I'll leave the more prurient aspects of the Jennifer Lawrence and Kate Upton photo-hacking scandal to others but there are plenty of potential investment implications arising from the news, notably for cloud computing stocks.
The network security issues publicized by the misappropriation of celebrity photos are by far the biggest factor slowing the widespread corporate adoption of cloud computing. Industry group Cloud Security Alliance lists data breaches as the number one threat to the sector in a 2013 report, The Notorious Nine: Cloud Computing Top Threats.
At the same time, the cost savings offered by the cloud – basically the outsourcing of the majority of internal IT departments and hardware purchasing – form an obviously compelling argument for chief financial officers.
Growth in cloud-related spending has been prodigious, rising from near-zero a decade ago to $58-billion (U.S.) in 2013. The vast majority of the growth in the sector, however, has been in the software as a service (SaaS) category. Salesforce.com Inc.'s cloud-based client relationship software applications have seen the company's market capitalization grow to $36.6-billion.
Spending has been limited in the cloud platforms industry, indicating that few corporate networks have migrated online and most remain contained within the company's internal data centers. The fear that sensitive customer and corporate information will fall into the hands of hackers or competitors has prevented the technology from taking over completely.
The security concerns in the cloud are legitimate, clearly, but don't support the underlying assumption that internal networks are more secure. Recent events like the hacking of JP Morgan's data center and the theft of Target Corp.'s credit card information have proven this is not the case.
The growth in cloud platform spending is somewhat based on the cynical premise that, if neither the cloud or internal networks are entirely secure, CFOs would rather choose the cheaper option if they're going to be hacked anyway.
Despite security issues, cloud computing spending is expected to ramp up significantly between now and 2020. Technology consulting firm Forrester Research Inc. expects annual revenue for cloud companies to rise more than threefold to $191-billion in the next six years.
The early indications Tuesday are that, while hordes of smartphone users may be furiously deleting their hard drives, the market believes the cloud computing investment thesis remains intact. The First Trust ISE Cloud Computing Index Fund, for example, was trading 0.12 points, or 0.44 per cent, higher at mid-day.
SOURCE: Scott Barlow/Bloomberg
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