Pick of AIM by Miles Nolan

Though it’s been around for over ten years, ‘cloud computing’ is only now coming to the fore. In a market that is gaining traction, which companies are likely to benefit?

The world has moved on in strides since my days at school with a BBC computer, and then at university with a clunky pager. Technical boffins may try to doll it up, but what exactly is cloud computing?

The ‘cloud’ is the provision of computing power and services from a remote location (data centre) over the internet to a user with an internet-enabled device – a computer or smartphone. It is a broad term that encompasses all services delivered online, including consumer-facing platforms such as Facebook, Twitter and online music.

Good examples of cloud-delivered services are Hotmail and Google Mail. The ongoing shift in working practices should help increase its adoption. Email has been a big beneficiary of the cloud revolution. For example, hosted mail using Microsoft’s Hosted Exchange allows companies to collaborate and share email, calendars and company data in the cloud.

Tough economic conditions have forced companies to delay non-essential IT spend, but using the cloud, the payment is typically on a per-user, monthly basis.

The host with the most
The first to join AIM to capitalise on this growing market was Nasstar. It delivers Hosted Exchange (HE), a full Microsoft Windows 7 Hosted Desktop (HD), and all its customers’ non-Microsoft business applications. It has 7,000 HE users, with a further 2,000 HD users. To accelerate its sales efforts Nasstar has developed a white-label partner programme, with more than 50 companies now selling and supporting the HD Platform.

The product is highly scalable, and order enquiries have increased significantly over recent months. Nasstar recently confirmed a £1.2 million placing at 8p to fund additional hardware infrastructure and to help establish partnerships with larger players in the market. Having operated on a shoestring hitherto, the institutional support is welcome and should help Nasstar gain traction.

Mission-critical services
Fellow AIM counter Iomart is a cloud computing-to-managed hosting firm that is witnessing strong demand for its services.

Through its hosting arm it is closing up to 40 new orders a month from new and existing customers. From a single server to private cloud networks, it specialises in delivering mission-critical hosting services. With five state-of-the-art centres in the UK, it allows customers to save costs and cut the risks associated with maintaining their own online applications.

Iomart is growing at breakneck speed, with sales up 38 per cent to £25.3 million in the year to March, as pre-tax profits soared sevenfold to £2.8 million. It has introduced additional cloud products to address backup, storage, email and archiving. Chief executive Angus MacSween says, ‘Almost every company, regardless of size,
that we speak to is considering either a full or part cloud solution for their IT needs.’ Next year, broker Evolution expects pre-tax profits of £5.2 million and EPS of 4.5p, the shares’ upward trajectory looks set to continue.

Investors should also take a closer look at Altitude following the recent disposal of its promotional marketing arm for £6.3 million. It has developed a fully integrated eCommerce, CRM and ERP technology solution that provides software to suppliers and distributors in the promotional merchandise space.

Using its system it provides a single solution that enables distributors to provide quotations and virtual samples, as well as the ability to track orders and raise invoices.

Altitude uses cloud computing and has gained good acceptance in the UK. However, the US is likely to be the growth driver. Users pay a monthly fee of up to $199, providing good recurring revenue. Moreover, because the use of the system is critical to the client there tends to be little churn.

Altitude has already turned away one bid, but with a highly disruptive technology it is unlikely to be the last.