In a deal worth $4.3 billion, Rackspace is being acquired by investment company Apollo Global Management for $32 a share. From what I’ve read so far, the press releases are putting a spin on it that implies the private route allows Rackspace to transform the company without the stress and attention of being a public company.
Rackspace has been moving away from a pure hosting business to one that provides support for organisations looking to adopt public cloud and in particular OpenStack. The company has also been selling off non-core assets like Cloud Sites (link) and Jungle Disk (link) as the transition to a more services-orientated business has occurred. The problem for Rackspace and any other small public cloud services providers is how to compete against the combined might of Amazon Web Services, Microsoft Azure and Google Cloud Platform. All three of these vendors have used their considerable financial resources from traditional businesses (retail, software and advertising) to effectively subsidise their ability to massively scale out their public cloud services offerings.
Competing with vendors that have almost unlimited resources to build new data centres, develop new product features and acquire customers, leaves companies like Rackspace in a tough position. The best the company can do is move to a services-based model and help customers adapt to the multi-cloud world of the future. As a result, support for services (such as adopting AWS) feature as prominently on Rackspace’s homepage as their hosting services do.
The Architect’s View
It’s both a smart and obvious move for Rackspace to adapt their business by taking the private route. It offers time and privacy to pivot the business to managed services rather than pure hosting. Competing against the big three cloud providers is in practical terms a futile effort; better to work with, than against them.
Disclaimer: This blog (and a number of other websites) is hosted on a Rackspace VM and has been for many years.
- Rackspace CEO: Yes Brexit has hit us, yes we sold out Cloud Sites biz (The Register, retrieved 31 August 2016, posted 9 August 2016)
- Encrypted cloud backup company jumps out of Rackspace, into Rand building downtown (San Antonio Business Journal, retrieved 31 August 2016, posted 15 January 2016)
- Rackspace going private in $4.3B buyout (Data Center Knowledge, retrieved 31 August 2016, posted 26 August 2016)
- In Going Private, Rackspace Will Do Things Not Possible as Public Company, CTO Says (WHIR, retrieved 31 August 2016, posted 26 August 2016)
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