As is often the case, the retail investment media is advising the retail investor to get on to a bandwagon, in this case the cloud computing bandwagon, about three years too late. Or 30 years too late depending on your definition of cloud computing, as I pointed out in this 2008 review of IBM’s cloud computing strategy.
A Barron’s article dated January 4, 2010 begins
"If you don't have a cloud story you better get one."
But in trying to explain the opportunity to the retail investor, Barron’s is also explaining why the cloud computing train has left the station at least in terms of information technology (IT) investing. The author suggests
“You're in the clouds when you access a photo from a social-networking Website like FaceBook or MySpace and store your pictures on the site, rather than on your hard drive.”
But the photographer in question had already “stored” the photo on his or her hard drive first; the hard drive is on his or her camera. The article would have been more accurate—and therefore better framed the investment situation—had it ended that sentence “… rather on your desktop computer.” Nothing about cloud computing in this example changes IT investing dynamics. And if you haven’t figured out what has happened to the photography investing environment, please don’t invest retail.
The article goes on:
“You're also using cloud computing if you're a small-business owner who decides to access his sales group's customer-relationship programs via a Web browser from Salesforce.com (CRM) because he hates the hassle or expense of maintaining his own software applications.”
CRM (meaning customer relationship management, not the ticker symbol) actually moved to the web 10 years ago, but mostly in large and midsized businesses. Small businesses will continue to be happy to do their CRM on their PCs for the foreseeable future because they can combine it effectively with accounting and other applications. That’s the reason that Intuit (INTU) and Sage (LSE: Sage) were probably the fastest growing enterprise software suppliers of 2009.
And the final Barron’s example reads:
“And if you're a giant Barron's 400 company that doesn't want to invest in any more data-storage arrays and opts to store digital information with IBM-run (IBM) data centers, you're again operating in the clouds.”
Large companies have been doing that for 50 years, simply doing the requisite cost-benefit analysis between inhouse and outsourced IT. There is no new IT investment opportunity there, and it looks to me like IBM is gradually exiting the IT investment arena, in favor of management consulting.
New Year's resolution: Retail investor beware.
-- Dennis Byron