A long term trend in Dock Street portfolios

Cloud Computing is one of the most important technologies in the world, delivering substantial returns for Dock Street clients. But the name leaves something to be desired. If you don’t already know what it is, “cloud” doesn’t give you much to go on. It’s basically the definition of vague. 

A good analogy for understanding the cloud computing business is a hotel. Someone builds a building, and they rent out the rooms on a nightly basis. Cloud computing is similar: someone builds a building, fills it with large computers called servers, and rents them out over the Internet. 

But unlike hotels, the cloud is becoming the “primary residence” for more and more computing work. In the past, companies used to buy their own servers, storage, and networking equipment. Then they’d hire an IT staff to manage it all. In the cloud model, the cloud service provider (CSP) does all that heavy lifting for the customer. 

Why are businesses increasingly keen on renting computing resources instead of buying? 

One reason is to avoid making the risky decision around forecasting how much computing resources will be needed in the future. There are major downsides to getting that estimate wrong. If you didn’t buy enough computers, you’re going to have to spend even more time and money setting up more systems. If you bought too much, then you’ve wasted large sums and you’ve committed to higher ongoing costs to operate all that infrastructure. 

Renting allows companies to more flexibly scale up and scale down, depending on their needs. Not only is it capital efficient, it allows companies to run tests and trials with less of a commitment. Companies can rent a few servers for a few hours to run a project and then just shut them off. 

Well-heeled companies increasingly have multiple computing “residences,” just as wealthier people have several homes. Large companies like Visa and Mastercard have computing needs that are too big for just one data center. For them, the cloud is just another residence. The cloud helps companies quickly establish operations all over the world, which is often necessary when sensitive data needs to be kept within a nation’s borders.  

The cloud is increasingly the place where computing work lives—for small businesses, large businesses, and even governments. The cloud has been and will continue to be an area of long term growth for the world’s economy, and Dock Street clients are well positioned to benefit.

Best regards,

Evan McGoff

Disclosure: Dock Street Asset Management, Inc. and/or our clients may own Visa (V) and Mastercard (MA). This article is not intended to be used as investment advice.