HOLT Community Competition - ARB Guidance

SUBMISSION TOPIC

The Academic Review Board (ARB) has included some guidance in the topic description for participants submitting to the HOLT Community Competition. As always, each submission will be evaluated on its merit.

Cloud computing: who will survive the competition?

Cloud computing, a new computing architecture that makes efficient use of centralized hardware resources at lower costs and with increased flexibility is rapidly emerging in the technology industry. Companies increasingly prefer to obtain highly specialized computing services from cloud based service providers so that they can focus on their core competency.

By deployment type, cloud computing can be classified as: public cloud, private cloud and traditional IT structure. Public cloud is widely seen as the future of IT infrastructure. Reported by International Data Corporation (IDC), public cloud spending will experience a 21.5% compound annual growth rate (CAGR) - nearly seven times the rate of overall IT spending growth. By 2020, IDC forecasts public cloud spending will reach $203.4 billion worldwide.

By service type, cloud computing can be categorized as: Software as a Service (SaaS), Platform as a Service (PaaS) and Infrastructure as a Service (IaaS). Although SaaS will remain the dominant cloud computing type, spending on IaaS and PaaS will grow at a much faster rate than SaaS with CAGRs of 30% and 32% from 2017 to 2022, respectively.

Industry giants have joined in the fierce competition in cloud computing. Amazon’s subsidiary, Amazon Web Service (AWS), is currently the market leader. Its revenue reached 12 billion USD in 2016, 55% up YoY, and was estimated by Synergy Research Group to account for more than 40% of total revenues of PaaS and IaaS cloud service markets. Microsoft is the closest competitor of Amazon. Microsoft Azure had revenue of 2.7 billion USD in 2016, around 60% up YoY. IBM, Salesforce.com and Google occupy the 3rd to 5th places in the industry respectively

It seems that the future of small- and medium- sized players is gloomy with the drumbeat of competition from big companies. But is that true? During the last 5 years, CyrusOne has achieved annual sales growth of 24%. In 2016, Equnix’s sales grew by 33%. In the same year, Acacia Communications and Nutanix realized sales growth of 100% and 84% respectively. Given today's uncertain, complex and ambiguous global environment it is very difficult for any organisation to be sure they will outperform their competition. What if a company develops a core technology or non-substitutable asset that could not only defend itself from the competition but also enable the organisation to continue to grow and prosper? What if a company chooses to sell itself to a giant player and expand its business with support from its parent company?

Assume that you will be joining the “Cloud Computing Investment Conference” next month, a prestigious event for asset management firms that focus on investment trends related to the cloud computing. You will be making a keynote speech about future investment opportunities in cloud computing.

Please recommend one small- or medium-sized company from cloud computing industry that can survive the competition or has the probability of being acquired by an industry giant to invest in. Please state clearly and logically the reasons behind your recommendation and give the targeted price of the stock of the recommended company using HOLT Lens™.