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If you are an investor who follows Warren Buffett’s famous strategy of investing in businesses that you understand, you may have shied away from investing in enterprise software. Not only is software for businesses sometimes difficult to understand, but it changes so quickly that it can be difficult to tell a passing fad from a killer app.
Here’s a quick cheat sheet on two business trends that by all appearances look to be here to stay.
Cloud computing, loosely defined, refers to the shifting of data and operations off site and onto a shared utility. If you have an iPhone, for example, you can store your photos in the cloud, which not only means that they’re safe if your phone is stolen, but also that businesses can achieve all sorts of economies of scale by running operations in the cloud rather than on their own hardware.
Big Data is a trend born of the convergence of ever-faster computing power and the fact that we’re all sharing more personal information than ever before. It puts the old data with a lowercase D to shame. It’s now possible to build extremely detailed and quite accurate profiles of consumers and businesses – and to do it in real time. Think of the personalized receipts with customized coupons you now get when you pay with a rewards card at the grocery store. That’s Big Data at work – and it’s just one of a multitude of applications.
Here’s one more thing to know about cloud computing and Big Data. They both have a lot of room to grow. Although businesses have rapidly adopted the cloud and Big Data, many continue to struggle with the logistics. In this piece I’ll focus on two companies that are addressing that very challenge by helping businesses use the cloud and Big Data more effectively.
New Relic Inc. (NYSE: NEWR) is a company that makes a cloud-based suite of products that help businesses collect, store and analyze data in real time. It had a pretty stunning initial public offering back in December, when its stock jumped almost 50% on the first day of trading. Last week, New Relic reported fiscal fourth-quarter results that beat expectations, with revenue rising 68% year-over-year. Although it is still losing money, it is rapidly signing up new customers and expanding relationships with existing partners, which seems to suggest that it’s addressing a strong market demand.
Hortonworks Inc. (NASDAQ: HDP) is another promising enterprise software maker that warrants a close look from investors. In a nutshell, Hortonworks helps companies analyze and understand the large volumes of data they are now able to collect. It had a successful IPO on the same day as New Relic last year, and like New Relic, it seems to have strong momentum. Its recent quarterly earnings showed revenue more than doubling and its losses narrowing from a year earlier.
Both are promising businesses that should be able to continue to grow and turn a profit if they continue to address the significant need for businesses to master the cloud and/or Big Data.
One warning to investors: Keep your eyes on the next generation of technology. While neither the cloud nor Big Data are going away tomorrow, there’s always the chance of a newer entrant building a better mousetrap, so to speak.
The Next Big Tech Breakthrough
3D printing is without question one of the most stunning technological achievements the world has ever seen. And it’s only just getting started. What do I mean? Well, in 2016 its next iteration is going to hit markets. And the Silicon Valley insiders who’ve seen it are blown away. One says, “It’s not only a game-changer, it’s going to rewrite the rules of the 3D printing industry.” And Computer World magazine says “Rival 3D printers will have to step up their game or be left behind.” Don’t be left behind – discover all the details behind 3D Gen2 right here.