Page 40 - DIY Investor Magazine - Issue 23

CLOUD COMPUTING:
A BUSINESS NECESSITY...
Ben Rogoff
Fund Manager
Polar Capital Technology Trust
In just a decade, cloud computing has become the default computing platform, with 88% of organisations now adopting a cloud-first strategy. What began as
a way of increasing flexibility and reducing IT costs has morphed into a strategic necessity for companies to become more agile and access infrastructure capabilities that they do not have themselves.
Cloud computing allows companies to access virtually limitless computing power and storage on a pay-as- you-go basis. Any organisation – from a start-up to a government – can have access to world-class computing resources cheaply and quickly.
The computing infrastructure itself is owned and operated by the ‘hyperscale’ cloud companies Amazon, Microsoft and Google. When individuals stream videos, play games, use social networks and bank online they are often using physical computing resources sitting in the cloud.
Instagram is an example of an application that uses cloud computing to store photographs.
More importantly for us, it also allows businesses to save the cost of having to own, maintain and manage their own hard drives or servers while still having the ability to provide full computing capabilities.
Cloud computing is a key part of businesses’ digital transformations as they modernise not just to evolve but to survive.
WHERE ARE WE NOW?
The cloud computing industry is dominated by three big players. Amazon Web Services (AWS) is Amazon’s cloud platform that was launched in 2006 and is the market leader.
‘ACCESS TO WORLD-CLASS COMPUTING RESOURCES CHEAPLY AND QUICKLY’
To give an idea of the scale of the business, in Q4 2018 alone it generated $6.7bn in revenues, up 45% on the previous year, with a profit margin just shy of 30%. Azure, launched in 2010, is Microsoft’s equivalent that recorded $3.1bn in revenue over the same timeframe (76% y/y). Google’s GCP (Google Cloud Platform, which includes G Suite/Google Apps) produced $2.7bn (102% y/y).
DIY Investor Magazine | Oct 2019 40
Three main categories of cloud computing service have developed: Infrastructure as a Service (IaaS), the significantly larger Software as a Service (SaaS) and the intermediate Platform as a Service (PaaS), where the consumer provides the software and the provider provides the network, server and operating system.
IaaS is essentially the storage and network building blocks of any cloud service. It has quadrupled in value over the past three years to be worth more than $42bn.
‘AS OFTEN HAPPENS WITH DISRUPTIVE TECHNOLOGIES, WE APPEAR TO HAVE HIT AN ADOPTION SWEET SPOT’