Category Archives: Cloud Computing

Crackdown 3.BagoGames/Flickr

Crackdown 3 is one of the most highly anticipated games on the Xbox Ones lineup, not least of all because its one of the few exclusive titles coming to the marginalized console. Microsoft released the trailer for the game that comes with the obligatory explosions and considerable selections of firearms. It also featured gaming community favorite Terry Crews. Unfortunately, its not all good news, especially on the single player front.

The last time Crackdown 3 made an official appearance was back in 2015, where Microsoft provided a demo for the game. The recent trailer did a good job of making it up to fans, which consisted of many things that went bang and boom. Retaining its cell shaded, neon theme, its still the Crackdown of old, The Verge reports.

Opening the trailer is movie star Terry Crews, the Oldspice spokesperson himself. After a brief, yet intense monolog, viewers are shown some gameplay aspects, which includes a ton of jumping using the jetpacks and blowing people away.

The game is scheduled for launch on November 7th for the Xbox One and Windows. This makes for a relatively short waiting period before gamers can start knocking down buildings in multiplayer. Speaking of which, this is where the bad news comes in.

Back in 2014, Microsoft announced that the game would feature cloud computing aspects in order to make the environment destructible. All well and good, but the company recently clarified that this was only for the multiplayer mode.

For single-player, gamers will not be able to enjoy as much of the destruction. Then again, the game might more than make up for that by absolutely slamming players with a huge amount of content and enemies to destroy as a member of the elite forces that cracks down on crime.

Whats more, the game is coming out the same time as the newly unveiled Xbox One X, Kotaku reports. Crackdown 3 would be a great testbed for bringing out the full power of the console.

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Terry Crews Is On Crackdown 3 Trailer, No Cloud Computing For Single Player - EconoTimes

Your next medical diagnosis could come from a cloud-based machine learning system. According to a Bloomberg report, Alphabet Inc. (GOOG) subsidiary Google is gearing up to provide "Diagnostics-as-a-Service" capabilities through its cloud division. The service will analyze reams of patient and disease data to diagnose patients and, possibly, recommend appropriate drugs for treatment. A German cancer specialist Alacris Theranostics GmbH is already working with Google's cloud division to carry out virtual clinical trials and virtual patient modeling. It uses these models to design drug therapies for patients. (See also: Google Creates New Cloud Group to Take On Amazon and Microsoft.)

Google is not the only cloud company targeting the healthcare industry. International Business Machine Corporation's (IBM) Watson, which uses a mix of artificial intelligence and cloud computing on the back end, analyzed medical data and images pertaining to 1,000 cancer patients last year and returned diagnoses that concurred with a human doctor's assessment in 99 percent of all cases. Amazon.com, Inc. (AMZN), which is a leader in cloud computing, lists genomic sequencing as one of the most prominent use cases of its service on its site. Last year, the National Cancer Institute announced a collaboration with Microsoft Corporation (MSFT) and Amazon to analyze cancer genomes and enable secure collaboration between researchers using the company's cloud services. (See also: Top Medical & Healthcare Software Companies.)

Healthcare spending on cloud services reached $3.73 billion in 2015 and is expected to increase to $9.5 billion by 2020. Primary use cases for this spending were data storage, email and software systems that increase efficiency. For example, telemedicine is rapidly gaining ground as a means to cut down on redundant costs associated with doctor visits for minor ailments. Medical diagnosis using cloud computing is a relatively new use case.

And it might be a while before the diagnostic use case becomes a reality. This is because such diagnoses requires healthcare providers to release critical data to cloud computing companies. A mix of regulatory and competitive advantage considerations may prevent them from doing so. The Bloomberg article quotes an analyst who says that medical data are likely to remain "locked up" with healthcare providers in the "foreseeable future." (See also: Investing in the Healthcare Sector.)

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Cloud Computing Companies Move Into Medical Diagnosis (GOOG, IBM) - Investopedia

Weekly Review

The REIT ETF indexes (VNQ and IYR) finished the week lower by 0.3% as the 10-year yield climbed 7bps following the UK elections. The S&P 500 (NYSEARCA:SPY) gained 0.3%. The homebuilder ETFs (XHB and ITB) were lower by 1.0% on the week. The commercial construction ETF (NYSEARCA:PKB) gained 0.2%.

