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

                              May 8, 2023 - Data Center Sustainability Initiatives Expected To Increase
                              • The proportion of companies implementing a data center infrastructure sustainability program will rise from about 5% in 2022 to 75% by 2027, according to Gartner Research. About 42% of respondents to a Gartner survey said that environmentally friendly choices are helping to drive business growth and provide a differentiator from their competition, and 29% report that it’s helping to create strategic value through industry partnerships. Part of this move toward more active sustainability initiatives is due to CIOs increasingly handing off that responsibility to dedicated infrastructure and operations leaders, according to Autumn Stanish, senior principal analyst at Gartner.
                              • Several states are considering data center industry regulation, according to Data Center Knowledge. Pending data center laws in Virginia, for example, are focused on more stringent requirements in terms of carbon reduction and sustainability. Federal regulation is not expected to be in place anytime soon, according to Jay Dietrich, research director of sustainability at the Uptime Institute. Dietrich “Legislative and regulatory processes and procedures in the US can be laborious, and final standards governing data center information and energy efficiency reporting are likely to remain several years away,” Dietrich notes.
                              • 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.
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