Rackspace reported its earnings last week, and the numbers were surprisingly good for the Austin-based cloud services company, so good in fact it proved to me that even a small slice of the cloud with a well-defined strategy can produce good results.
Rackspace might not be a household name, but it was founded in 1998, went public a decade later, and was one of the founding members of OpenStack, the private cloud project. It has made its mark providing cloud infrastructure services and more recently helping companies that are transitioning to the cloud to manage multiple clouds.
First, let's look at that earnings report. They reported net income of $49 million, up 77.5 percent compared to Q1 last year. Now, clearly that's not AWS reporting $2.57 billion in revenue, but it's a healthy quarter nonetheless.
Rackspace has been in the process of becoming less of an Infrastructure-as-a-Service provider and taking on more of a consultative role where they help customers manage across multiple clouds, a scenario that is occurring with increasing frequency inside large organizations. Enterprise IT departments used to working in more traditional settings don't always have the staffing or skill set to manage this new way of computing—and Rackspace is happy to fill that gap for them.
Mind the Gap
While Rackspace is able to provide the computing resources if a customer requires that, it has recognized that it's not easy to compete directly with Amazon and Microsoft, so it decided to partner with them instead.
"We will manage the infrastructure and provide [customers] with services and technology to use these platforms—whether it’s ours or someone else’s. We’ll support them on AWS or Azure or Microsoft private cloud. And we deliver that with great service and [Service Level Agreement (SLA)] and a consistent set of problems we can solve," Scott Crenshaw, SVP of strategy and product, explained in an interview recently.
Crenshaw said that he goes around and talks to IT leaders, and he's hearing that this kind of cross-cloud coordination is challenging for companies. Rackspace, which has always prided itself on its customer orientation, felt like this was a way they could use their resources to pivot successfully as company.
That shift in strategy appears to be working. If you can't beat strong competitors like AWS and Microsoft, you can join them (or at least partner with them), and if the numbers are any indication, it appears to be working reasonably well.
It might not be the kind of money that AWS and Microsoft pull in or even what Google and IBM haul in, but it's going to be a fair amount of money. And if shifting cloud strategies gives Rackspace a way to capture a bigger slice of the cloud market, it could find that from small slices big dollars one day come.
Photo Credit: Garrett Heath on Flickr. Used under CC by 2.0 license.