Everyone can recognize that technology has become a huge part of our daily lives and culture. The word Amazon has become synonymous with online shopping, not the beautiful rainforest we have in South America. When we search for things on the internet, we ‘google” to find the answer. Just by following these internet buzz words, investors could find many fruitful investment opportunities.

With this pandemic, companies have dedicated even more resources and effort into technological advances as more businesses rely on operating within a digital framework. One of those technologies is cloud computing. Most people have used cloud technology to some extent by storing photos or documents online and accessing it through another digital device.

Cloud computing permits users to forego the need to store data on their local digital devices. An e-mail is a good example of cloud computing. Incoming or sent e-mails are not stored in your local hard drive, instead, they are stored on the e-mail providers’ servers. This allows you to access your e-mail on any digital device as long as you have an internet connection. The data still needs to be housed in a physical location and so providers will have physical remote networks also known as “server farms” to store all the data. The e-mail concept has now expanded to all sorts of data storage such as photos, documents, applications, and videos.

Many companies are using cloud computing as a way to generate cost savings as they can avoid the upfront cost of building their own physical networks to house their data. Instead, they can outsource this service for a fraction of the cost to cloud companies. These cloud companies have built up scalability with large server farms to help manage and expand their data storage capacity at a lower cost. This saves the company significant resources that they can reallocate into other ventures. Not only does cloud computing provide cost savings, but it also offers flexibility to the workplace. As 'work from home' has become the norm due to the pandemic, employees no longer share the same physical space making cloud technology more important than ever as increasingly more data needs to be digitized and stored in a form of digital infrastructure where it can be accessed anywhere using different devices.

Over the years, the expenditure in cloud technology has increased but it is still low relative to overall IT spending. In 2019, according to the International Data Corporation (IDC), worldwide public cloud services and infrastructure spending was at $229 billion, representing less than 5% of the global Information and Communication Technology (ICT) spend of $5 trillion. They predict that this spending will double to $500 billion as soon as 2023 against a global ICT spend of $5.8 trillion. This represents an increase to 9%.

Based on these figures, there is considerable upside for companies that focus on building cloud infrastructure. There is no one company that has monopolized the entire technology area but there are a few leaders that have taken substantial market share – Amazon Web Services: 47%, Microsoft Azure: 13% and Google Cloud Partners: 4%. The market leaders do have an edge in this area as other companies such as IBM try to play catch up since the key is scalability. Companies like Amazon that have quickly and aggressively built their cloud infrastructure will have an advantage as the cost of conducting business is lower. This advantage could even become more pronounced as the cloud infrastructure space continues to grow.

We cannot deny the importance of cloud technology as it provides cost-effective, agile, and flexible working environments for companies. It is likely not too long from now when the cloud has become another piece of technology that has been ingrained in our lives. Speak to your advisor about the suitability of adding both market-leading or niche cloud investments into your portfolio.