Don't let it get away!
Keep track of the stocks that matter to you.
Help yourself with the Fool's FREE and easy new watchlist service today.
It's taken a while, but according to a new study by Gartner, 2013 is the year businesses will break open their wallets and start investing in IT again. According to the Gartner forecast, total spending on global IT-related products and services is expected to reach $3.7 trillion this year, a 4.2% improvement from 2012.
Of the five categories included in the research, enterprise software should account for $296 billion of the overall spending total. The improvement of 6.4% in total sales compared to last year places the enterprise category at No. 1 as the largest growth sector within the IT industry, based on comparisons to 2012. That's all well and good, but the more important question for investors is: Which companies stand to benefit from this growth?
For a lot of folks, Amazon.com (Nasdaq: AMZN ) may seem out of place on a list of enterprise-related investment opportunities. Amazon is, after all, the master of online retailing -- similar to $68 billion eBay (Nasdaq: EBAY ) , particularly as the latter expands beyond its "auction" format to offer its users eBay Deals, a traditional online retailing alternative. The days of Amazon.com and eBay as competitors, however, are long gone. Why?
Because there's a huge distinction between Amazon.com and eBay: diversification. The online retail market still drives revenues at Amazon, just as it does at eBay. According to a Morgan Stanley analyst, Amazon.com could own as much as 25% of what is expected to be a $1 trillion online retail market by 2016. eBay will get a piece of that, too, but what makes CEO Jeff Bezos and team really outstanding, and differentiates Amazon from eBay, is that they've become one of the leaders in cloud and enterprise computing.
Irrespective of the hiccup over the holidays involving access to Netflix (Nasdaq: NFLX ) streaming video, Amazon Web Services (AWS) is a cloud computing and enterprise pioneer. Amazon's new EC2 High Storage solution, launched in late December of last year, is just the latest in a line of 30 unique enterprisewide business solutions. EC2 is expected to roll out to multiple markets -- it's focused on the East Coast now -- in 2013. Good timing, based on Gartner's spending expectations.
While AWS doesn't account for a huge percentage of Amazon's total revenues -- which were up 27 % last quarter to $13.8 billion -- its enterprise/cloud computing sales continue to grow both at home and abroad. Domestically, other net sales, which are largely AWS revenues, nearly doubled last quarter. As enterprise spending improves, Amazon's AWS unit should prosper.
For many, Google (Nasdaq: GOOG ) is quickly becoming what Microsoft (Nasdaq: MSFT ) was in the '90's: the Evil Empire. The European Union certainly isn't a fan, nor was the Federal Trade Commission, until it recently settled its case with Google regarding "favored" search engine results, copying content, and a few other assorted concerns. And talk about irony: The recently released blog on Microsoft's website, responding to the Department of Justice's patent concerns involving Google and the shipping of Microsoft products, is proof positive that roles in the IT industry have changed.
But with all of that, Google remains a strong enterprise investment alternative heading into 2013. Much of the press Google receives -- outside of the legal and regulatory coverage -- consists of its forays into the mobile computing market. Google's Nexus tablets and smartphones are making waves in the industry, and its Android OS continues to dominate the global smartphone market. But the hardware and, of course, advertising revenues from Google's industry-leading search engine tell only part of the story.
Google's enterprisewide cloud computing business services include Google+, data center alternatives, Google Apps (with its 5 million users), web analytics, and mobile solutions. The vast majority of Google's revenues are derived from advertising, no surprise there. But sometimes lost in an analysis of Google is that its suite of enterprise solutions helps to drive its outstanding revenue results, which were up 45% year over year this past quarter alone.
As a full service, enterprise business solutions provider, along with cutting-edge hardware manufacturer, streaming video pioneer, social media outlet, and search leader, Google is hardly reliant on growth in the enterprise market. As it happens though, with $45 billion in cash, outstanding net cash from operations, and multiple solutions to offer, it's ideally suited to take full advantage.
Though they live in different worlds, at least at first glance, Amazon.com and Google share a few key attributes. Amazon and Google offer a range of solutions, successfully growing beyond their initial business objectives and positioning themselves to share in a huge opportunity in 2013: an increase in enterprise spending.