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Tech Giants & The Rich-Get-Richer Effect

In this article by Seeking Alpha, a website that covers the latest in financial news, the authors describe how despite the beliefs of some, cloud software services are only gaining in popularity as time goes on. Because of this, there is a literal “rich-get-richer” effect – that is, companies that are already at the forefront of the technology industry are becoming even more influential and powerful. Citing Synergy Research, the growth is not only increasing but even accelerating. Synergy also states that combined cloud softwares, including infrastructure, platform, and private and hybrid cloud revenues, earned $6 billion, led by software giants Amazon, Microsoft, Google, and IBM. These four companies are in fact growing faster than the market itself, according to John Dinsdale, a Synergy analyst.

Dinsdale attributes the rise of the cloud software industry to the fall of the old client-server industry, especially since this new software is much more cost-efficient and easier to manage—for example, if there is a bug in the system, a fix only needs to be implemented once to spread across the entire network.

Of the four companies mentioned, Amazon, Microsoft, and Google have been consistently exceeding earnings estimations for their third quarter, as evidenced by their rising stocks. In this way, these already “rich” companies are only getting richer. However, IBM remains an anomaly in this—their stock has not been rising steadily with IBM’s increase in cloud software development. Dinsdale maintains that it is truly the aforementioned three tech companies that will remain dominant, and this is where the rich-get-richer effect can really be seen. These companies are supported by individual services that give them not only steady revenue but also vastly increased notoriety (examples include the Amazon store, Google’s search service, and Microsoft’s software business). All in all, if these trends continue, it is not unreasonable to predict that due to the rich get richer effect, these tech companies will only gain in popularity and grow to be even more influential than they already are.

Source: http://seekingalpha.com/article/3602966-the-cloud-grows-faster-and-the-rich-get-richer

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