Rackspace Shifting Engineering Effort Away from Public OpenStack Cloud

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Rackspace is positioning itself for growth in 2016 and that involves making sure resources are being put into the right areas of the company. Rackspace reported its fourth quarter and full year 2015 fiscal results on February 16, showing areas of growth as the company continues to expand its focus to supporting multiple types of clouds and not just the OpenStack public cloud.

For the quarter, Rackspace reported revenue of $522.8 million for a 10.7 percent year-over-year gain. Net income was reported at $32.1 million for a 7.8 percent decline from the fourth quarter of 2014. For the full year, Rackspace generated $2 billion in revenue, up from $1.8 billion in 2014.

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Looking forward, Rackspace provided first quarter fiscal 2016 guidance for revenues to range between $517 million and $521 million.

While Rackspace is one of the original creators of the OpenStack cloud platform, Rackspace’s strategy for future growth is to embrace multiple cloud technologies, including Amazon Web Services (AWS).

“Our top priority is to lead the AWS managed service provider ecosystem, letting AWS provide the economies of scale on its infrastructure, while we provide valuable economies of expertise,” Taylor Rhodes, CEO of Rackspace said during his company’s earnings call.

In October 2015, Rackspace first announced its support for AWS and so far, it’s a move that is paying off. Rhodes said during the first four months of Rackspace’s managed support for AWS, it has signed 100 customers, the majority of whom are new to Rackspace.

“Most of these new customers are ones we could not have won without providing AWS support,” Rhodes said. “Now that we’ve got them in the door, we believe that we can cross-sell to them our other offers such as Managed Security, private clouds and data services.”

Rhodes also commented that increasing numbers of new cloud workloads are heading towards AWS and Microsoft Azure. As such he added that Rackspace expects the growth rate for its OpenStack public cloud to slow in 2016.

“At the same time, now that we support AWS and Azure customers, we are in a good position to benefit from the growth in those clouds, and this is where we will see rapid growth in our business,” Rhodes said.

With AWS and Azure as the expected areas of growth for Rackspace, the OpenStack public cloud business unit isn’t going to be the benefactor.

“We are shifting engineering and marketing resources from our OpenStack public cloud to our new offers, including our OpenStack private cloud, which is growing in the high-double digits,” Rhodes said. “Even as we shift resources toward our higher growth products, we intend to continue to improve the reliability and performance of our OpenStack public cloud for the many customers who continue to use it.”

Sean Michael Kerner is a senior editor at Datamation and InternetNews.com. Follow him on Twitter @TechJournalist

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