Data Processing & Hosting
Industry Profile Report
Dive Deep into the industry with a 25+ page industry report (pdf format) including the following chapters
Industry Overview Current Conditions, Industry Structure, How Firms Operate, Industry Trends, Credit Underwriting & Risks, and Industry Forecast.
Call Preparation Call Prep Questions, Industry Terms, and Weblinks.
Financial Insights Working Capital, Capital Financing, Business Valuation, and Financial Benchmarks.
Industry Profile Excerpts
Industry Overview
The 11,080 data processing and hosting companies in the US provide outsourced information technology services to businesses and other organizations. These services include automating business processes, website hosting, providing business software applications via the Internet, video streaming services, time-shared computer capacity, and data entry and reporting services.
Protecting Security of Customer Data
High profile incidents of computer hackers gaining access to social security and credit card numbers housed on a customer's behalf has increased security concerns for data processing and hosting companies.
Cloud Computing
Widespread adoption of cloud computing has increased demand for data processing and hosting companies.
Industry size & Structure
The average data processing and hosting company has about 44 workers and $29 million in annual revenue.
- There are about 11,080 data processing and hosting companies in the US that employ 490,000 workers and generate revenue of $318 billion.
- 61% of firms operate out of a single location.
- Large data processing and hosting companies include Automatic Data Processing, FISERV, Rackspace Hosting, and Alliance Data Systems. Web hosting and cloud computing services are also provided by units of large companies, such as AT&T, Amazon.com, Google and SS&C Technologies.
Industry Forecast
Data Processing & Hosting Industry Growth
Recent Developments
Jul 18, 2024 - Employment Decreases, Wages Increase
- Data processing and hosting industry employment decreased slightly while wages for nonsupervisory employees increased slightly during the first five months of 2024, according to the US Bureau of Labor Statistics (BLS). Data processing and hosting firms slightly increased their prices during the first five months of 2024, according to the BLS.
- Data centers used around 2% of global electricity in 2022, with consumption projected to potentially double by 2026, according to The International Energy Agency. Artificial intelligence (AI) growth is accelerating electricity demand, as AI server racks consume around four times more energy than conventional servers. Power constraints may affect data processing and hosting industry expansion. The Pacific Northwest’s power grid could be pushed beyond its limits in five years by the electricity demands of the data center industry, regional power planners reported in July. The region would need to find more power sources to avoid struggling to keep lights on while also phasing out fossil fuels and meeting environmental mandates to protect salmon, according to a Northwest Power and Conservation Council report. Opposition to data center construction may increase in areas where power shortages may occur.
- About 53% of respondents to DLA Piper’s 2024 Real Estate State of the Market Survey said that data centers are the most attractive real estate asset class. That is a significant increase from the 32% favorability observed in the prior year. “As AI technologies scale, the demand for processing and computing capacity has exploded, creating a growing need for data centers,” said John Sullivan, US chair of DLA Piper’s Real Estate Practice. “Notably, we’re seeing data center development expand beyond traditional markets like Northern Virginia into both rural areas and central cities, with access to power as the single most important factor in location choices.”
- CIOs are increasingly doubtful about cloud-first computing, according to CIO.com. The resulting infrastructure of choice — a combination of on-premises and hybrid-cloud platforms — will aim to reduce cost overruns, contain cloud chaos, and ensure adequate funding for generative AI projects. “The most common motivator for repatriation I’ve been seeing is cost,” said David Linthicum, former chief cloud strategy officer at Deloitte. “...most enterprise workloads aren’t exactly modern” and thus not best fits for the cloud, Linthicum added.
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