The HS Dent Financial Blog

RSS      

Head In the Clouds

The world of computing is undergoing a major shift.  Consider this fact:  The newly released Windows 7 is Microsoft’s first operating system to come with fewer features.

Yes, you read that right.  Windows is actually getting slimmer.  And the primary reason for this is the rise of internet-based “cloud computing.”  Let’s see what the Economist has to say on the matter (”Clash of the Clouds“):

Windows 7 is not just a sizeable step for Microsoft. It is also likely to mark the end of one era in information technology and the start of another. Much of computing will no longer be done on personal computers in homes and offices, but in the “cloud”: huge data centres housing vast storage systems and hundreds of thousands of servers, the powerful machines that dish up data over the internet. Web-based e-mail, social networking and online games are all examples of what are increasingly called cloud services, and are accessible through browsers, smart-phones or other “client” devices. Because so many services can be downloaded or are available online, Windows 7 is Microsoft’s first operating system to come with fewer features.

Any of you readers who get this blog post delivered to a Hotmail, Gmail, or Yahoo! e-mail address already know a thing or two about the Cloud.  Though a Microsoft Outlook-based e-mail server may be what you use at work, you no doubt appreciate the convenience of a personal e-mail account that can be accessed from any web browser anywhere in the world.

For now, most applications remain on desk tops (we tried Google Docs, Google’s online office solution, and it was horrid).  But this will likely change.  Google’s office solution will no doubt get better in the years to come, and Microsoft is moving to get its flagship Office suite available in the cloud on a subscription basis.

Furthermore, there are economies of scale that can be exploited.  As the Economist writes, “Why should every company or university set up and maintain its own mail server when Google or Microsoft can do it more efficiently?  Companies are already happy to rely on utilities to provide electrical power, after all.  Cloud computing will do the same for computing power.”

The beneficial result should be cheaper computing and higher productivity.  And a nasty recession with deflationary forces putting pressure on profits give companies every incentive to accelerate this process.

Charles Sizemore, CFA
Co-author of the recently-published Boom or Bust: Understanding and Profiting from a Changing Consumer Economy