Writing On The Wall: RackSpace Removes Unmanaged IaaS Offerings

By Flux7 Labs
August 11, 2014

Last week, RackSpace announced its intention to remove unmanaged cloud service offerings. You can read about it here: Where does IaaS fit into the managed Cloud.

In some aspects, this decision is a surprise. But, if you were paying attention, you’d agree it was bound to happen. So why should we have known this was going to happen?

Change Is in the Air

During the past few years, the cloud has proven itself to be the future. And RackSpace has been in the cloud business since the beginning. But the truth of the matter is well laid out here: http://bit.ly/1svqeKN.

At the same time, when the cloud has proven itself to be the future, RackSpace’s stock price has steadily fallen. It’s obvious that RackSpace’s strategy of competing head on with Amazon wasn’t working and they needed a new strategy. Which brings us to why they were losing in this space.

Band of Gorillas

RackSpace is a relatively small company. It was fighting the industry’s 800-pound gorilla called AWS.

For a company with a market cap of $4-billion to compete head on with a company that has a market cap nearly 30 times more is difficult. But, it makes it a competitor notorious for living under low profit margins, and the battle RackSpace faced during the past few years becomes more apparent.

What’s more, there hasn’t been any good news for RackSpace. Before RackSpace was competing against the 800-pound gorilla. Now, there’s a band of silverbacks baring their teeth, vying for dominance. Google, Microsoft, IBM. All of them are determined to get a slice of the cloud.

To stay in the market, RackSpace has had to sidestep them. This is especially due to the value added from the cloud being able to scale your infrastructure. We talked about that in this blog post: 6 Reasons why large enterprises should consider moving to AWS.

‘This Stuff Is Hard’

Aater Suleman, CEO of Flux7, and I were talking to one of our customers, who we also have a mentor relationship with, to better understand how to make Flux7 more successful.

I liked the way he put it: “This stuff is hard.”

You need a lot of expertise. And the problem is exacerbated by not having enough feedback to know if what you’re doing makes sense. Which is why it makes sense for Amazon to have a large partner network, and for RackSpace to use support as an opportunity to grow.

RackSpace has always had customer support as a core value, and this move lets the company focus on its strength.

So, the question is: What does this mean for the business landscape of the cloud?

A Mixed Reaction

While many customers would appreciate the additional hand-holding, a lot of large customers will have the opposite reaction. Many enterprises believe IT infrastructure is a mission-critical asset. As a result, they want to keep it in-house.

In fact, many of our biggest clients make sure there is knowledge transfer to enable their in-house teams to manage the infrastructure. As such, this move is expected to cause some people wanting to jump off RackSpace. At Flux7, with our expertise in OpenStack and AWS, we believe we are in a very good position to capitalize on this change.

New Doors Opening for RackSpace

RackSpace. by going higher up in the value chain. will benefit from increased margins, better customer lock-in, and more flexibility in their offerings. In addition, the company can look into critical changes to its business, such as moving into more of a services role, while leveraging partners for infrastructure.

Hey, don’t knock it. IBM has survived for more than a century because of its willingness to recognize major changes in the environment, and change with them.

DevOps Culture Becoming More Prevalent

Even though the cloud enables very dynamic and versatile environments, many customers aren’t able to take advantage of it.

The service packages RackSpace offers includes complete DevOps support. This will encourage more companies to bring a DevOps methodology to their setups. In turn, this helps the DevOps revolution continue its advancement through the world of technology by showing value to more people. This should result in more opportunities for everyone in technology whether it be organizations like Flux7, which provides DevOps consulting, or developers looking to release the next killer app.

In short, we already knew the cloud and DevOps spaces are interesting. And there have been many developments to vett that out. What we’re really seeing with RackSpace’s recent decision is just more evidence of the tumultuous world in which we live.

Let us know what you think. Drop your comments in the section below.

Click here to find out how the cloud can optimize and modernize your infrastructure at a small to medium-sized business. Or, click here to see how quickly your large enterprise can migrate to the cloud.

Want a case study on cloud migration?

Download a cloud migration case study now