A must-know overview of the cloud computing business


Oct. 29 2019, Updated 11:23 p.m. ET

Cloud computing

Cloud computing is in vogue—so much so that “the software industry” and “cloud computing” are used interchangeably. There’s so much information available on the Internet about the cloud that you might be confused as to what exactly the cloud is and how it affects the tech sector.

The National Institute of Standards and Technology or NIST is an agency of the U.S. Department of Commerce and the Cloud Security Alliance. It defines “cloud computing” as “a model for enabling convenient, on-demand network access to a shared pool of configurable computing resources (e.g. networks, servers, storage, applications, services) that can be rapidly provisioned and released with minimal management effort or service provider interaction.”

So “the cloud” is an umbrella term that covers a broad range of Internet services. Organizations can choose, when, where, and how they use these services.

The above image explains how cloud computing delivers services over the Internet where resources, software, and information are shared and provided to computers and other devices. Cloud computing, in simple terms, is the storage and accessibility of data and programs in and through the internet.

 Distinct characteristics

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  • On-demand self-service: Organizations can request and manage their own resources
  • Broad network access: Organizations are offered services over the Internet or private networks
  • Resource pooling: Customers can draw from a pool of computing resources—data storage space, networks, computer processing power, specialized corporate, and user applications—usually in remote areas
  • Measured service: Service use is measured and billed accordingly
  • Rapid elasticity: Flexible computing services can contract or expand according to business demand

As cloud computing provides services over the Internet, it can be either a subscription or pay-as-you-use service that’s available in real time over the Internet.

Investing in cloud computing

Cloud computing is a rapidly growing multi-billion dollar market with huge potential. This has prompted companies like Microsoft Corp. (MSFT), IBM Corp. (IBM), SAP AG (SAP), and Hewlett Packard (HPQ) to either go for strategic acquisitions or huge investments to shift their business models toward cloud computing.

The First Trust ISE Cloud Computing Index Fund (SKYY) is the only ETF that invests solely in the cloud space.


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