This Is Why You Bet on Cloud Computing

Microsoft (Nasdaq: MSFT  ) wants to store your data in a trailer park.

That's the metaphor CNET's Ina Fried used in describing Mr. Softy's latest data center plan recently, and she's right. Mobile computing facilities ought to be fancier than this. Instead, they look like metallic white shipping containers. Tie a few together, and you've got a mobile data center that looks like a trailer park.

"Once built, the units can be placed inside a large building or when equipped with outer protective panels, they can reside out in the open and be linked together to build out an entire datacenter," writes Kevin Timmons in this blog post. Timmons is Microsoft's general manager for data center services.

Don't let the visual fool you. These ITPAC containers, as Microsoft calls them, pack a mishmash of computing, storage, and networking equipment. Each container is capable of housing 400 to 2,500 servers, cooled by ambient air and a single water hose. Timmons says tests show ITPACs can be assembled in four days. Call it cloud computing, gone portable.

Google (Nasdaq: GOOG  ) ought to feel threatened by this. So should Amazon.com (Nasdaq: AMZN  ) and salesforce.com (NYSE: CRM  ) . Hosted services such as SharePoint, Exchange, Bing, and of course Azure are Mr. Softy's answer to these and other cloud computing upstarts. If the company proves capable of deploying data centers this quickly and pervasively, it can make those services very powerful.

But this idea also isn't new. In 2007, Google obtained a patent for "modular data centers with modular components," which translated means "data center in a box." Sun Microsystems has demonstrated similar technology in years past, as has IBM (NYSE: IBM  ) . Both remain large data center operators.

Nevertheless, the point remains. The fast, mostly wireless, and browser-accessible infrastructure being built today is akin to the highway infrastructure build-out that kicked off in 1956 with President Eisenhower's signing of the Federal-Aid Highway Act. Ford and General Motors prospered in the years following.

For the cloud, Google is already Ford. Microsoft, with its data centers, hopes to be GM. Betting on either right now could produce decades of healthy investing profits.

Would you buy Google right now? How about Microsoft? Make your voice heard using the comments box below.

Amazon and Ford are Motley Fool Stock Advisor selections. Google and salesforce.com are Rule Breakers recommendations. Microsoft is an Inside Value pick. Motley Fool Options has recommended a diagonal call on Microsoft. Try any of our Foolish newsletter services free for 30 days.

Fool contributor Tim Beyers is a member of the Rule Breakers stock-picking team. He owned shares of IBM and Google 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. Life is a highway for the Fool's disclosure policy.


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  • Report this Comment On May 23, 2010, at 9:40 AM, kportnoy wrote:

    What is the MS strategy? A more secure geographically diversified cloud than heavily centralized Google as a platform for applications to compete with Google in a ad-supported business model? I doubt it. How about leveraging the lessons of the WinTel PC platform; grown huge? I bet the latter.

    Over the past 50 years the computing pendulum has swung from the center (BigBlue) to the periphery (WIntel) and now back to the center (Cloud Computing). Narrow pants are coming back, too. There was a similar pendulum between timesharing and and owned platforms. If I'm too small to buy my own IBM datacenter, I'll pay to use yours.

    In the absence of any input from real sources, I surmise that ITPACs will bring a powerful turn-key centralized cloud computing architecture to smaller and smaller venues: 1) mid-sized businesses for commercial and proprietary applications and 2) smaller vendors developing cloud-applications for a broad external customer base.

    The economics of shared vs. owned data centers would be an indicator to watch. I can pay George's company, and trust George, and pay his prices, to run and secure my hardware platform or I can pay Jim a smaller amount to operate the ITPACs in the basement.

    This is not "cloud computing" as it is currently used in conversation. This is an architectural shift that follows the swing of the established pendula and repositions MS to a focus of leverage and market power. It won't win competing MS Word against Google Docs.

    But fully loaded ITPACS would be a game changer on the WIntel model. If the ITPAC comes pre-built with a full software infrastructure so I plug it in and it boots up like a PC, (duh?) every CIO in the universe is gonna look at it hard, buy one to try, and buy gazillions. (Who gets fired for buying Microsoft?) Only MS has a "full software infrastructure" and "interfaces" that everybody already understands; from the developers to the end-users. That's the huge market advantage that MS brings to the wars.

    Then, remember how much money other companies made leveraging the MS architectures and weaknesses. There will be many investment opportunities in this lower tier.

    YMMV

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