The 3 Giants Leading This Decade’s Most Important Trend
If I had to name the biggest game-changing trend of the past decade — a trend that has disturbed the most companies, made the biggest organizational impact, changed the way businesses are structured, and impacted the most lives — it would be cloud computing.
Nothing short of a paradigm change, the advent of the cloud has truly transformed the way most technology companies do business. Even consumer companies have been significantly affected by the shift.
#-ad_banner-#The premise behind the cloud computing is simple: When technology — from simple applications to complete data centers — is delivered over the internet, it can be delivered as-needed, or on-demand. This on-demand business is now known as the cloud.
The on-demand feature makes everything easier. Companies have found that signing up for on-demand services is the easiest way to meet their future needs; the cloud-based model can easily get you more (or less), depending on how those needs change.
It also turns out that consuming technology over the internet is less expensive than doing it the traditional way: Basically, you pay for what you use — no more, no less. It requires much less hardware, too: All the hard work is done somewhere off-site (“in the cloud”). And forget about “our company’s computer guy” — this archetypal character is now nearly obsolete because the company providing the cloud computing generally also offers support service.
Moreover, because software is now delivered on-demand, there’s no real need to sell software licenses (cloud companies utilize subscriptions rather than licenses or outright buying).
On-demand delivery is a convenience for everyone, from the teenager who listens to streaming music, to the scientist who backs up her files, or for the large corporation whose workforce needs quick access to software programs without waiting to install them on every single office computer.
Because of its flexibility, lower costs, and ease of use, customers on all levels have been enthusiastically consuming cloud-based services.
Not every tech stalwart has adapted to these new market conditions. But those that have made the move to the cloud — especially the early adopters — are thriving. Those that haven’t are floundering.
Let’s take a look at a few major tech companies as examples.
The chart above shows the price action of top tech names over the past decade. Microsoft (Nasdaq: MSFT) and Oracle (Nasdaq: ORCL) are in the middle of the pack, having more than doubled in that time.
Both are major cloud players.
This pair shouldn’t surprise you; you might have seen one of the newest ads MSFT is running to brag about its cloud prowess. One of the oldest players in the field, MSFT has truly transformed itself from a Windows-focused company into a cloud company on the back of CEO Satya Nadella.
For many in the business, Oracle has been nearly synonymous with the cloud. It’s one of the major players in the industry, making the best of the SaaS, or “software as a service,” trend. It’s also a big player in the newer platform as a service (PaaS), and infrastructure as a service (IaaS) applications of the cloud’s capabilities.
Both MSFT and ORCL had to transform their existing businesses in order to adapt to the new market. This is reflected in their stock performances: strong, but not particularly outstanding.
Meanwhile, Hewlett-Packard (NYSE: HPQ) and IBM (NYSE: IBM) have been lagging, with the price of HPQ down in the past decade and IBM up by only 77%. These two giants operate in a more traditional environment, and their business, growth prospects and share price action reflect that fact.
And then there is Salesforce.com (NYSE: CRM). This company started as a cloud business, pioneering on-demand services and succeeding in bringing them into the mainstream. Its price action (more than 600% growth) reflects its high-growth and first-comer business.
One of the former positions in the Game-Changing Stocks portfolio, MINDBODY (Nasdaq: MB) is another cloud company; its fast-growth business of delivering software on demand for the wellness industry handed us a quick, nearly 50% gain, in just a few months.
Yet the cloud industry is still in the very beginnings of its growth stage.
In the latest issue of my premium newsletter, Game-Changing Stocks, I introduced a company whose innovative ways put it apart from the crowd. In fact, it’s the only publicly-traded company in a brand-new, game-changing area of the cloud, called CPaaS (Communications-Platform-as-a-Service). Its transformative business model carries a great future promise, much like that of almost any true game-changer.
The companies I just mentioned (Microsoft, Oracle, Salesforce) arguably still have a lot of upside to offer investors, but let’s face it — they’re huge. The law of large numbers will likely prevent them from creating the kinds of life-altering, game-changing returns they did for investors in the past. But my most recent pick in Game-Changing Stocks, is still in the early stages of growth. So it has the same kind of potential that these other companies had in the past.
If you’d like to know more about this pick, as well as the other research my staff and I have been working on for readers, go here.