Is There An Upside To This Recession?

Talk to companies in the hosting industry and you’d have to say yes. I deal with hosting companies every day and I’ve heard from only a few that their businesses are in decline. In fact, I most often hear that their businesses keep growing – sometimes with record revenues and profits.

One company I deal with has experienced 300% growth over the past year and expects to double the number of its employees over the next two years. Another, admittedly a smaller company, will double its employees in less than a year.  The side benefit that many are receiving from the recent layoffs is that there is a large talent pool to draw on where previously attracting and retaining talent was difficult.

What’s going on? Is there a lesson here for other industries? Have the leading economists and analysts missed something? Perhaps not.

The seeming immunity of hosting companies is rooted in the unique type of business they are in. Simply put, no matter how hard pressed companies are by the economy, their need to be online for sales, customer service, marketing and data continues. Websites, email and other online activities only get turned off when the company, itself, turns out the lights.

So that’s part of the reason why hosting companies are still doing well. Another reason is directly attributable to the recession: Many of the people who are being laid off are not looking for jobs elsewhere, because they know those jobs are scarce. Instead, they are marshalling their money, their knowledge, their talents and their contacts to start up their own small businesses. And what is one of the first things they all need? To be online. While it is possible for a small business to operate without a website, few actually try to, because people just expect a business to have a website. And it simply doesn’t seem reasonable to be in business today without an email address.

The recession has also brought about declines in energy costs, which ultimately are reflected in lower electricity costs for hosting companies.

For instance, the bellwether price of West Texas Intermediate crude oil fell from $133 per barrel in July to $41 in December and January, and are projected average $43 per barrel in 2009. Also, the Henry Hub natural gas spot price is projected to decline from an average of $9.13 per thousand cubic feet in 2008 to about $5 in 2009. Henry Hub is base price for natural gas futures and generally sets the price for North American natural gas.

One last statistic: Texas Electricity projects commercial electric rates as low as 3 – 4 cents per kilowatt hour in 2009.

If nothing else, it’s still a good time to be a hosting company.