(Hoya Capital Real Estate, Performance as of 12pm Friday)

Across other areas of the real estate sector, mortgage REITs (NYSEARCA:REM) finished the week higher by 0.5% and the international real estate ETF (NASDAQ:VNQI) declined 0.6%. The 10-Year Treasury yield (NYSEARCA:IEF) gained 7 bps on the week, recovering from YTD low yields earlier this week.

REITs are now higher by 0.8% YTD on a price-basis and higher by roughly 3% on a total-return basis. The sector divergences are quite significant: the Data Center sector has surged 24% while the retail-focused REITs have fallen double-digits. REITs ended 2016 with a total return of roughly 9%, lower than its 20-year average annual return of 12%.

REITWeek Recap

This week was NAREIT's annual REITWeek conference in New York City, the biggest industry conference of the year. We listened to about 25 presentations across all the major REIT sectors.

We came away with a slightly more positive outlook on the REIT sector as a whole. Retail REITs were unquestionably the major focus for many investors. The bifurcation between high-quality and low-quality retail space has intensified. High quality retail space in desirable locations continue to perform very well and, in many cases, the apparel downsizing has actually been a net positive as the vacated space has been put to more productive and higher-traffic uses. We detailed our judgments in "Short Squeeze May Send Mall REITs Surging."

We also published, "Obamacare Uncertainty Remains A Drag On Healthcare REITs," our update on the Healthcare REIT sector. We discussed that healthcare REITs have outperformed over the past quarter, but this outperformance is entirely attributable to plunging interest rates. Healthcare REITs are up 8% as the 10-year yield fell 45bps. Hospitals and skilled nursing REITs, the sub-sectors most exposed to changes in healthcare policy, continue to trade at substantial discounts as Obamacare crumbles and its replacement appears politically infeasible. While much of the media focus is on drug prices, labor costs are the true drivers of healthcare inflation. This is a structural allocation-of-resources issue within the American education system.

Finally, we also published our Net Lease update, "Retail Contagion Continues To Trouble Net Lease REITs" where we discussed that despite the significant decline in interest rates over the past quarter, net lease REITs have badly underperformed the broader REIT indexes, a worrying development for the sector. Net lease REITs are the most yield-sensitive REIT sector, but these REITs have not acted as bond-proxies so far this year. Investors have been rudely reminded of the significant retail exposures of these names. Credit issues with key tenants at Spirit Capital has dragged down the entire Net Lease sector. More than other REIT sectors, net lease REITs depend on their cost of capital advantage for acquisition-fueled growth. Spirit's credit issues may have meaningfully impaired the sector's competitive advantage.

Arguably the most significant piece of REIT news this week actually came after the conference, as Digital Realty (NYSE:DLR) announced a merger with DuPont Fabros (NYSE:DFT) to form a data center giant that appears more fortified to go head-to-head with the public cloud providers, Google (NASDAQ:GOOG) and Amazon (NASDAQ:AMZN). While demand has continued to be robust and outstripping supply, pricing power has been a concern among investors as companies have increasingly utilized public cloud solutions rather than using their own server racks in the data center. In many cases, both the public and private cloud are both located in these REIT data centers, but the rent per megawatt is lower when, for example, Amazon is the tenant rather than an individual mid-sized company. We think consolidation is the right move. We will write a full report on it early next week.

The six best performing REITs on the week were Dupont Fabros , LaSalle Hotels (NYSE:LHO), Diamondrock (NYSE:DRH), Pebblebrook (NYSE:PEB), Sunstone (NYSE:SHO), and CoreSite (NYSE:COR).

The six worst performers on the week were Care Capital (NYSE:CCP), National Retail Properties (NYSE:NNN), Store Capital (NYSE:STOR), Realty Income (NYSE:O), Digital Realty , and CubeSmart (NYSE:CUBE).

