The topography of the tech industry is constantly shifting. Innovation after innovation, in any field, tends to do that. However, one particularly noteworthy technology is shifting the balance of power in Silicon Valley. Well-established companies like Hewlett-Packard Co. and eBay Inc. are clambering to catch up to more savvy competitors who have taken advantage of cloud computing.
It was not that long ago when people would store all of the information right on their hard drives, after paying a one-time fee for software, which they’d then manually install. Thanks to the cloud, though, users can store their files and data on an external source (or “in the cloud” as they say), allowing them to access it from any Internet-connected device and eliminating the need for software updates.
Business software makers immediately saw the technology’s potential, and built their entire business models on the cloud. Such companies, like Salesforce.com Inc., VMware Inc., and Workday Inc., have all had astounding revenue growth.
Apple Inc. and Google Inc. — the tech world’s two apex predators — have both leapt into the cloud, too. Thanks in part to iCloud and to Google Drive, Apple Inc. is now the most valuable company in the world, worth about $600 billion, with Google close behind at $400 billion.
Now that the cloud’s true potential has begun to be tapped, more and more people are using it. Right now, there’s about one exabyte’s (or one billion gigs’) worth of data stored in the cloud. It’s also predicted that in the next four years, the global market for cloud equipment will reach $79.1 billion.
“When we talk about ‘the cloud,’ it implies more of a distributed failover architecture that appeals to companies these days. This technology provides better reliability, especially for IT systems,” says Jason Rogers, Systems Manager of Sectorlink.
As a result, companies are looking for new ways to make money off the cloud. Google is following Amazon’s lead, and is beginning to lease out some of its data centers’ servers to web service providers.
Naturally, this is bad news for former industry leaders, like HP, IBM Corp. and Oracle Corp. If everyone is renting server space from Google and Amazon, then no one is buying their equipment or hardware.
Now, HP is splitting off its PC and printer operations to form a separate company better tailored to software and services for cloud computing.
Similarly, eBay is cutting loose PayPal — its premier payment service — in order to give it a fighting chance against other payment services utilizing the cloud, like Apple’s Apple Pay on the new iPhone 6.
Despite the companies’ scramble to catch up, these spinoffs are good signs, says Rob Enderle, a technology analyst. Investors seem to agree, too. On the day PayPal spun off, eBay’s stock prices rose by over 7%. When HP disclosed its plans to severe the ties with its PC division, its stock prices rose by about 5%.
As Enderle says, “The companies are at least trying to evolve to address the threat, which is a good sign because the change in technology is accelerating.”