Cloud computing has emerged as the buzzword for all major technology players and Hewlett-Packard Company (HPQ) is no exception. The company recently announced that it has entered into a four-year agreement with Microsoft Corporation (MSFT). Under the agreement, HP will provide cloud computing solutions to Microsoft for extending its communication and collaboration applications to business and government customers.
Both the tech majors have sensed significant opportunity prevailing in the cloud computing space, and have collaborated to cash in on this. Cloud computing offers enhanced power and speed to the users as well as corporate computing, which includes applications and devices. Cloud-based applications typically deliver rich and expansive online experience.
However, challenges regarding the shift to cloud computing persist around the world, as most of the employees are apprehensive about moving from traditional on-premises systems, infrastructure and applications.
The joint venture between the two companies has a role to play in this regard, in our view. Microsoft intends to use HP's private cloud services to offer its Microsoft Exchange Server 2010, SharePoint Server 2010 and Lync Server 2010. Moreover, HP will resell Microsoft Office 365 with several of its own cloud services, while Microsoft plans to use its own public cloud services to offer Microsoft Office 365 and its Office tools.
In theory, this business model will be helpful for new companies that are yet to establish their own infrastructure. Simultaneously, it will also reduce the networking cost of already established companies that need to address the challenge of keeping their IT up-to-date.
Despite this potential, cloud computing has not yet achieved the popularity it had promised. As per a research report published by Deutsche Bank, quoting from a survey by PricewaterhouseCoopers about the German cloud computing market, the reasons for the lower-than-anticipated performance are data protection and compliance (60%), standardization of internal processes (53%) and arranging individual service-level agreements (49%).
So, if cloud computing is to deliver on its promise, service offerings will have to satisfy individual and legal standards with regard to data privacy. So we expect companies like Hewlett-Packard, IBM (IBM) and Salesforce.com (CRM) to improve their R&D to plug these gaps, thereby transforming cloud computing in a big way.
Both Hewlett-Packard Company & Microsoft Corporation have a Zacks #3 rank, implying a short-term Hold recommendation.
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