The Hansberger Group
at Morgan Stanley
Private Wealth Management
3280 Peachtree Road, Suite 1900
Atlanta, GA 30305
404.264.4269
June 2020
Research White Paper
Nick Velasquez
PWM Analyst
Cloud Computing
Original Thinking has been the mantra of The
Hansberger Group for over 40 years. Our
investment practice is defined by an obsession
with original investment management and creative
new ideas.
The identification and understanding of secular
themes are a critical step in our investment
process. Themes that are challenging the status
quo and causing paradigm shifts in the business
world, we believe, may provide powerful tailwinds
to participating companies and create incredible
investment opportunities.
Over the years, The Hansberger Group has
identified a number of themes across multiple
industries, and this white paper will discuss one of
the most important themes impacting the business
world today - cloud computing.
Background
The “Cloud,” as most people call cloud computing, is
not a recent development. It is the amalgamation of
various foundational technologies that have
developed since the 1940s including mainframe
computers, virtualization and networking.
One of the earliest mainframe computers developed
by IBM dates back to 1944. It was the Harvard Mark I,
a 5-ton electromechanical machine, 51ft long and 8 ft
tall with 765,000 parts and over 500 miles of wiring1.
Virtualization of computing power traces its roots as
far back as the 1960s. IBM’s data transmission
terminals located around the world could
communicate with a central computer to enter and
retrieve information2.
Networking technology also evolved around the same
period in 1969 with the development of ARPANET, the
predecessor of the Internet, by the US Department of
Defense3.
Over the ensuing decades, these three foundational
technologies evolved to enable today’s cloud
computing technology. As research firm Gartner
describes it, cloud computing is “a style of computing
where massively scalable IT-enabled capabilities are
delivered as a service to external customers using
Internet technologies." In short, the cloud is a global
network of servers accessible to anyone with a
computer and an internet connection.
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The Cloud Emerges
Worldwide public cloud services saw an immense
growth in revenues over the past 10 years, increasing
from $59 billion in 2009 to $228 billion in 2019 – nearly
a four-fold increase. Revenues are expected to reach
$355 billion by 20224,5.
Exhibit 1: Worldwide Public Cloud Services Revenues
The basic objectives of any business are to sell more,
reduce costs, and generate profits. Cloud computing
helps them actualize these goals with enhanced
technology.
Push for Greater Efficiency,
Scalability and Flexibility
Innovators and entrepreneurs levered the
advantages of cloud computing to launch new cloud-
based products and services, which can be
categorized into three primary service deployment
models: Software-as-a-Service (SaaS), Platform-as-
a-Service (PaaS), and Infrastructure-as-a-Service
(IaaS).

• SaaS: cloud-based software applications

o Examples: Salesforce.com, Adobe, Shopify,
Veeva Systems, and Microsoft 365
Source: Gartner Inc 2019, Statista 2020, Author generated graphic

• PaaS: cloud-based hardware and software

development tools
Why are businesses transitioning to the cloud? Cloud
o Examples: Twilio, Salesforce Platform,
computing delivers all computing infrastructure and
Google App Engine, AWS Lambda
software tools required to launch a digital ready
business including servers, storage, databases,
• IaaS: cloud based computing resources
networking, software, analytics, and intelligence tools
o Examples: Amazon Web Services (AWS),
all easily accessible over the internet. For established
Microsoft Azure, Google Cloud, Alibaba
companies, cloud computing offers significant
Cloud
advantages which have attributed to the rapid growth
in demand for cloud services including:
Exhibit 2: Cloud Computing Stack
• Scalability – rapidly increase or reduce demand
for resources with a pay-as-you-use model
• Cost savings – reduced capital expenditures for
building/maintaining an on-site data center
• Additional cost savings – lower administration
costs
• Reduced lead times with on-demand availability
of resources
• Supports collaboration through multi tenancy
architecture
• Focus on core competencies, not on computing Source: RubyGarage.org, Author generated graphic
infrastructure
• Increases reliability and technical support

