The Biggest Market Opportunity: Cloud Computing?

Lately, I've noticed that I've become much less of a Mac user, and much more of a Google (Nasdaq: GOOG  ) user.

I mean that I use lots of Google's cloud-hosted software to run my meager writing business. Rather than browsing the Web with Safari, I use Mozilla's open-source Firefox and the preview edition of Google's Chrome. Rather than a stand-alone RSS reader, I use Google Reader. Rather than a landline phone, I use Google Voice -- connected to Skype's $2.75 billion network, of all things. And rather than Mail and Calendar, I use Gmail and Google Calendar, hotlinking both to my iPhone via a simple hack that makes these services behave as if they were connected to an Exchange server.

My MacBook Pro is merely the host for what amounts to a Google-Firefox operating system, with a heaping helping of Microsoft's (Nasdaq: MSFT  ) Office applications mixed in. Apple's (Nasdaq: AAPL  ) own software -- outside of OS X, which many of us Mac users love -- is nowhere to be found.

Software redefined
Interestingly, it wasn't always this way. Mail was once my default email client, and iCal was my default for calendaring. I switched over when I found Gmail more functional and Google Calendar easier to manage. (Try the quick entry on Google Calendar sometime.)

Best of all, I found Google's search better at sifting through my inbox than anything Apple or Microsoft offered. Fast, reliable search is a must-have when you're in an information-driven business. Right now, frankly, that describes all of us.

Doesn't this simple truth explain why Google developed the Android mobile OS, and why it's now creating a computer OS? Isn't it also why Google CEO Eric Schmidt could no longer sit on the board of Apple?

Now boarding: Cloud Nine
I'm not the only one using cloud-computing software. Businesses are engaging with customers in the cloud using salesforce.com (NYSE: CRM  ) , and Oracle (Nasdaq: ORCL  ) is actively pursuing a slice of this growing pie.

The Army and other branches of the U.S. government also want in. In what may be the most visible example of government adoption of cloud computing, federal CIO Vivek Kundra last week introduced Apps.gov in a blog post , in which he also praised the underlying technology:

Cloud computing is the next generation of IT in which data and applications will be housed centrally and accessible anywhere and anytime by a various devices (this is opposed to the current model where applications and most data is housed on individual devices). By consolidating available services, Apps.gov is a one-stop source for cloud services -- an innovation that not only can change how IT operates, but also save taxpayer dollars in the process.

Meet Joe Oddlot, online
I'm encouraged that my country's CIO understands the utility of Web-based computing. But it's still everyday Janes and Joes, not the feds, who are leading the cloud-computing revolution.

Take the rise of social media. More than 87 million people in the U.S. alone logged onto Facebook last month. More than 21 million logged into Twitter, which at least partially explains why venture investors now value the business at $1 billion. These and other cloud services have taken on a greater role in enabling business.

Microsoft, recognizing this, recently introduced a preview edition of the browser-based version of Office. And Adobe (Nasdaq: ADBE  ) committed $1.8 billion to acquire Omniture (Nasdaq: OMTR  ) , a combination that could bring highly regarded measurement and analytics tools to developers and owners of cloud-computing software built on Adobe's AIR platform.

Cloud computing has already changed everything, and the revolution is still in its infancy. That's why I believe today's investors in Google, salesforce.com, Adobe, and other emerging cloud giants will be handsomely rewarded in the years to come.

But that's also just my take. Now it's your turn to weigh in. Is cloud computing the biggest market opportunity right now, or are Google and its peers offering nothing more than a siren call? Please take a moment to vote in the poll below and then leave a comment explaining your rationale.

Adobe, Apple, and Omniture are Stock Advisor selections. Google and salesforce.com are Rule Breakers recommendations. Microsoft is an Inside Value pick. Try any of our Foolish newsletter services free for 30 days.

Fool contributor Tim Beyers had stock and options positions in Apple and Google and a stock position in Oracle at the time of publication. Check out Tim's portfolio holdings and Foolish writings, or connect with him on Twitter as @milehighfool. The Motley Fool is also on Twitter as @TheMotleyFool. The Fool's disclosure policy usually loves a rainy night, but has mixed feelings about rainy days.


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Comments from our Foolish Readers

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  • Report this Comment On September 21, 2009, at 5:42 PM, geoslv wrote:

    I don't know about this. The problem is reliability of other people's computers. You sure you wanna trust your data to someone somewhere else? Think data loss etc. I wouldn't even trust my own computer. Paperless office???

  • Report this Comment On September 21, 2009, at 5:51 PM, geoslv wrote:

    Think AOL blogs. Suddenly AOL decided they would not host blogs anymore. Suddenly everyone lost all the data they had stored there. Apparently not receiving any mail notice.

    Think Imeem. They recently decided not to host users' photos and videos anymore. No advance mail notice. They thought placing a note on the website 5 days in advance was proper notification. People lost stuff they didn't have backup for.

