Cloud computing is one of the hottest new tech sectors on the market today. Essentially, cloud platforms enable companies to store data remotely and retrieve it via the internet.
Due to the massive influx in data collection and storage, these platforms are becoming increasingly popular among businesses and organizations across all verticals.
Remote servers are rapidly becoming an essential part of how companies keep, manage, and access information.
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.
As such, the Investing News Network (INN) looks a little closer at what cloud computing is, some companies in the sector, and the market outlook.
What is cloud computing?
For those new to the technology sector–or even if you’re not–you’re likely familiar with the term, “the cloud.” As described above, cloud computing allows users to store and access files over the internet, rather than over a hard drive.
As PC Magazine describes it, “the cloud is just a metaphor for the Internet.”
Much like other technology sectors, as time goes on, the definition of cloud computing and its varying uses also expands. For example, uses of cloud computing include: virtual IT (information technology, which uses third party servers on a company’s IT network; software, which may use commercial software applications, or develop and host off-site custom applications; and network storage, which enables files to be backed up over the Internet without having to know the actual location of the storage.
In that regard, Cloudcomputing.com categorizes cloud computing as: client-server computing, mainframe computing, grid/distributed computing, and utility computing.
Other examples of “the cloud” include services like Netflix (NASDAQ:NFLX), an online–and legal–video streaming services website that completely eliminates the requirement for video storage on a computer, or a DVD or BluRay disc.
Web-based email is also considered a cloud-computing service. Rather than using a computer-based email service such as Microsoft’s Outlook, online-email services have become some of the largest cloud computing services.
How to invest
Indeed, much like other commodities and sectors, there are a number of ways for investors to jump into cloud computing investing.
Here’s a quick look at some of the options available for those with a keen interest in cloud computing:
- Stocks: Of course, stocks may very well likely be an investor’s first choice when considering a cloud computing stock. Some of the industry leaders, and some smaller cloud computing companies include: Citrix Systems (NYSE:CTXS), Arista Networks (NYSE:ANET), Salesforce (NYSE:CRM), Veeva Systems (NYSE:VEEV), Mitel Networks (TSE:MNW), Absolute Software (TSX:ABT), to name a few.
- Dividends: Quite often, there are companies that pay its shareholders dividends. If you’re not familiar with dividends, Dividends.com describes it as, “for every share of a dividend stock that you own, you are paid a portion of the company’s earnings.” Generally, dividends are paid out quarterly. Some cloud computing companies that pay dividends are: CoreSite Reality (NYSE:COR), Oracle, Microsoft, and IBM.
- ETFs: For those who are interested in investing in a sector as a whole rather than a specific company, ETFs are generally the way to go. That said, there is currently only one cloud computing ETF, which is the First Trust ISE Cloud-Computing Index Fund (NASDAQ:SKYY). The fund began in mid-2011, and has since added 30 holdings to its portfolio.
Cloud computing outlook
All told, the cloud computing industry is growing rapidly, due to the smart economics and convenience of these internet based platforms.
In fact, research firm Gartner estimates the industry will grow by 18 percent in 2017 to $246.8 billion, up from $209.2 billion in 2016.
“The overall global public cloud market is entering a period of stabilization, with its growth rate peaking at 18 percent in 2017 and then tapering off over the next few years,” Sid Nag, research director at Gartner said in the release.
For investors looking to get in on the ground floor of a rapidly expanding industry, cloud computing may be the place to do it.
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This is an updated version of an article first published on the Investing News Network in 2015.
Securities Disclosure: I, Jocelyn Aspa, hold no direct investment interest in any company mentioned in this article.