There’s no denying that “cloud” is a hot commodity, and Rackspace is strategizing a monopoly move. Some Rackspace fans say that the company has done an incredible job of shifting from classic web host to cloud vendor, but it didn’t come without bumps and hurdles. Rackspace has been dedicated to fostering the OpenStack cloud computing option, but there hasn’t been much measurable success from this venture. For years, Rackspace was motivated by the fact that it got the silver medal for sheer size, on the heels of Amazon Web Services (AWS) which no web host could fathom overthrowing, but then other heavy hitters joined the playing field. IBM, Google and Microsoft came out with their own features, and suddenly Rackspace was scrambling to stay on top.
In 2014, Rackspace started seeing how a sale would benefit the company. There were no takers, at least not for the price Rackspace likely wanted, and ultimately Rackspace removed itself from the market once again. Instead of an easy sell, they decided to put all their energy into becoming a major managed cloud vendor. It made sense from many angles, especially since the “Fanatical Support” motto of the company fit in nicely with their new niche. Plus, since most businesses need all the help they can get moving to the cloud, it just made sense that Rackspace could make big bucks as this “helper.”
Too Much of a Good Thing?
What’s interesting is that recently the CEO of Rackspace, Taylor Rhodes, has hinted that supporting multi clouds (not just Rackspace’s own) is going to be the new strategy. These murmurings began after Q1 ended this year, when Rhodes said that supporting a bevy of clouds is a natural fit and in keeping with the Rackspace mission. According to Rhodes, “good conversations” are happening with multiple partners, but so far he’s not naming names. It’s a unique route for Rackspace to take, especially since the company is already working with clients such as Microsoft with Office 365 and SharePoint.
Should Rackspace start supporting AWS or Azure customers, that’s even more money and clients locked in. Rackspace is basically mimicking Dell’s move of going away from the model of offering their own cloud in favor of supporting the cloud(s) of others. Rackspace has also probably figured out exactly how much other cloud supporters are making. For example, one of the biggest AWS partners/supporters is 2nd Watch, a company that’s grown exponentially by supporting AWS. However, this isn’t an easy move to make. Rackspace needs both the right operational and cultural strategy in order to become a leading service provider. They also need to be certain that realistic potential margins will be enough to not just support their current cost structure, but grow it. A plateau isn’t an option.
A Last Ditch Effort
Rackspace may be well known in the industry, but don’t confuse that with being successful. Recent financial reports have been lackluster, while AWS maintains a multi-billion dollar business that just keeps growing. Rackspace isn’t floundering, or even in decline—yet. In the last quarter, Rackspace’s earnings were up 14.1 percent from last year, which sounds like a lot but isn’t considering the sheer growth of “cloud” in general.
In an official Fortune statement, Rackspace said, “We continue to explore opportunities to provide expertise and Fanatical Support on the infrastructure of other public cloud providers, in addition to our own OpenStack public cloud. We are having talks with potential partners, developing internal support capabilities, and investing in tech startups that can help us support other public clouds.” It’s a saturated market and everyone wants a piece of it. Only time will tell if Rackspace has what it takes to pull a Dell.