As long as you know how to pick your cherries in the cloud, you can get rich from this huge trend.

Unfortunately, most Americans have no idea what cloud computing is. That gives informed investors a solid leg up on the rest of the market.

A survey of 1,000 Americans, commissioned by software builder and cloud lover Citrix Systems (Nasdaq: CTXS  ) , shows a frightening rift between what the cloud is, and what people think it might be.

For example, 59% correctly say that "the workplace of the future" will exist entirely in the cloud, yet one in three respondents also said that cloud computing is basically science fiction today. Also, 54% of respondents claimed that they don't use cloud computing at all -- but 95% of these self-described Luddites actually do use it.

In fact, you're using the cloud right now. The term covers every service that lives on Internet servers somewhere out there, including the Fool's website. Other examples would include your online banking tools, the Netflix (Nasdaq: NFLX  ) stream you just paused so you could focus on this important article, and the Google (Nasdaq: GOOG  ) search that helped you find me today.

What does "cloud computing" mean, then?
The "cloud" terminology comes from an age-old tradition among network engineers. When asked to draw a diagram over their networks, these stewards of data bits would fill up the paper with detailed rundowns of servers, desktops, routers, and other distinct hardware. But then, the network almost always connects to something out of the engineer's control, such as the networks of another division or a different company -- or the Internet.

A simple cloud quickly became the default icon for these nebulous destinations. It's intuitive shorthand for, "Someone else's network."



 

Diagram from Wikipedia's article on network diagrams, used under the GNU Free Documentation License.

In short, cloud computing is all about connecting to services that don't run as a program on your own computer systems. Easy as pie.

What's the big deal?
But wait a minute -- if that's all there is to cloud computing, haven't we been doing it since the early 1990s -- or maybe even longer? What's with this sudden urge to slap a label on it?

Well, there's a very real trend to do more and more work in the cloud, offloading it from your own systems. Look at the Netflix service, for example. That's a cloud-based alternative to keeping a library of DVD discs or VHS tapes in your living room. It's also a new way to access movies you don't own, which replaces a trip to the video store or rental kiosk with a simple swing of your remote control. If you're surprised by the way Netflix is growing this model across the globe, you just haven't been paying attention to the advantages of digital video.

Cloud computing, 1; bricks and mortar, 0.

Mobile computing also plays a large part in this trend. Now that smartphones and tablets are commonplace, it makes sense that consumers would like to use them for common tasks, like watching Netflix movies, managing online bank accounts, or finding information on the go. Given that even a high-end smartphone is considerably less powerful than your average laptop computer, it makes sense to design interfaces just for mobile use. The back-end processing moves further onto the service provider's hardware, leaving your phone with the simple task of presenting the results.

This is cloud computing at its finest.

Some companies even indulge in a hybrid of cloud computing and real-world manipulation. Consider the way you order stuff from Amazon.com (Nasdaq: AMZN  ) , expecting the merchandise to arrive at your physical doorstep in a couple of days. Sure, you used the cloud to place the order, but Amazon goes beyond that simple interaction.

The reason why you buy Amazon's goods is that the e-tailer often offers significant discounts compared to your local merchants, and that's because its all-digital business model cuts costs with a razor-sharp machete. Instead of paying top dollar for a fully staffed, stocked, and maintained storefront in an attractive retailing neighborhood, Amazon has robotized warehouses with minimal overhead. It's almost an unfair advantage over traditional big-box stores. This company double-dips in the cloud model, and that's why Amazon is such a huge winner in the retail wars.

This is just a snapshot of a rocket ride
Citrix, of course, has a vested interest in shining a positive spotlight on cloud computing. The company is a quiet giant in making the software that powers this revolution. But that's okay, because Citrix doesn't have to twist or bend reality to make it sound good. The fact is, cloud computing is a win-win situation for consumers and companies alike.

On the service provider's end, this model cuts costs, and sharpens the efficiency of operations. Consumers get better services, often at a lower cost. The loser in this exchange? The incumbents, leaders of the old guard, who fail to adapt to the new rules of engagement.

The cloud is a powerful concept, and always evolving. Many of the things we do in the cloud today would not have been possible 10 years ago. Can you imagine trying to shovel a digital video stream through a squeaky 56k modem line? And you ain't seen nothing yet, judging by the inexorable march of progress. Networks are getting faster and cheaper, as seen in the Google Fiber project, servers become more powerful and efficient, and people come up with brand-new ways to use these tools all the time.

Over half of the study's respondents thought that the weather makes a direct impact on cloud computing. I hope you come away from my little lecture knowing that Hurricane Isaac has nothing to do with this industry term, short of, perhaps, knocking a few data centers offline.

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Fool contributor Anders Bylund owns shares in Google and Netflix, and has also created a bull call spread on top of his Netflix shares. He holds no other position in any of the companies mentioned. Check out Anders' holdings and bio, or follow him on Twitter and Google+. The Motley Fool has a disclosure policy.

We Fools may not all hold the same opinion, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.


Read/Post Comments (2) | Recommend This Article (5)

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  • Report this Comment On September 01, 2012, at 9:16 PM, colleran wrote:

    One example of how Amazon is using the cloud is in their cloud music service. I have uploaded my entire music collection (over 35gb). Amazon will store it for me for $27/year. But wait, they are not really storing most of it. What they are doing is giving me access to their mp3s of the music I uploaded. Think of it. They can have thousands, millions of cloud music customers while storing very little of their music. It is the most brilliant use of the cloud I have seen yet. It also gives them access to music not on their site that they could add to sell and, at the same time, keep reducing what they actually store.

    Next I want the movies I own put into the cloud so I don't have lug around all these DVDs. Somehow, I think Amazon is listening.

  • Report this Comment On September 01, 2012, at 9:20 PM, colleran wrote:

    Sorry, I just had to add one other comment. The other thing that the cloud potentially provides is the ultimate in redundancy. I can easily imagine all of the data on my hard drives in the cloud in such a way that it would be practically impossible for it to be lost (as in a disk crash).

    Did I mention storing my DVDs?

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