Economic Data

Every week, we like to dive deeper into the economic data that directly impacts real estate.

(Hoya Capital Real Estate, HousingWire)

Home Prices Continue To Rise As Mortgage Rates Continue To Fall

Core Logic's Home Price Index showed a 6.9% YoY rise in home prices in April, a slight deceleration from the 7.1% YoY rise in March."Mortgage rates in April dipped back to their lowest level since November of last year, spurring home-buying activity," said Dr. Frank Nothaft, chief economist for CoreLogic. "In some metro areas, there has been a bidding frenzy as multiple contracts are placed on a single home. This has led home-price growth to outpace rent gains. Nationally, home prices were up 6.9 percent over the last year, while rent growth for single-family rental homes recorded a 3 percent rise through April, according to the CoreLogic Single-Family Rental Index."

Zillow's April Case-Shiller forecast sees a 5.6% rise in home prices for April. Home price appreciation has reaccelerated in recent months after showing signs of slowing in early 2017 as mortgage rates shot up nearly 100bps from the summer 2016 lows. All else equal, lower mortgage rates lead to higher home prices.

Bottom Line

REITs fell 0.3% on the week as the 10-year yield climbed 10 bps. Hotels and retail REITs were the best performers. This week was the annual REITWeek conference in NYC. We came away with a more positive outlook on the REIT sector as a whole, especially the higher quality retail space.

Apartments and hotels have been upside surprises this year and have defied the headwinds from higher supply. Demand has been robust in both sectors and has largely offset higher supply. Digital Realty will merge with DuPont Fabros to form the largest data center REIT. Consolidation will allow these REITs to command better pricing power with the public cloud providers.

Please add your comments if you have additional insight or opinions. We encourage readers to follow our Seeking Alpha page (click "Follow" at the top) to continue to stay up to date on our REIT rankings, weekly recaps, and analysis on the REIT and broader real estate sector.

Disclosure: I am/we are long VNQ, SPY, CCP, COR, DLR, CUBE, SHO.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: All of our research is for educational purpose only, always provided free of charge exclusively on Seeking Alpha. Recommendations and commentary are purely theoretical and not intended as investment advice. Information presented is believed to be factual and up-to-date, but we do not guarantee its accuracy and it should not be regarded as a complete analysis of the subjects discussed. For investment advice, consult your financial advisor.

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Real Estate Weekly: Digital Realty Becomes A Cloud Computing ... - Seeking Alpha

May 20, 2017; Baltimore, MD, USA; Javier Castellano aboard Cloud Computing (2) races Julien R. Leparoux aboard Classic Empire (5) during the 142nd running of the Preakness Stakes at Pimlico Race Course. Mandatory Credit: Patrick McDermott-USA TODAY Sports

Why isnt Always Dreaming in the 2017 Belmont Stakes? by Cody Williams

French Open 2017: Womens results Final by John Buhler

Cloud Computing was not on the radar of many people coming into the Preakness Stakes. He opened at a 30-1 underdog. And though his odds drastically improved leading up to post time to 13-1, he was still considered a longshot. Yet, he came out of nowhere and was able to overtake Classic Empire on the final stretch to win at Pimlico Race Course.

However, the win for Cloud Computing eliminated the chance of a Triple Crown winner in 2017. Thus, the Belmont Stakes didnt hold the same meaning for him or for Derby winner Always Dreaming. As such, both Always Dreaming and Cloud Computing wont be running on Saturday in the 2017 Belmont Stakes.

But not running solely because theres no shot at the Triple Crown seems a bit petty. Is that the whole reason as to why Cloud Computing isnt running at the 2017 Belmont Stakes? The short answer is, of course, no.

Though many people only pay attention to horse racing during the Triple Crown races, its actually quite a long season. There are numerous races with big purses for the winner throughout the summer. Thus, a lot of trainers and owners are interested in seeing their horses do well in those races to complete the season.

Whats more, the Belmont Stakes is a notoriously grueling race. Weve seen former Triple Crown hopefuls win the Derby and Preakness only to come up short at the Belmont because of the length of the race.

