The Cloud Computing Giant You Don't Know

To look at my email inbox is to see that last week's coverage of cloud computing caught your attention. Not all of you were complimentary. Some wondered where my head was when I called EMC (NYSE: EMC  ) a disk maker when, in fact, it does much more than that, including its own set of cloud computing services.

More of you, though, like Amazon.com (Nasdaq: AMZN  ) as a cloud computing company. You argue that its S3 and EC2 offerings -- otherwise known as rentable storage and computing power -- are game-changing, and that Amazon is way ahead of everyone else in this area.

I'm not so sure. Amazon has limits on what it can offer because its infrastructure is first responsible for managing a massive e-commerce business. IBM (NYSE: IBM  ) , which last week announced a $400 million commitment to expand its cloud computing infrastructure, has no such conflict. Unlike Akamai Technologies (Nasdaq: AKAM  ) and salesforce.com (NYSE: CRM  ) , it's the cloud computing giant you don't know.

IBM operates a vast network of global data centers and, last November, unveiled what it calls the "Blue Cloud," which in many ways apes what Amazon offers but also goes further. Big Blue's clusters are based on its servers and software and come with access to the company's vaunted professional services organization.

We don't yet know how IBM is pricing "Blue Cloud" or what it'll mean for its bottom line. But think about the company's business model: If its professional services unit continues to lead others, IBM should do whatever it must to get really good at creating cloudy clusters. That means investing in infrastructure; $400 million for new and revamped facilities in Tokyo and at Research Triangle Park likely are just the beginning.

More clouds are forming in Big Blue's skies. Don't be surprised if they rain billions.

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Fool contributor Tim Beyers owned shares of Akamai and IBM at the time of publication. When not typing up articles for Fool.com, you'll find him picking growth stocks for Rule Breakers, which counts Akamai as a core holding. Get a daily dose of his Foolish musings right here.

Microsoft is an Inside Value pick. Amazon is a Stock Advisor selection. Try either of these market-beating services free for 30 days. There's no obligation to subscribe. The Motley Fool's disclosure policy enjoys a cloudy day every so often.


Read/Post Comments (5) | Recommend This Article (10)

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  • Report this Comment On August 04, 2008, at 4:59 PM, LouieJunior wrote:

    Good job -- putting down the Amazon shills. I get tired of reading all the hype about Amazon. Face it, the only thing the company does well - is collect money for UPS and FedEx!

  • Report this Comment On August 25, 2008, at 2:42 AM, Shadowlord42 wrote:

    "If its professional services unit continues to lead others..."

    That's a big IF.

    For a company that gets more than half its revenue from its services arm, they sure don't act like that part of the business is all that important, especially when it comes to the people who keep those contracts enforced and that revenue coming in.

    $10.4B in income. $26K / employee. Yet they slapped the services arm by giving OT at the expense of 15% of the service employee's salary....the best have already left. For far too many years they've taken advantage of employees by requiring mandatory OT w/o compensation. Perhaps outsourcing is the answer...oh wait, other country's laws are much stricter than the US regarding OT and compensation. No savings there. Just hire more people, don't worry about quality, quantity will make up for it.

    It will cost more downstream than the over-paid, penny-pinching IBM management sees at this point.

  • Report this Comment On August 26, 2008, at 3:31 PM, rjudas wrote:

    Good article. One should really recognize the big blue has made huge changes in the last few years after face the split-up. I consider them as the strongest competitor in the enterprise cloud field, so keep your eyes open.

    Roland

  • Report this Comment On August 26, 2008, at 3:32 PM, rjudas wrote:

    Good article. One should really recognize the big blue has made huge changes in the last few years after face the split-up. I consider them as the strongest competitor in the enterprise cloud field, so keep your eyes open.

    Roland

  • Report this Comment On February 24, 2009, at 11:46 PM, daftstockpicker wrote:

    Ah bah. Cloud computing is so previous generation and is going to soon become a buzzword in the trasheap of history. Same with Web Services. Same with Web 2.0. COmputing technology changes so fast it is already outdated a couple of months after it is introduced. Would I rather own AMZN or EMC or IBM as an investment? That is all that matters in my opinion. My preference out of the three: AMZN.

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