This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
See Cramer's multi-million dollar portfolio for FREE and get his new book Get Rich Carefully! Learn More

Google's Move and the Cloud's Future

As Google and Amazon keep driving down their prices it becomes increasingly unlikely that any vendor without their kind of scale -- and willing to take on their pricing -- is going to make much headway.

This doesn't just impact upon vendors such as Rackspace  (RAX), which bet its future on a public cloud-based  OpenStack, but phone companies including AT&T  (T), CenturyLink (CTL) and Verizon  (VZ) -- Verizon unit Verizon Terremark recently lost the contract -- as well as HP, which now handles the government Web site.

All these players and more thought unique platforms or consulting services or public-private "hybrid" clouds or dedicated sales forces and systems could give them a profitable place in the market. In a world of self-service and commodity pricing, that looks increasingly like a long-shot bet.

There are going to be niches remaining in the cloud market. Some countries are going to demand that data be hosted locally. Some companies are going to pay the price of building their own public clouds. Moving corporate workloads onto cloud will remain a viable niche.

But the mainstream cloud business is a commodity business, a low-margin business, a business dominated by scale and focused mainly on bringing lower costs directly to customers as fast as possible.

The big profits will be in using clouds, not building them. It's what Amazon and Google are doing with their clouds that will drive their profits. That's an important lesson investors need to keep in mind as 2013 draws to a close and the future grows increasingly cloudy.

At the time of publication the author had a position in GOOG and IBM.

This article was written by an independent contributor, separate from TheStreet's regular news coverage.

Stock quotes in this article: GOOG, AMZN, IBM, HPQNFLX, MSFT, CRM, ORCL, RAX, T, CTL, VZ 

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
DOW 16,262.56 +89.32 0.55%
S&P 500 1,842.98 +12.37 0.68%
NASDAQ 4,034.1610 +11.4670 0.29%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto
Advertising Partners

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs