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With the cloud-based security services sector poised to reach $9 billion by 2020, here's a look...
Cloud computing and data services enable companies to store data remotely and retrieve it via the internet. Cloud investing emerged vis a vis the explosion of corporate data generated in the digital age. These remote servers are rapidly becoming an essential part of how companies keep, manage, and access information. The cloud computing market reflects this. While the concept of cloud computing itself may seem somewhat ephemeral, the companies who provide these services are corporate giants that dominate the tech industry. Companies like Google (NASDAQ:GOOGL), Amazon (NASDAQ:AMZN), Oracle (NYSE:ORCL), Microsoft (NASDAQ:MSFT), and IBM (NYSE:IBM) provide the corporate foundations for cloud investing, transforming this “up in the air” service into a practical business solution.
In 2010, IBM announced its intention to boost annual cloud computing revenues from $4 billion to $7 billion by 2015. Although this is just a small percent of the company’s overall revenue (last year, it brought in $24.1 billion in revenue), it speaks to major companies’ commitment to cloud investing and development.
Amazon’s cloud computing and data service Amazon Web Services reflects industry-wide commitment to cloud investing. In the final quarter of 2014, Amazon revealed that its cloud services reached one million active users. Cloud computing is the future of corporate data management, and cloud investing is poised to become an incredibly important facet of the technology sector.
New era of transparency
CFO Tom Szkutak’s decision to include Amazon’s cloud-based business in its next quarterly report speaks to the company’s confidence in its market positioning, as well as the increased importance it places upon this sector.
Up until this point, it has been difficult to gain an objective evaluation of the cloud investing market because the majority of service provides integrate their financial data about this sector into larger divisions. Amazon’s move towards greater transparency follows Oracle’s decision to openly include cloud revenue in its quarterly report.
Oracle is quickly becoming one of the leaders in cloud technology, with growth that outpaces its major competitors. For the quarter ending May 31, 2015, Oracle reported 29% growth in the areas of software as a services (SaaS) and platform as a services (PaaS) as compared to the previous year. In the full fiscal year, the company reported $1.5 billion in SaaS and PaaS revenues, or 32% growth from the previous year.
Long term growth potential
Cloud investing offers benefits which significantly outpace alternative options. When a customer signs with a cloud service provide, expenses are recognized at the outset of the deal, while revenue is recognized over the course of the contract. Oracle CEO Saftra Catz states that a $1 million software license deal ultimately brings in around $3 million in revenue over a decade, whereas a $1 million SaaS/PaaS booking brings in about $10 million over ten years because of the recurring subscription revenue.
As venture capital firm Andreessen Horowitz explains, “once a SaaS (software as a service) company has generated enough cash from its installed customer base to cover the cost of acquiring new customers, those customers stay for a long time”. This model of continued revenue makes cloud investing a very exciting venture for both major tech companies and investors looking to capitalize upon the long-term need for increased remote data storage.