Thus, with the prestige of the Triple Crown not on the line, it makes sense that Cloud Computings team would rather focus on the summer and not such a long race. Its unfortunate and takes away some of the drama, but it makes sense in the long run.

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Why isn't Cloud Computing in the 2017 Belmont Stakes? - FanSided

The cloud computing industry is still in its early stages of adoption. In 2016, the Infrastructure as a Service (IaaS) segment recorded just $22 billion in annual revenues. Considering the hundreds of billions dollars the IT industry spends every year, it is very clear that IaaS still has a long way to go.

The Software as a Service segment is a bit older, but the model has now become the preferred method for software delivery. Microsoft has done an excellent job of ditching its old annual licensing model for SaaS, and the success of Office 365, their lead SaaS product, is ample validation of that. Oracle is targeting $10 billion in annual revenues from SaaS over the next few years.

With these and thousands of other companies in the fray, the SaaS segment is expected to continue its double-digit growth over the next several years.

The cloud software market reached $48.8 billion in revenue in 2014, representing a 24.4% year-over-year growth rate. IDC expects cloud software will grow to surpass $112.8 billion by 2019 at a compound annual growth rate (CAGR) of 18.3%. SaaS delivery will significantly outpace traditional software product delivery, growing nearly five times faster than the traditional software market and becoming a significant growth driver to all functional software markets. By 2019, the cloud software model will account for $1 of every $4.59 spent on software.IDC

As businesses around the world slowly started warming up to the idea of third party-managed infrastructure services (IaaS) and software products delivered over the cloud (SaaS), the segment has piqued the interests of all the major tech players. Early entrants Amazon (NASDAQ:AMZN) and Microsoft (NASDAQ:MSFT) have already crossed $13 billion in trailing 12-month revenues while IBM has, so far, kept pace. Google is still working toward getting its bona fides in the cloud game by building datacenters and increasing features and services while Oracle is slowly working on its IaaS portfolio as well.

But Amazon and Microsoft, the lead players in the cloud story, have now made it clear that they are already on their way to embracing the next level of cloud. Microsofts CEO Satya Nadella made a huge announcement during the recent Microsoft Build 2017 developer conference that the companys cloud strategy is moving toward edge computing:

It has been barely four years since Microsoft CEO Satya Nadella announced the companys Mobile First, Cloud First strategy. Instead of basking in the glory of newfound success in Cloud, Microsoft CEO Satya Nadella has now announced that the time has to come to move on from a Mobile First, Cloud First strategy toward a more cloud-focused Intelligent Cloud, Intelligent Edge strategy.1reddrop

Amazon made its edge computing/IoT-focused software, Amazon Greengrass, publicly available Thursday, making it loud and clear that they, too, are in the race to move computing closer to the edge.

But most investors in the stock market have barely begun to discover cloud computing so heres a little primer on the new wave of cloud computing.

What is edge computing?

In cloud computing, the processing power is always centralized. Data has to travel from a device to servers, where it gets processed; the output is then pushed back to the device. Edge computing moves these heavy processing tasks or as many of them as possible closer to the point of origin, hence the word "edge."

This reduces the time data needs to travel, thereby reducing latency and cutting reliance on internet connections. It results in improved reliability and faster, more reliable decision making at the edge.

Among its application areas are artificial intelligence, or AI, where it It completely transforms the way AI can be applied to various scenarios.

Thats probably an oversimplified description of edge computing, but its enough at this point to understand that the "edge" part of the equation takes the "computing" part of cloud computing away from massive data centers and brings it closer to the connected devices themselves.

There are several obvious advantages to adopting an edge computing model over a traditional cloud computing one, but the segment itself is in very early stages of its development. Edge computing also needs a robust IoT and AI device ecosystem to make its impact felt in full force. By moving in early on this new paradigm in cloud computing, Amazon and Microsoft, the top two cloud companies, have once again moved the cloud goal posts and significantly raised the bar.

