The Next Big Upset

A 0-2 start. Fifth seed in the NFC playoffs. A quarterback under siege from the New York media since draft day 2004. And a coach who, at times, made Attila the Hun look like the Flying Nun.

This is the group that, today, goes by the title "Super Bowl Champions."

Underdog? Long shot? I'm not sure there's been an adjective invented to describe the magnitude of the New York Giants' 17-14 victory over the previously undefeated New England Patriots in Super Bowl XLII. How about we go with ginormous? (Gitastic? Mansational?)

Shocking? No, not really
I'll admit to a bias here: I'm a Giants fan. And not just any Giants fan. I was a fan of those Giants -- the ones who set a nationally televised record for ineptitude in a 20-20 tie of the St. Louis Cardinals on Monday Night Football in October of 1983. Those Giants were 3-12-1.

These Giants are champs.

And not a single investor -- whether you favor the Pats or the G-Men -- should be surprised. Think of all the upsets in the business world. Google (Nasdaq: GOOG  ) over Yahoo! in search technology. Amazon (Nasdaq: AMZN  ) over bricks-and-mortar department stores. Blue Nile (Nasdaq: NILE  ) and its end run by Zale and peers in jewelry.

Upsets aren't really upsets in the business world. They're as inevitable as a sunrise. Or a risque GoDaddy commercial during the Super Bowl. That's why Fool co-founder David Gardner has a service called Rule Breakers, to which I contribute.

Three industries, three upsets in the making
Our guiding thesis is simple: Find the Next Big Upsets. How do we do it? Start with the industries that have experienced past glory. They're the ones most likely to be complacent and, in the process, be disrupted by a bold upstart.

Here are my three picks for industries that will play host to the Next Big Upset:

  • Software-as-a-service over installed software. SaaS, as it is known, is highly attractive for its cost advantages and lower administrative burden when compared with installed business software from the likes of SAP and Oracle (Nasdaq: ORCL  ) . And let's be honest: Would you really want to install software if you didn't have to? The more than 35,000 customers who use salesforce.com (NYSE: CRM  ) say "no."
  • Content networks over do-it-yourself distribution. Online video has become a phenomenon. Digital applications are becoming more common. (See SaaS, above.) Neither is possible without complex infrastructures for delivering data reliably across the Web. Google has built much of what it needs internally. But few others have and, with the expense of servers, routers, software, and so on, I expect few will. Enter Web content distributor Akamai Technologies (Nasdaq: AKAM  ) , a Rule Breakers pick that I suspect will report excellent earnings on Wednesday night.
  • Virtualization over classic data center infrastructures. With more data comes a greater need for processing power. But power can be costly, especially when it comes to cooling what we techies call data centers -- code-speak for big rooms with lots of servers. The problem is simple. More servers means more power, and more power means more heat. More heat needs to be offset with more air conditioning, which means ... yep, that's right, more power. But what if servers were more efficient? What if their resources could be finely tuned? That's the theory behind virtualization: Manage processing demand more efficiently, avoid buying new servers, and, thereby, keep the power bill manageable. It's why VMWare (NYSE: VMW  ) was one of the hot IPO stories of 2007.

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