It's about to become one of the biggest tech rivalries of all time.
We're talking bigger than AMD vs. Intel, Netflix vs. Comcast, and Apple's iOS vs. Alphabet's Android.
That's because this growing showdown is taking place over the Internet of Everything (IoE).
There's a lot riding on the line here. Over the next two decades, the IoE will have a business and economic impact worth between $14 trillion and $25 trillion.
See, the IoE will connect trillions of sensors around the world that will be attached to everything from autos and streetlights to shipping boxes and robots to smart cities and homes.
One of the two stands to profit hugely.
The IoE will play a central role in what I call the "Convergence Economy." That's when multiple technologies "converge" to create whole new technologies, devices, and/or business opportunities.
And in the IoE, we're talking about a world in which just about every physical object – including probably our own bodies – is in some way connected to the web.
And that puts the cloud front and center in the battle between GE and Siemens. The reason: The IoE will create a tsunami of data that will be stored in remote data centers so it can be accessed from anywhere in the world.
GE is surely the premier industrial firm in the world.
Its consumer division has long been at the forefront of appliances, electrical equipment, and lighting. And enterprises turn to GE to solve major challenges in energy generation, security, inspection equipment, and medical devices.
Now, GE wants to take every one of those businesses into the digital sphere, bringing smarts and communications to all the products it makes.
In fact, GE now calls itself the "digital industrial company."
Bill Ruh, GE's chief digital officer, has quickly built a team of 1,200 in Silicon Valley to ensure that the firm's Predix industrial cloud-based platform is embedded in every new product the firm designs.
And not just products from GE…
The firm says that Predix "works with operating assets from any vendor or vintage." The software captures and analyzes the massive reams of data that are being produced today – and the even larger amount of info that the IoE will produce.
Applying Predix software to aircraft engine maintenance, for example, has reduced down time by 25%. This is now a nearly $6 billion business for GE, and the firm thinks it will be a $20 billion business by 2020.
But GE will need to keep close tabs on its main global rival…
That's Germany's Siemens.
The firm's MindSphere platform performs many of the same functions as Predix.
Siemens sees MindSphere as a "Platform-as-a-Service" (PaaS) that other firms can use to build IoE applications.
And both of these firms know that all of this action will be taking place in the cloud. So they're joining forces with the leading global cloud-focused tech firms.
For example, the Azure cloud platform from Microsoft Corp. (Nasdaq: MSFT) is being optimized to handle the Big Data output that each MindSphere project will produce.
At this point, Siemens has lined up more than 100 partners, and GE is catching up quickly. So we're likely looking at the next mega-trend in cloud computing, thanks to the efforts of these firms.
How You Can Win Either Way
In a case like this, we're looking to profit no matter who wins this cloud-based IoE Battle Royale.
And that's why I'm recommending the First Trust Cloud Computing ETF (Nasdaq: SKYY).
This exchange-traded fund (ETF) is composed of firms, like Microsoft and cloud leader Amazon.com Inc. (Nasdaq: AMZN), that will directly benefit from this key trend.
But it also has players that will profit from the overall growth in cloud-based technology. Take a look:
- IBM Corp. (NYSE: IBM) – This firm's artificial intelligence Watson platform was purpose-built to tackle the Big Data analytics challenge posed by the IoE. The key twist is that Watson is built to learn from all that data and generate usable analysis that executives may not even have thought to ask. IBM's 2015 purchase of the Weather Co. demonstrates what we're talking about here. A growing array of global geo-sensors are providing Watson with the raw data to radically improve weather forecasts, a great breakthrough for farmers and consumers alike.
- SAP – As I said before, HANA is this firm's best shot at IoE leadership. The $21 billion (in sales) database software giant is well-positioned to scale up to even larger data-processing jobs, the kinds we'll see much more of as the IoE makes deeper inroads. SAP is targeting smaller firms, a savvy move. There are now roughly 600,000 online firms operating in the United States, which is a much deeper client pool than the Fortune 1000 that SAP has long focused on. SAP sees the IoE as a Trojan horse into cloud computing. The firm expects to grow its cloud-based subscription services from around 22 billion euros in 2016 to around 27 billion by 2020.
- VMWare Inc. (NYSE: VMW) – This firm is backing its way into the IoE, building on its massive presence in cloud-based data storage management. And it's using a purpose-built IoE platform called Liota to get there. It's a secure open-source software development kit (SDK) that applies standard software protocols to enable Big Data levels of analytics and security. For example, Liota underpins the growing set of data being generated by the early class of connected cars. Open-source software, like Liota, is one of the best ways to ensure that all connected cars in the future can profit from the growing body of on-the-road data that is generated.
- Akamai Corp. (Nasdaq: AKAM) – Don't overlook Akamai, which operates a massive global network of data centers. These centers provide direct connections between the servers of today's leading tech and telecom firms, which will enable the seamless hand off of IoE data as this market grows. Akamai's software and servers have already proven their worth against malicious IoE software code aimed to disrupt major networks.
Built for the Long Haul
As you can see, the cloud and the IoE were meant for each other. One could not be possible without the other, and each will be a prime driver of the other's growth.
The First Trust Cloud Computing ETF has already begun to reflect just how exciting and massive this opportunity will be. It's been a strong performer, up 54% since the market bottomed out Feb. 11, 2016. That's 75% better than the S&P 500's performance during that stretch.
But don't just focus on recent gains. This will be a great growth play you'll want to own for years to come if you intend to get on the road to wealth – paved by tech.
Or if you intend to use tech investments to pay for your children's education… or fund a dream vacation.
That's because the IoE and cloud-computing trends are just getting going – and will be vastly larger markets a decade from now.
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About the Author
Michael A. Robinson is one of the top financial analysts working today. His book "Overdrawn: The Bailout of American Savings" was a prescient look at the anatomy of the nation's S&L crisis, long before the word "bailout" became part of our daily lexicon. He's a Pulitzer Prize-nominated writer and reporter, lauded by the Columbia Journalism Review for his aggressive style. His 30-year track record as a leading tech analyst has garnered him rave reviews, too. Today he is the editor of the monthly tech investing newsletter Nova-X Report as well as Radical Technology Profits, where he covers truly radical technologies – ones that have the power to sweep across the globe and change the very fabric of our lives – and profit opportunities they give rise to. He also explores "what's next" in the tech investing world at Strategic Tech Investor.