Their competitors now have to take the risk to invest sufficient resources, time and money if they want to keep Amazon and Microsoft in check. Considering the fact that Google and Oracle are only now starting on the cloud computing segment itself, it is going to be an extremely difficult task to execute to keep expanding their cloud offerings while also working on edge computing and IoT technologies.

By putting a clear moat around their businesses, Amazon and Microsoft are further differentiating themselves from the now-crowded cloud computing space. Microsoft is even going so far as to redefine its very vision for the future of cloud computing and the direction that the companys cloud push is going to take.

Why do investors need to know this? Because these are the moves that will take Microsoft and Amazon from their annual cloud revenues of $13 billion to twice, thrice that and beyond. Its not something of which a serious tech investor can afford to be unaware.

Disclosure: I have no positions in the stock mentioned above and no intention to initiate a position in the next 72 hours.

Sangara Narayanan

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Edge Computing Is New Cloud Computing Tech Investors Should Track - GuruFocus.com

For those virtualization admins hiding under a virtual rock regarding cloud, I have news for you. Your job isn't safe. No one can put the cloud genie back in the bottle. Cloud computing is here to stay, and virtualization admins need to shift focus to keep up with tomorrow's jobs.

This complimentary guide helps readers determine the pros, cons and key considerations of DevOps by offering up 5 important questions you should be asking in order to create a realistic DevOps assessment.

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The move to cloud is already happening at all levels, from the smallest through to the largest businesses. Cloud and microservices mark a new iteration of change that is as disruptive as the original arrival of virtualization with VMware -- if not more so.

Virtualization has two phases: consolidation and abstraction.

In the beginning, virtualization's goal was more efficient use of underutilized hardware. Rarely do servers consume all the resources allocated to them. Virtualization admins could reclaim these lost resources and vastly reduce wasted capacity.

In phase two, virtualization developed advanced functions such as live storage motion or migration, high availability and fault tolerance. These virtualization capabilities address the issues that arise when several machines share one physical piece of hardware. Automation arrived and made server deployment simple and straightforward.

I argue that this virtualization adoption curve peaked a few years ago -- we are now moving to the next iteration, and you'll need to follow a cloud computing career path to come along.

Even once-conservative technology adopters, such as financial institutions, are jumping on board with the third wave of virtualization.

There is a thirst to cut costs, and automation allows massive cost cuts. There will be job losses. No virtualization admin should think it will never happen to them. You are fooling yourself. Fewer staff means fewer medical plans and pensions to support. It is not hard to see why the cloud appeals to the bottom line.

There will not be enough cloud computing careers to go around based on old virtualization working practices, such as in a phase one scenario.

Consider virtual machine orchestration. In early-phase virtualization environments, VMs still required some level of administration action, such as deployment from a template, to accompany automated steps. Tools such as VMware vRealize Automation or Platform9's managed vSphere stack enable an approved user to request a VM, customized to their specifications, and have it deployed within 10 minutes with no administrator interactions. Larger companies used to have several virtualization admins whose jobs purely entailed VM creation and deployment. Within a year or two, that job role disappeared.

Virtual machines are now moving to cattle status, meaning they're disposable commodities. To scale applications, organizations adopt automation tools that deploy new VMs. It's quicker to deploy another instance of a machine than to troubleshoot a broken one.

DevOps does away with manual work; manual deployment is the exact opposite of how DevOps is supposed to work. A key tenet of DevOps is that tasks performed more than once in the same way should be scripted so the IT platform does the action itself.

There is still time to retool and get on a cloud computing career path. Virtualization admins are luckier than most.

Platform as a service reduces the workload. Workloads that used to be custom-built and based on infrastructure as a service are now provided as a service for consumption by developers and companies. Examples include the larger cloud vendors offering secure and highly available database hosting that organizations consume without any effort to build and manage the underlying database infrastructure. Little to no database admin input required. No server admin required either.

The complexity hasn't gone away -- it has just changed. Management complexity moved from the VMs to orchestration and scaling. Virtualization elements such as high availability and disaster recovery (DR) lost importance, while the IT industry turned its attention to microservices that are scalable, redundant and can be spun up and down at will. Automation means little to no hands-on intervention. For example, you can spin up a cloud infrastructure from a single PowerShell script.

