Rackspace: AWS is Clouding the Picture on Dedicated Servers

All dedicated servers are not created equal. That's the message today from Rackspace Chief Technology Officer John Engates, who says recent price cuts on dedicated virtual machine instances from rival Amazon Web Services have led to confusion about "dedicated" products.

In a blog post, Engates responded to the recent AWS price cuts. He emphasized that Rackspace doesn't aspire to be the cheapest cloud player, building its business on its “Fanatical Support,” which is a major differentiator for the San Antonio firm.

But Engates also asserted out that the cuts don’t have the impact that the investor community seems to perceive. After last week's announcement from Amazon, Rackspace stock dipped as much as 8.5 percent amid concerns that the cuts in AWS’ dedicated EC2 offerings could potentially be seen as a threat to Rackspace's lucrative business in dedicated and managed hosting.

Engates says the current discussion is conflating apples and oranges.

"The real conflict lies in the way that AWS defines dedicated computing, which is at odds with the view of the rest of the industry, including Rackspace,” writes Engates. "At Rackspace, we don’t charge a separate fee for each region or for each data center where you have a dedicated server. Nor do we charge extra for our renowned Fanatical Support. Our pricing philosophy is to provide transparency and simplicity. We won’t nickel and dime you with hidden costs, extra charges and complex pricing structures."

Dedicated as Gateway to Hybrid

Rackspace is famous for removing itself from the hosting pricing wars several years ago and focusing on providing a premium product with its Fanatical Support. The strategy worked well. As a public company, it is under additional scrutiny from an investor community.

Rackspace asserts that there's a disconnect in Wall Street's reaction that doesn't reckon with the intricacies of internet infrastructure. Engates' blog post goes into great detail in laying out the differences between the companies, both philosophically and from a cost perspective. Engates goes over the differences between servers vs. instances, as well as unit cost vs. total cost.  

There has been a lot of anecdotal evidence that some companies are leaving public cloud for a service provider hybrid cloud.

"Many of our customers come to us from a one-size-fits-all public cloud, and they tell us that the hybrid cloud approach has improved the performance, reliability and overall cost of their infrastructure," writes Engates. "One thing we’ve learned from these customers is that dedicated hardware (whether bare metal or with virtualization) isn’t going away. If anything, there’s a renewed need for it with the increased use of I/O-heavy applications such as databases and Big Data platforms. The public cloud is a powerful technology, but it isn’t the answer for every business or every workload. Customers want to run the cloud where they want (whether on premise or in a vendor’s datacenter), how they want, and in the combination that best fits their applications. In many cases, dedicated hardware will play a key role.”