    Think value. I wasn't one, but I can imagine.

    I will give credit to Yahoo for giving more than a month's mail notice when closing some features.

  • Report this Comment On September 22, 2009, at 12:26 AM, caliguy wrote:

    I see the 'cloud' as the beginnings of separating the hardware from the software; currently, that is generally called 'virtual computing' by VMWare and others. If one were to consider the computing assets that currently exist in America, it's near-impossible to figure out how to put that much computing power in a 'cloud' and maintain control and cost-effectiveness. The same idea holds true for software as well, but people understand more about hardware computing power than software's requirements. Since you can't put all that computing power in any one place with todays technology, the 'cloud' will have very real limits and that doesn't even count the security problems it has today. But separating what machine a given application runs on, separating the hardware from the software, is a very compelling idea that can create tremendous efficiencies in computing in general. So while I think the 'cloud' has a number of positives going for it, and I think the model will expand for a while, I believe that the 'cloud' can be no more than a stepping stone to something bigger, or at least more manageable, secure and cost effective. Think about what happens when there are 100,000 really big 'clouds' out there, then what? Somebody will want to find a way to capitalize on consolidating that many 'clouds' into fewer 'clouds.' In reality, 100,000 'clouds' can't even begin to hold all of the computing power they would need to have to keep up with applications demand, the accessibility demand and the cost-efficiencies start going the wrong way. There will be steps beyond the 'clouds' as we learn more about, and have more experience with, the concept of 'cloud computing.'

  • Report this Comment On September 22, 2009, at 3:39 AM, sett0047 wrote:

    Great comments. The "cloud" will make lots of winners, but probably even more losers. When I hear resistance to cloud computing, it usually comes from a desperate IT guy that will do anything to not lose his super ventilated server room.

  • Report this Comment On September 22, 2009, at 11:22 PM, grayhall wrote:

    Yes, cloud computing is the biggest market opportunity. How big is the cloud opportunity? To get this answer we only have to answer two questions:

    (1)How big is the IT infrastructure market?

    (2)What fraction of IT infrastructure will move the cloud?

    The IT infrastructure market consists of three things ... IT infrastructure technology sales, IT infrastructure outsourcing sales, and the internal costs incurred by people who do not outsource the management of IT infrastructure. [Christian please check my facts] IT infrastructure technology sales exceed $250B annually, IT infrastructure outsourcing sales are approximately $200B annually, and the internal costs incurred by do-it-yourselfers probably exceeds that. So let's be conservative and say it's $500B annually and growing.

    What fraction of IT infrastructure today "lives" in the cloud? Tier 1 Research says the hosting market is roughly $10 Billion today. That doesn't include Amazon Web Services revenue, and perhaps other non-hosting forms of cloud computing, so I think it's safe to say less than 5% of all IT infrastructure today lives in the cloud.

    What fraction of IT infrastructure will be cloud-based in 10 years? It's anyone's guess, but let's start by asking where new infrastructure is likely to be deployed by people making rational business decisions. Is the service provider model for managing IT infrastructure in centralized data center facilities with 24x7 support organizations a better, cheaper and faster way to deploy and manage IT infrastructure? I think so. Will 25% of IT infrastructure live in the cloud someday soon? Doesn't seem unreasonable. If so, the cloud opportunity could be 5X it's current size even if the market for IT systems stops growing! And it won't. Oh yeah, and we haven't even talked about application revenue yet.

    Hope that helps with the discussion.

    http://www.cloudstoragestrategy.com

  • Report this Comment On September 25, 2009, at 1:05 PM, deadlysaber wrote:

    Google have said that they are going back to basics with their operating systems stating that, "We're designing the OS to be fast and lightweight, to start up and get you on to the web in a few seconds," said the blog post written by Sundar Pichai, vice-president of product management, and Google's engineering director Linus Upson.

    Google have also indicated that operating systems have never really been designed to be used for the internet, so now they will make internet access and web based programs faster and easier to use then ever before.

    I personally feel that Microsoft could be getting a bit scared, we already know that Google are one of the largest companies in the world, they also have a huge amount of web based applications. They are going to be creating this operating system from scratch, so they will be able to structure it around the current way in which users use computers. Google want to bring everything online and allow people to access their documents and work from any computer, for so long people have relied on their hard drives which then crash and make you lose everything. Google will be making everything and anything web based, which will also ultimately help their search engine in the future.

    --------------------

    Money without intelligence is like a car without a road.

    http://www.intelligentinvestingtips.com

  • Report this Comment On September 27, 2009, at 6:09 PM, geoslv wrote:

    Google is also controlled by the international totalitarian Left. Give them all your data. It's bad enough with the "desktop search", which catalogs everything in your computer and accesses it at their site. Something else to keep in mind, even if you can't stop it.

  • Report this Comment On December 30, 2009, at 3:41 PM, Fool wrote:

    Zzzzzzzzz.

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