Classic DR locations are now costly relics of waste. Cloud affects virtualization in secondary ways. For example, businesses are used to having one primary data center and one DR setup in another data center. Given a relatively modern application set, the entire company infrastructure can restart in its entirety in the cloud in the event of a disaster. Modern DR management products, such as Zerto and Acronis, eliminate the costly secondary data center, allowing businesses to prepopulate and configure DR setups in the cloud.

This is the reality for virtualization admins, and the only future is in a cloud computing career. Over time, more applications are built cloud-first to save money from the start; the old, immovable on-site applications go the way of pagers and typewriters.

The reality is that most virtualization admin roles as we know them will vastly shrink or become outmoded over the next decade. A virtual data center requires far fewer staff, and with automation and scripting, a single administrator can manage massive numbers of servers.

There is still time to retool and get on a cloud computing career path. Virtualization admins are luckier than most. While the technology itself may change, these administrators have skills that easily translate to the popular cloud and DevOps arena.

This doesn't mean becoming a code guru or programmer, but a virtualization admin will need a deep understanding of architectures and tools such as Docker for containerization, Chef for configuration management and Kubernetes for container orchestration to become a DevOps admin. Learn multiple scripting languages and investigate hyper-converged infrastructure for cloud hosting.

The warning signs are there, fellow admins. It is just a case of doing something about it while you still can.

Help keep an organization on track as a cloud capacity manager

Break down seemingly convoluted DevOps job requirements

DevOps engineers must demonstrate strong communication skills

Set up a DevOps home lab to gain hands-on skills

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Virtualization admin? Pivot -- pivot now -- to a cloud computing career - TechTarget

The cloud is no longer an afterthought, it is a competitive advantage. According to a new Insight-sponsored report by Harvard Business Review Analytic Services, businesses are turning to the cloud for agility, data capabilities, customer and user experiences as well as cost savings.

A companys IT environment should work for them by enabling them to both run and innovate. Large and small to mid-sized companies need to focus on managing and modernizing their IT infrastructure, so that it becomes a transformative part of their business that can directly improve results, said David Lewerke, Director, hybrid cloud consulting practice at Insight. While we knew there were a number of benefits, we wanted to better understand from respondents exactly how cloud systems were impacting their business outcomes.

The report found 42% use a hybrid cloud approach, 40% host their systems in a private cloud, and 13% host in a public cloud. Other benefits of cloud adoption included time to market, ability to manage security, and the ability to mitigate risk.

Rust 1.18 releasedThe latest version of the systems programing language Rust has been released with new improvements, cleanups and features. The biggest changes in Rust 1.18 includes an update to the latest edition of The Rust Programming Language book. The book is being written in the open on GitHub. Version 1.18 features the first draft of the second edition, as well as 19 out of 20 draft chapters.

Other features include an expansion of the pub keyword, library stabilizations, and cargo features.

More information is available here.

WebKits intelligent tracking prevention featureWebKit, an open source web browser engine, is providing a new feature called cross-site tracking. The Intelligent Tracking Prevention feature limits cookies and other website data to help users feel they can trust the privacy-sensitive data about their web activity again.

The success of the web as a platform relies on user trust. Many users feel that trust is broken when they are being tracked and privacy-sensitive data about their web activity is acquired for purposes that they never agreed to, John Wilander, security engineer for WebKit, wrote in a post.

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The benefits of cloud computing, Rust 1.18, and intelligent tracking prevention in WebKit SD Times news digest ... - SDTimes.com

This blog develops the themes of our February piece on cloud availability risks from software patent claims. It shows how the patent cloudscape is changing; how PAEs are increasingly active in Europe as well as in the USA; and how CSPs are starting to respond in their contract terms.

