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 10,700 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 $30 million in annual revenue.

    • There are about 10,700 data processing and hosting companies in the US that employ 466,000 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,, Google and SS&C Technologies.
                              Industry Forecast
                              Data Processing & Hosting Industry Growth
                              Source: Vertical IQ and Inforum

                              Recent Developments

                              Nov 16, 2023 - Revenue Increases
                              • Data processing hosting and related service revenue increased 6% year over year and 2.1% quarter over quarter during Q2 2023 to $83,237 million. Firms slightly increased their prices in the first 10 months of 2023. Industry employment increased slightly during the period while wages for nonsupervisory employees increased moderately.
                              • The power demands of generative artificial intelligence (AI) are poised to overwhelm data center capacity, according to TechTarget. AI providers will need to spread processing across the edge and enterprise devices as a result. Most experts agree that there isn't enough unused electricity to perform future AI processing in only hyperscale data centers, according to TechTarget. AI-driven compute demands have slowly increased over the last nine to 12 months, said Barry Buck, marketing leader at data center builder DPR Construction. Current infrastructure has met customers' power needs, but DPR sees companies having to build outside primary data center locations where power is more readily available.
                              • Two of the leading users of data processing and hosting technology reported a massive spike in water consumption at their data centers, according to the AP news service. Microsoft’s data center water use increased 34% from 2021 to 2022 while Google reported a 20% increase in water consumption over the same timeframe. Shaolei Ren, a scientist at the University of California at Riverside who has carried out studies to evaluate the environmental impact of generative artificial intelligence (AI), told AP News that the majority of growth in water consumption is due to an increase in AI workloads. Microsoft told the AP that it’s working on ways to make its large compute systems more energy-efficient for both training and application workloads.
                              • Cloud computing remains one of the most resilient sectors in a generally tough environment for technology companies, according to The Wall Street Journal. Post-pandemic spending on cloud will be more disciplined, however, and economic uncertainty may affect demand. Many economists warn of a coming recession. Spending on cloud computing “will fluctuate with the broader economic picture,” according to Lee Sustar of market research company Forrester Research.
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