Rackspace does (should) not compete directly with AWS

OpenStack cloud providers such as Rackspace (The Open Cloud Company) and HP are in a difficult part of the cloud computing market. Googe, Microsoft and AWS are in a position to provide compute, storage and network bandwidth at much lower costs due to their scale. However, I’ve never really considered Rackspace and the like as direct competitors to the “Big 3” of cloud computing. I’ve often wondered why Rackspace, for example, ever got into a cloud model that’s closer to AWS than managed services. Midsized hosting providers are at their core managed service providers (MSP).

The value proposition of the MSP is to take commoditized services and add value above the actual consumable service. They may provide that consumable service, in the case of cloud servers, or they may resell the service for little or no profit. Rackspace has made a pretty good living in traditional hosting by either taking in customers existing hardware or re-selling equipment from OEM’s such Dell, HP and EMC. The value for the customer has always been in the tailored services on top of these products. It would be unreasonable to think that Rackspace would start manufacturing and selling servers to the general public so why sell cloud services directly at scale?

So, I’ve always wondered why Rackspace would embrace an AWS type model for cloud services. Cloud computing resources are a commodity, Rackspace is in the business of managed services. I’ve always believed their cloud play is managing cloud services – be it theirs or others. Lydia Leong (@cloudpundit) from Gartner made the point on twitter that Rackspace’s future should be in managing multiple clouds for customers. I can see this as much more viable business strategy. Unless you are Google, Microsoft or Yahoo(maybe) why would you want to compete head to head with AWS.


VMware hasn’t even taken the approach of competing directly with AWS which they have noted as their biggest threat. VMware preaches a hybrid cloud first approach to cloud computing opposed to the mainly public approach AWS takes. VMware believes that this is a much more viable business for the future of enterprise compute. Overall I agree. I don’t know if VMware’s product is the best breed solution or if an OpenStack + (insert cloud provider) is a better model. Either way I don’t believe it’s smart for traditional managed hosting providers to compete directly with AWS.

Published by Keith Townsend

Now I'm @CTOAdvisor

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