With increasingly recognised benefits of security, flexibility and reliability, cloud computing continues to carry all before it. Its aggregation of massive processing power also heralds deep, connected and transformative innovation in our daily lives. Intellectual property (IP) is at the centre of this wave of innovation, and an increasingly fierce battleground as the current high profile dispute between Alphabets Waymo and Uber over core autonomous vehicle technology shows.[1]

You might think that the cloud, built and running on shared environments and public standards, would be a safe space from intrusive IP disputes. But the evidence is mounting that the cloud is proving attractive for PAEs (Patent Assertion Entities, businesses who litigate their patents but generally dont otherwise use their patented technology). And whilst cloud users are increasingly aware of the importance of security and privacy, cloud IP risks are now equally important but still somewhat overlooked: many enterprises dont yet have complete clarity on their IP litigation strategy or IP innovation strategy, especially in a global context.

There are persuasive reasons for cloud customers to focus more on patent risks. PwC, in its most recent (May 2017) Patent Litigation Study[2] notes that damages awards for PAEs are almost four times greater than for other patent claimants and that damages awards at trial in patent disputes continue to rise.

Europe is quickly becoming a key jurisdiction for patent enforcement: the European Patent Office granted 96,000 patents in 2016, [3] up 40% from 2015, and the Unitary Patent along with EU-wide injunctions will soon be a reality.[4]

The cloud computing patent landscape is also developing rapidly. Cloud patent families are well-known in areas such file-storage and protocols but other areas like Fintech[5] are also growing quickly.

PAEs are acquiring cloud computing patents at a rapid pace according to IPlytics, an IP intelligence provider,[6] who note that:

PAEs often acquire patents in technological areas that will likely become strategically important for future markets.

This is borne out in a European Commission report on PAEs in Europe[7] which (on page 26) cites findings that:[8]

PAEs are overwhelmingly involved in the litigation of German and UK patents related to computer and telecommunications technology [and that] these findings are consistent with existing evidence on the activity of US PAEs, which also tend to enforce high-tech patents at a disproportionately high frequency, especially software patents.

Part of the attraction for PAEs is that patent infringement is increasingly easy to detect in the cloud: detailed documentation, APIs and the code for open source (the software that powers much of the cloud) are readily available, and can be read and analysed by anyone, making the cloud a soft target.

As the economic importance of the cloud rises, cloud customers make increasingly interesting targets for PAEs: customers generally dont have the same level of expertise in cloud tech as cloud service providers (CSPs), have a greater incentive to settle, are less prepared to fight an IP battle, and have little incentive to solve an IP Issue for others. Contrast this with the position of the CSP, who will want to avoid an IP threat becoming an issue across its customer base.

A measure of this growing cloud patent claim risk is the evolving approach of the largest global CSPs to this issue in their cloud service agreements.

Microsoft has taken an early lead through its recently announced Azure IP Advantage[9] programme with uncapped indemnification for its Azure cloud services, including open source incorporated in its services, and 10,000 (7,500 currently, 2,500 to come) patents that Microsoft is sharing with its consuming customers.

Google in its Cloud Platform Terms of Service[10] seeks (at section 14.2) to exclude open source software entirely from its IP infringement indemnification a big carve-out given the importance of open source in the cloud environment.

In Amazon Web Services (AWS) Customer Agreement,[11] the effect of section 10 is that AWS does not offer in its standard terms any IP protection at all for its services. Section 8.5 is an unusual IP non-assert term that requires the customer not itself or through others to assert any IP claim regarding the AWS services it has used. The clause continues without limit in time after the agreement has ended; and to the extent it could be said to amount to a patent no-challenge clause, could be problematic in Europe under EU competition law, for example.

The fact that all the largest CSPs are starting to address cloud patent risk expressly in their contract terms is perhaps the most compelling evidence that this PAE-fuelled risk is becoming increasingly relevant and material. Cloud customers, and their regulators in regulated sectors, should take note as well.

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Growing Patent Claim Risks in Cloud Computing - Lexology (registration)

On 17 May, 2017 the Luxembourg Financial Regulator (CSSF) published four new circulars concerning cloud computing and IT outsourcing. The new regulations will immediately affect credit institutions, professionals of the financial sector, payment service providers, and electronic money issuers (Entities). The four CSSF circulars, which came into effect on the date of their publication, introduce new rules and replace existing requirements set out in existing circulars.

