Investing in This Type of Computing Could Put You on Cloud 9

Phillip is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

With more devices connecting to the Internet than people living on Earth, it's easy to see why cloud computing is drawing attention. However, getting in on an advancement in computer technology before the masses really catch on takes courage. Many of the most alluring potential breakthroughs in the sector could have you floating on cloud 9, but they can also plunge you head-first into a bearish cave.

Businesses are consistently moving towards streamlining operations, so it's easy to see why so many are catching on to the benefits of cloud computing. The cost-cutting features that cloud provides to business operations are just the beginning, and the cloud's ability will increase to the point where it becomes unwise for a company to operate without cloud technology.

Cloud computing is quite possibly the next market advancement that could take your portfolio to new heights. But even if the technology becomes the next game-changer, you need to know where to put your money. After all, if you choose the wrong player, those clouds can produce a vicious lightning strike that can do serious damage to your bottom line. Fortunately, three companies stand out as the obvious buys in this market.

What Amazon doesn't do? (NASDAQ: AMZN) started out as a book retailer that grew to offer basically anything a consumer would want. But, the company hasn't looked back once, and with its eyes peeled, Amazon is now selling AWS (Amazon Web Services). The feature allows firms to rent hosted storage and computing. Amazon Prime is bundled content that reaches more users because it sells tablet device hardware at nearly zero cost. Because of Amazon's fast potency at turning almost anything it touches into gold, coupled with the firm's familiarity with only working online, I can see Amazon Prime taking off. 

The company has also developed the Amazon EC2. While still in its infancy, the cloud technology could be a breakthrough that could earn Amazon the spot as the top cloud storage provider. The technology offers users with a way to resize the compute capacity in the cloud. That means web-scale computing is much easier because users would be able to control their information and store it on Amazon's cloud network. Amazon also touts the service's ability to quickly boot new server instances, and the technology facilitates scaling both up and down.

In the company's first quarter, net sales increased to $16 billion from $13.2 billion, and that has come mainly from product sales. With that kind of stability, and an upward trend in sales, Amazon is a secure way to invest in the cloud computing market.

Can IBM use this opportunity for a comeback?

International Business Machines (NYSE: IBM) may have been virtually wiped out of the computer manufacturing business, but the company is selling consulting services for cloud solutions. IBM executive Vance McCarthy said cloud computing will generate $20 billion of new revenue for the company by 2015. The company is investing in what they call a "new wave" of smart clouds.

Company executives said they believe cloud computing is just getting started and there is a long way to go. They said IBM plays an important role in that bright future. And that isn't just talk. Several reports indicated on June 4 the company's intent to purchase SoftLayer Technologies. The company is the world's biggest private Web hosting firm that already has 25,000 clients, including AT&T. That move is a sign IBM is ready to play hardball in an attempt to lead cloud computing, and the acquisition would make the company a major player following the expected signing of a sales contract.

IBM is also making major moves in the production of data analytics software. In fact, on May 30, the company released Big Data, which helps organizations maintain and build a global workforce. If IBM can continue releasing new software, it could once again be on top of the computer industry.

Microsoft goes on cloud spending spree

Microsoft (NASDAQ: MSFT) has poured considerable resources into cloud computing. In fact, in 2011, the company spent nearly all of its $9.6 billion annual research and development budget on cloud. The company's recent cloud-first strategy has shown that the investment could pay off. The strategy looks to service businesses with with Microsoft Windows Azure, which will facilitate information storage and aims to make the process much easier, though details haven't been released.

But, what is known is that Microsoft has already reported that Azure has helped the company reach the $1 billion benchmark in cloud-related revenue. Any integration of cloud computing with Azure will land a heap of clients due to Azure being tied in with the Windows operating system, which is often the default software in new computers.

Microsoft is also a big player in the Unified Communications market, a $30.5 billion business that experts believe will be worth more than double that by 2018. The business integrates real-time communications services such as Skype. Microsoft is nearly ready to launch Lync with Skype enabled. This will give Microsoft a stronger hold on the global customer base. 

Get in now and be ready to wait

Cloud computing still has a long way to go before all the electronic components it takes to run a business can be fully integrated. The three companies mentioned have what it takes to dominate in this market, and the sector is large enough for them all to profit.

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Phillip Woolgar has no position in any stocks mentioned. The Motley Fool recommends The Motley Fool owns shares of, International Business Machines., 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. Is this post wrong? Click here. Think you can do better? Join us and write your own!

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