Laggard Rackspace growth sparks concern: is there enough cloud biz to go around?

Rackspace has an “in” with their existing traditional hosting customers. But you have to ask yourself how many of them already are satisfied with a traditional model of computing. After all if they don’t even want to host their own infrastructure what’s the appetite for investing in the development effort needed to build cloud aware applications.

This means that beyond their existing customers they have to appeal to the market you mentioned above. This is a competitive landscape. These organizations not only have to choose between vendors but platforms and strategies. Do they want to just extend their existing enterprise using vCloud or SCCM/Azure (one day). Or do they want to build a new delivery model all together. Once, this decision is made the next question is which platform/vendor.

What’s the pool for this type of organization. Rackspace is probably the best option for an Openstack Cloud but what’s the market potential for OpenStack clouds? I agree this is what we are seeing in their results.


Here’s the narrative that cloud vendors would like us to believe: there are infinite workloads flowing to clouds of infinite capacity. There’s enough business for all, keep moving.

But there is nagging worry, sparked anew by Rackspace’s laggard Q1 cloud growth, that the appetite for cloud services may not be unlimited after all. For its first quarter ending March 31, Rackspace(s rax)logged $91 million in public cloud revenue, up 4 percent sequentially and 40 percent year over year. It is the quarter-over-quarter number that has people spooked; given that Rackspace has been touting its new OpenStack public cloud, folks expected much better numbers.

To be fair there are nuances about the Rackspace quarter to be examined. First, it blamed some of the inertia on price cuts on some services during the quarter. And the newer OpenStack-based public cloud business was up 75 percent sequentially, CEO Lanham Napier told analysts…

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Published by Keith Townsend

Now I'm @CTOAdvisor

One thought on “Laggard Rackspace growth sparks concern: is there enough cloud biz to go around?

  1. Will it be OpenStack, no-one knows, will it be cloud everywhere: yes, I believe every serverroom/datacenter is gonna be a cloud.

    Because who wants to deal with or manage single systems ? Why not manage them like cattle ? Rolling out new things with the push of a button after specifiying exactly what you want. Instant gratification. Nut just virtualization like the enterprise has now, but also networking and storage. When you have that, you can have self-service. That is at the technical level what cloud is.

    In the enterprise and maybe smaller organisations you’ll obviously need a ‘paper’ trail, budgets and maybe a process/workflow around it so you can get approval from your boss.

    I like this article about what the cloud is about:

    I’ve mentioned this before, I think the real question is: will enterprises and their applications adapt to be able to run in a cloud environment. Or will cloud-systems adapt to be able to run enterprise workloads. My guess is some enterprise applications will adapt, others won’t.

    Maybe cloud environments will support running something like VMware vSphere Fault Tolerance or the open source equivalant Xen Remus to run enterprise applications that were not designed to handle failures. So we might just end up just rolling out a FT-pairs.

    New applications like ‘big data’, which is at least 80% if not close to a 100% of the time Hadoop, are already built for ‘the cloud’.

    I just know, no-one wants to manage individual systems and deal with failures of those individual systems. You obviously still need deployment tools and configuration management and software for handling updates, and the hard part will be rolling upgrades, but that is all software.

    It is like Marc Andreessen said: software is eating the world.

    So the software will keep improving.

    Open Source will make sure that the lower layers, the platform, are a commodity. Amazon, Apple, Google, even VMware based their software on open source software.

    Microsoft is the only company left building software on top of their own software. It can also be seen as a form of commodity software.

    Facebook with their Open Compute project is trying to do the same with hardware, to make it a commodity.

    Enterprises will keep on buying from vendors and not have the time to figure it out themselves. Will those vendors be providers selling hosted private cloud or will they buy from vendors selling packaged OpenStack or will VMware, Citrix and Microsoft adopt enough cloud-like capabilites in their products. I don’t know.

    I do see a lot of projects with encryption in the cloud. Obviously targeted directly at the enterprise so they can move workloads into the public cloud. Lots of servers have the ability to do hardware-assisted hashing and encryption these days.

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