Cash in on the next big digital revolution

It’s still new technology but Silicon Valley firms already make billions from cloud computing

THE cloud is not just a feature of the weather. In tech terms the ‘cloud’ is big business – the next major development in the digital world. Giants such as Amazon, Microsoft and Google are spending billions on their cloud infrastructure, and some commentators think the cloud computing market could be worth more than £312bn by 2020.

So what is it? The cloud is a term for using remote servers hosted on the internet to store, manage and process data, rather than having to buy a local server or use a personal computer. Servers are highly powerful computers which look after masses of data.

Huge cloud infrastructure providers such as Amazon Web Services and Microsoft Azure have hundreds of data centres each with thousands of servers.

But now there is a ton of data available to download at home and whether it’s Netflix, BBC iPlayer, or your photo library, this can be stored remotely on the cloud. Rather than buying a DVD, you stream it to your TV – this is where cloud computing is most visible. Theoretically, the cloud makes life much easier for businesses and individuals.

WHEN a firm wants to upgrade its software, it can simply run it online. If its local network runs out of storage, it doesn’t need to buy new servers when it can rent space from an infrastructure provider. The question for investors is how you get in on this boom.

Damindu Jayaweera, a tech analyst at broker Peel Hunt, says: ‘The correct way to think about cloud is as giving the abilshovels’ ity to scale when you need to, for the amount you need, and only pay for what you need.’

Robert Rutherford, boss of tech consultancy QuoStar, says: ‘Traditional computing resource is expensive. With cloud, businesses simply buy, turn up and turn down their computing resource at will without any impact on daily operations.’

There are ways in which investors can muscle in through lesser-known stocks.

Walter Price, who invests clients’ money via the Allianz Technology Trust, said: ‘Businesses often adopt more than one cloud provider, and that creates multiple winners.’

Jayaweera says investors need to look for the ‘picks and behind the trend. These are the behind-thescenes companies which allow businesses to become remoteoperating successes.

Boku, for example, is a payments firm which sits behind household names such as Apple and Spotify. Since firms who sell their products over the internet will never meet their consumers to take payments, Boku allows the company to charge people via their mobile phone bill.

GBG works with Ebay, running background checks on sellers since Ebay would never be able to vet them in person.

There are also firms which operate in the deeper hardware space, running data centres full of servers. Whereas Amazon, Microsoft and Google are public cloud providers, sharing spare server capacity with individuals and businesses, Iomart provides private cloud capabilities.

This means that a business can rent actual space on a server dedicated to them, and know exactly where their data is being stored. Compliance concerns might make this important to them, Jayaweera says, or it may run older software incompatible with the public cloud companies.

Rutherford says there are strong opportunities. ‘Cloud is now the main method for delivering IT. It’s not some fad such as cryptocurrency. The benefits are proven and helping drive business growth.’