Main novelties and amendments

Circular 17/654

This circular addresses the obligations that Entities must meet when their IT infrastructure uses or will rely on a cloud computing infrastructure.

The circular applies to the partial or full transfer of the activities and does not make many differences between an external provider and an internal provider within a group of companies.

The CSSF defines the term of material activity as any activity that, when not properly performed, reduces the ability of an Entity to meet regulatory requirements or continue its operations, and any activities that are necessary for the sound and prudent risk management.

Three different IT service models are described:

For each of the above service models, the CSSF provides an interpretation of the levels of control on the systems and the software that an Entity must respect when applying such model.

Within these service models the CSSF differentiates four different cloud types:

An Entitys outsourcing of IT matters will qualify for particular regulatory treatment, if it meets specific criteria set out by the CSSF and will be excluded from the scope of other existing regulations relating the Entitys central administration, accounting organization, internal governance and risk management (e.g. Circulars 12/552 or 17/656).

The criteria that the CSSF uses to define the specific regulatory treatment are:

If the above criteria are fulfilled an Entity must obtain the CSSFs prior approval (if a material activity is concerned). In case a Luxembourg based professional of the financial sector is used, an Entity must only file a prior notification to the CSSF.

Once the outsourcing is implemented, all the changes to the set-up and the service providers as well as the in-sourcing must be notified to the regulator before an Entity enacts them.

Entities under the supervision of the CSSF that would like to offer cloud computing services or related operating services to their clients must submit a program description to the CSSF to obtain its prior approval.

This circular amends the requirements applicable to credit institutions, investment firms and professional lenders. The amendments introduce Circular 17/654 and clarify that Circular 05/178 is repealed.

In addition, the amendments clarify that every time specific infrastructures are used or changed, authorized entities must observe data protection and professional secrecy rules.

The circular clarifies the conditions for the use of other group entities that are not authorized by the CSSF. The systems of such group entities may be used under the condition that no confidential information is stored in a readable manner on those systems. If this is the case, the supervised entity must inform its clients and, if required, collect their consent.

This circular aligns the IT outsourcing requirements for professionals of the financial sector other than investment firms, payment service providers and electronic money issuers to those applicable to credit institutions and investment firms. It copies the wording of the relevant sections of Circular 12/552 to ensure consistency and ease further alignments.

Finally, the circular introduces Circular 17/564 and clarifies that professionals of the financial sector that offer IT services to their clients, may use the infrastructure of a third party or sub-delegate a part of their services only with the prior consent of the concerned clients.

This circular amends Circular 06/240 and is applicable to all credit institutions and professionals of the financial sector. One important clarification of this circular consists of providing that only the production environment should contain confidential data, whereas the test and development environment(s) (that as per applicable regulation may be accessed by third parties) should not contain confidential data.

Future developments

As the four circulars came into effect on the date of their publication, the Entities auditors are expected to pay particular attention to the new requirements when carrying out their audits.

Entities supervised by the CSSF will have to carefully study the new circulars and analyze the impact on their existing administrative organization and IT infrastructure, because if affected, they must be aligned to the new requirements. Therefore, changes may need to be implemented at multiple levels:

As service providers located outside of Luxembourg will be required to accept contractual provisions that they have never been requested to comply with before, (for instance, amendments to certifications and controls), the time to implement the changes should not be underestimated.

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Whether you are running applications that share photos to millions of mobile users or youre supporting the critical operations of your business, a cloud services platform provides rapid access to flexible and low cost IT resources. With cloud computing, you dont need to make large upfront investments in hardware and spend a lot of time on the heavy lifting of managing that hardware. Instead, you can provision exactly the right type and size of computing resources you need to power your newest bright idea or operate your IT department. You can access as many resources as you need, almost instantly, and only pay for what you use.

Cloud computing provides a simple way to access servers, storage, databases and a broad set of application services over the Internet. A Cloud services platform such as Amazon Web Services owns and maintains the network-connected hardware required for these application services, while you provision and use what you need via a web application.

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