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 33 workers and $20 million in annual revenue.

    • There are about 10,700 data processing and hosting companies in the US that employ 355,000 workers and generate revenue of $215 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

                              Nov 2, 2022 - Sector Remains Resilient
                              • 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.
                              • Investors are opting to convert old office buildings or empty warehouses into data centers as a quicker, more cost-efficient alternative to new builds. The construction of a new data center can take up to 26 months, and that excludes the permitting process, according to Chris Street, Managing Director of Data Centers, Asia Pacific, JLL. The types of conversion investors are currently pursuing usually take only around one year to complete. “This rush to bring new data centers onstream stems from the need to cope with the rapid digitization and surging demand for online and digital services,” Street says.
                              • Spending on warehouse-size data centers is expected to slow in 2023. Dell'Oro puts growth at just 7%, but many analysts expect growth to rebound over the long term. "The near-term environment is more of a speed bump rather than a brick wall on the cloud transformation underway," said Wedbush analyst Daniel Ives. "... we estimate 45% of workloads have moved to the cloud globally and (the share is) poised to hit 70% by 2025 in a massive $1 trillion shift. Enterprises will aggressively push to the cloud and we do not believe this near-term period takes that broader thesis off course."
                              • Sustainability efforts are intensifying in the data center sector, according to real estate services firm JLL. Industry experts cite the threat of stricter regulations as a catalyst for significant energy reduction. The US Securities Exchange Commission (SEC) recently announced plans to require public companies—including data centers - to disclose their annual greenhouse gas (GHG) emissions and the climate risk their businesses face. The European Union is also considering major updates to its Nonfinancial Reporting Directive to drive change in Environmental, Social and Governance reporting by companies. Proposed changes would increase the number of companies collecting data on their carbon footprint to assess the impact of green and behavioral taxes–including foreign companies doing business in the EU.
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