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Tech Investing Legend Spots Seismic Shift in the Computing Industry… But Who Will Profit?

Want to know what the “next big thing” is?

Simple. Just turn to someone who’s already created a “next big thing.”

This week, Ben Horowitz, an investing legend in the tech world explained just how big the combination of mobile and cloud computing could be.

Horowitz is the guy who got in early on Netscape, founded Opsware (which he then sold to Hewlett-Packard for $1.6 billion) and then became half of leading venture capital firm Andreessen Horowitz.

Today, Andreessen Horowitz is the unquestioned favorite for startups seeking capital. The group owns stakes in Facebook, Groupon, Twitter, Zynga, Skype, Digg and Foursquare.

So when Horowitz took the stage at the Web 2.0 Expo in San Francisco this week, we listened…

From Mainframe to Mobile: The Evolution of the Computing Industry

“What to Invest In and What to Build?”

In answering this question, Horowitz ended up describing a major shift in computing that will essentially reshape the entire industry. And it’s light years from how the industry began.

At first, IBM (NYSE: IBM) dominated the entire computing world – from hardware, to software, to mainframes. At that time, all computing was done on giant, expensive mainframe machines, with programmers sitting at terminals that connected back to the mainframe and paying by the minute for access to it.

Two simultaneous innovations paired up to destroy this system.

First, programming moved from hierarchical to database structures. The technical details aren’t vital, but the important thing is that this made much easier to write software – and made software much more powerful.

At the same time, the PC also rose to prominence. This meant that programs no longer needed to pay by the minute for mainframe time.

These two innovations caused a fundamental shift in the way that software was created and applied. And as a result, IBM lost its stranglehold on the market and huge tech titans like Microsoft (Nasdaq: MSFT) and Dell (Nasdaq: DELL) started running the show.

Today, Horowitz says the combination of mobile and cloud computing are changing the way we live and do business.

Next-Generation Technology Triggers New Opportunities

Thanks to mobile computing, inflexible IT infrastructure no longer hampers innovation. For example, when a business has a new idea, it doesn’t have to invest thousands of dollars in servers to handle the orders, or email servers for its employees. It can simply buy cloud space and test innovations at a fraction of the cost.

This will unleash completely new possibilities for computing and software. And with the industry still young, the possibilities are so broad that it’s tough to draw definitive conclusions just yet.

Horowitz compares this to the invention of the automobile. He notes that while you could have invested in engine manufacturers and tire makers, the changes were far more widespread. For instance, cars led to suburbanization, which led to fast food restaurants and all-encompassing malls and shopping centers. Not to mention the liftoff it gave the oil industry.

Previous advances in the computing industry lit a fire under software companies like Microsoft. And once that led to the growth of the Internet, all bets were off. Today’s shift has spawned the “Google Era,” as companies like Amazon (Nasdaq: AMZN) branch out and take advantage of mobile and cloud computing. We’ll be following this trend right here in Wall Street Daily, plus our investment newsletter, The White Cap Report, zeroing in on the implications – and the other companies profiting from them.

Ahead of the tape,

Matthew Weinschenk

Matthew Weinschenk