2
Software-as-a-Service (SaaS) is software delivered
via the internet.
A key feature of software delivered as-a-service is a
multi-tenant architecture which enables a single
instance of a software application to serve multiple
customers.
Benefits of using SaaS applications include:
• Accessible anywhere there is an internet
connection
• Easily scalable as business grows
• Fast configuration and deployment
• Lower initial costs – no initial license fees
Some of the most common business applications
delivered through a SaaS model include Customer
Relationship Management (CRM), Human Resource
Management (HRM), and Enterprise Resource
Planning (ERP).
Software-as-a-Service (SaaS) is the largest cloud-
based serviced model based on global revenues,
which reached $100 billion in 2019. Looking forward,
SaaS revenues could reach $151 billion by 2022, a
15% annualized growth rate over the next 3 years4.
Platform-as-a-Service (PaaS) is a platform on which
other software is built. Essentially, it is a set of tools
accessible via the internet and used for developing
software. PaaS supports custom applications
developed with preconfigured tools which reduces the
amount of programming needed.
A goals of PaaS is to streamline the application
development and operations process by breaking
down divisions between developers and IT
departments. To that end, PaaS has enabled the
adoption of DevOps and Agile software development,
methods which break down silos and replace the
traditional linear model for building and maintaining
applications with an iterative process. These methods
enable applications to be built and deployed quickly
and be updated daily rather than yearly.
Exhibit 3
Source: KPI Partners, Author generated graphic
Benefits of using PaaS tools:
• Improved developer productivity
• Support for custom applications
• Faster development and deployment of
applications
• Easy to scale as demand for tools increases
• Embedded security and resilience – data
protection and automatic backup features
Common tools available for developers to use include
code editors, deployment and testing tools, security
capabilities, and even application monitoring and
analytics services.
Platform-as-a-Service (PaaS) is the second fastest
growing cloud service model generating $32.2 billion
in revenues in 2019. By 2022, PaaS is expected to
grow to $58 billion, a 21.7% annualized growth rate4.
Infrastructure-as-a-Service (IaaS) is a pool of
computing resources including servers, storage, and
virtualization and network tools. IaaS providers
typically only manage the physical infrastructure.
Benefits of using IaaS services:
• Allows users to easily scale up or down
resources on an as-needed basis
• Significant cost savings from not building and
maintaining a proprietary data center
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 • Around the clock availability – less downtime
• Enables companies to quickly launch new
products and service – faster time to market
Marc Andreessen wrote for the Wall Street Journal:
“The cost of a customer running a basic internet
application in 2000 was approximately $150,000 a
month. Running that same application today in
Amazon’s cloud costs about $1,500 a month.” Today,
the costs are even lower and the average enterprise
could achieve savings of 40%, according to Cloud
Technology Partners6.
Infrastructure-as-a-Service (IaaS) is the fastest
growing cloud service model expected to reach $74.1
billion in revenues by 2022 from $40.3 billion in 2019,
a 23% annual growth rate over three years, according
to Gartner4.
The Cloud Cushions the Pandemic
The global impact of the 2020 Coronavirus pandemic
has underscored the importance of cloud computing
technologies as businesses were forced to transition
to 100% remote work overnight. In addition to
implementing new technology tools that support
remote work environment, these companies also had
to pivot their business operations to remain in
business and compete effectively. Every business had
to rethink how to keep their customers engaged and
adopt tools to facilitate digital interactions.
The vital role of cloud computing technology that
support the new work-from-home reality is reflected in
the exponential growth in the number of users and the
rate of utilization for cloud-based services such video
communications, collaboration tools, contact center
solutions, and desktop virtualization services.
Prominent technology company CEOs describe the
first half of 2020 as a time where multiple years’ worth
of digital transformation is happening in just a few
months. Others have said that accelerating digital
transformation has become a business imperative.
Additionally, existing drivers of cloud computing
adoption remain intact such as:
• Increased mobility expectations from employees
and consumers
• Exponential growth of data and demand for big
data analytics
• Growth of micro, small, and medium size
businesses
• Rising penetration of e-commerce
• Greater use of Artificial Intelligence (AI) and
Machine Learning
Software is Eating the World
Cloud computing continues to be an attractive
greenfield opportunity across all three delivery
models. Innovators and entrepreneurs continue
exploring what’s possible with cloud computing and
have created cloud-based solutions such as cyber
security tools, telemedicine platforms, insurance
industry back-end systems, and data warehousing
tools to name a few.
The Hansberger Group identified in 2017 and
continues to believe that cloud computing is a secular
theme altering the business world and creating
exciting investment opportunities.
Cloud computing is a paradigm shift that could
continue to disrupt the old and power a new class of
businesses and technologies such as Internet of
Things (IoT), Big Data, Artificial Intelligence (AI),
Blockchain, and more.
“We are in the middle of a dramatic and broad
technological and economic shift in which software
[cloud] companies are poised to take over large
swathes of the economy.” Marc Andreessen7.
The shifts are happening, and the cloud and software,
we believe, will continue to “eat the world.”
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References

1 IBM's ASCC Introduction, 4Worldwide Public Cloud Services Revenue Forecast,

https://www.ibm.com/ibm/history/exhibits/markI/markI_intro Gartner, November 2019
.html
5 Public cloud services: market size 2009-2022, Statista
2IBM Mainframes, 2020
https://www.ibm.com/ibm/history/exhibits/mainframe/mainfr
ame_intro.html 6Cloud Economics, Cloud Technology Partners,
https://www.cloudtp.com/doppler/cloud-economics-getting-
3History of the Cloud, https://www.bcs.org/content- bigger-picture/
hub/history-of-the-cloud/
7Marc Andreessen, Why Software Is Eating the Word,
Wall Street Journal, August 20, 2011.

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