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A must-read investor's guide to cloud computing innovations

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Part 2
A must-read investor's guide to cloud computing innovations PART 2 OF 8

Why is cloud computing such a fast-growing business?

The cloud is growing

The recent economic crisis of 2007 prompted firms to cut back on their IT expenditures, forcing them to look for cost-efficient solutions. According to net-security.org, approximately 30% of IT costs can be reduced by adopting cloud technology.

With cloud computing, instead of keeping an organization’s data on its own server or updating applications, you use a service over the Internet from a remote location to store your information and use applications. Online file storage like Google (GOOGL) Drive, social networking sites like LinkedIn (LNKD) and Facebook (FB), webmail, and online business applications all are cloud-based services.

Why is cloud computing such a fast-growing business?

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The picture above shows how the front end and back end, together through the Internet, form the architecture of cloud computing.

Cloud computing architecture

The cloud computing system comprises two ends—the back end and the front end—which are connected to each other through a network. The Internet connects these two ends.

The front end comprises users’ or clients’ computer network and applications, serving as an interface to access the back end.

The back end comprises computers, servers, and data storage systems—often called the “cloud.” You can access the back end through the Internet and from single or multiple locations. A central server between the front and back ends monitors traffic and clients’ requests to ensure smooth operation.

Increased investment in cloud computing

The adoption of cloud computing has led to cost efficiency. The funds expected to go to servers, license costs, maintenance costs, and backup costs can go to research and development instead.

Cloud computing facilitates improved compatibility between operating systems, flexible support for business strategies, faster response time to difficult conditions, enhanced performance, and scalability—not to mention increased storage capacity.

It’s no wonder, then, that in 2014, Microsoft, Google, and Amazon (AMZN) announced plans to spend billions of dollars on cloud services. HP (HPQ) also intends to have a piece of the cloud space. It intends to invest $1 billion in the cloud. IBM Corp. to date has invested $ 10 billion in cloud services and related acquisitions.

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