Although 2020 doesn't have flying cars or robot butlers, one futuristic aspect of today's world is the increase in remote work. This shift has been enabled by software and cloud computing, but the catalyst was the pandemic. Companies and employees are reporting equal or increased levels of productivity with increased satisfaction due to decreased commutes.
Even when things go back to normal, there will be a sharp increase in the number of remote workers. Additionally, many offices will likely give employees more flexibility and drop the requirement that they come to the office 5 days a week. For companies the benefit is clear, they will reduce costs with less office space. Additionally with geography no longer a limiting factor in finding employees, they will have a larger talent pool and have more leverage in terms of wages.
It is remarkable that for many companies, their software is more essential than an actual office. Even before the coronavirus, cloud computing stocks was a market darling due to their high growth rates, high margins, and the ability to generate recurring revenue.
And, they have been one of the clear winners of the post-coronavirus economy. This is evident from the Global x Cloud Computing ETF (Nasdaq: CLOU) which is 61% above its March lows and 20% above its pre-coronavirus highs. It made a new high in early May, while the Nasdaq (NASDAQ: QQQ) didn't make a new high until early June. Earnings of cloud stocks have also been strong, as many are beating estimates and raising guidance. There was concern that there would be a decrease in business spending due to weaker demand from the pandemic, however, it's increasingly clear that these services have become
Cloud computing allows businesses to store their servers and data on the Internet rather than data servers that they physically own. This has drastically lowered the cost for companies and allows them to slowly scale their operations rather than incur huge, fixed costs in buying, storing, and running servers. The next step is going beyond simple data and running applications and processes in the cloud.
Spending on cloud computing has increased from $100 billion in 2016 to $200 billion in 2020 and is expected to cross $500 billion by 2030. One way that manufacturing businesses have become leaner and more profitable over the past couple of decades was incorporating just-in-time inventory which meant that it would store as little inventory as possible to lower costs and bring products quicker to market. In one way, cloud computing is doing the same for IT services, allowing companies to improve service, increase revenues, and lower costs.