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, Amazon.com, Google and SS&C Technologies.
                              Industry Forecast
                              Data Processing & Hosting Industry Growth
                              Source: Vertical IQ and Inforum

                              Recent Developments

                              May 20, 2024 - Firms Decrease Prices
                              • Data processing and hosting firms slightly decreased their prices during the first quarter of 2024, according to the US Bureau of Labor Statistics (BLS). Industry employment increased slightly during the first quarter of 2024 while wages for nonsupervisory employees decreased slightly, according to the BLS.
                              • 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.
                              • 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.
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