The Cloud Versus The Device
Douglas is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Ever since Google (NASDAQ: GOOG) introduced Google Apps, the company has made increasing inroads at changing how businesses, governments and individuals work. Where the classic software model, most completely embodied by Microsoft (NASDAQ: MSFT), has persisted for decades, cloud computing is gaining acceptance rapidly. Given the clear dichotomy between these two models, we now have a framework by which to consider how the next advances in computing will take place.
Not only is this inquiry an interesting intellectual exercise, recent and pending events are likely to see these approaches do battle. By examining the central questions now, we will be better equipped to profit from both the success of the ultimate winner and the path that leads us there. Representing the cloud is the recently announced Chromebook from Samsung, and representing the device is the Microsoft Surface, set to be released on October 26.
The Cloud Option
In its continued effort to unseat competitors, Google recently rolled out a new, lightweight laptop with a starting price of $249. The device, which is manufactured by Samsung, contains no hard drive and utilizes an operating system modeled on the company’s web browser, Google Chrome – hence the Chromebook moniker. This version is not the first Chromebook released, but represents the lowest cost option to date. With the release coming just days before Apple (NASDAQ: AAPL) is expected to release the iPad mini and Microsoft is set to begin selling the Surface, the timing is a clear preemptive strike against the competition.
The concept behind the Chromebook line is that rather than needing to download software and store files directly on the device, users can operate completely in the cloud environment offered by Google Apps. This approach not only keeps the device light and nimble, it overcomes the need for users to face obsolescence concerns; you are always running the most current version of software because the company keeps it up to date on its servers.
The Device Option
While discussion about the impending death of the PC seems unavoidable, the Microsoft Surface represents the potential to bridge the gap between laptop and tablet. Where Apple’s iPad has controlled the tablet market since its release, thus far no tablet has contained the productive capability to fully replace the PC. The Surface, which will run on Windows 8 and have the ability to run the full Microsoft Office suite of applications, may finally offer a laptop-tablet hybrid that can replace both devices. The Surface will essentially be a laptop in a tablet form factor, meaning that the way files are stored and manipulated will follow the classic software model – although Microsoft does have cloud options as well.
Pros & Cons
The obvious advantage of the cloud model is that it virtually eliminates software costs and provides built-in, off-device storage. The collaborative advantages of the cloud model are already being demonstrated, which is a key reason that Google has been able to secure an increasing number of customers for this approach. Additionally, even if the classic model is able to persist for another generation or two, it has become fairly apparent that this is the ultimate direction of computing.
There continue to be certain factors, however, that favor the device approach at this point. First is the reality that most legacy business systems run on the classic software model, meaning that a bridge is necessary; most large companies are unwilling or unable to simply scrap their existing systems and build anew. The Surface will be able to help effectuate this bridge by functioning in both environments.
The second issue is what I will call the “offline effect.” Cloud computing requires access to the cloud, which means access to the Internet. The majority of the time this is not an issue, but the ability to work offline – on an airplane for example – is a critical productive advantage of the device approach. Because files are stored locally, users can remain productive even when Internet connectivity is an issue.
The last consideration in this battle is the form factor itself. Google offers both Chromebooks and the Nexus 7 tablet, but not a single device that covers both sets of functionality. The development of such a device will help Google to gain further market penetration, so it should be expected in short order, particularly if the Surface is successful. For better or worse, tablets are “cool” so this format is likely to attract consumer dollars.
Trading the Battle
While I believe that ultimately the cloud is likely to be the winner, in this comparison, at this time, the Microsoft Surface is the winner and should garner some of your investment dollars. For a plethora of other reasons, Google may be the true king of tech and should be a core holding for everyone as well. As such, owning Microsoft ahead of the release and Google for the long hual is recommended.
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Mr. Ehrman has no positions in the stocks mentioned above. The Motley Fool owns shares of Apple, Google, and Microsoft. Motley Fool newsletter services recommend Apple, Google, and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.