Rackspace Outlines Asian Expansion

Back in July we wrote about Rackspace's plans to expand into the Hong Kong market by leasing data center space from PCCW. The facility is the second phase of international expansion for Rackspace, which operates several data centers in the United Kingdom.

Today Rackspace (RAX) is officially announcing the Hong Kong data center and offering additional detail about its Asia/Pacific expansion plans. The company will invest at least $20 million in the new facility, starting with a footprint of about 9,500 square feet, with an option to expand to 18,000 square feet if needed.

"As our customers expand to other regions, they want a partner that will grow with them, and our expansion into Asia is an important step towards meeting our goal of becoming one of the world's great service companies," said Lanham Napier, president and CEO, Rackspace Hosting. "Hong Kong has a strong local economy and growing customer demand for hosting, especially in the financial services area, so we look forward to a successful expansion in the Hong Kong market."

"Obviously (Asia Pacific) is a large market and we wanted to be sure we were able to serve local customers," said Jim Fagan, Managing Director of Rackspace Asia. "As we've been moving upstream with our customer base, they absolutely have a requirement for a global provider. It's a key requirement for us to be a global company."

The opening of the Hong Kong a data center followed a two-year process in which Rackspace scouted sites in major markets around the region, including Hong Kong, Singapore, Japan, and Australia. The company already had more than 500 customers from the Asia/Pacific region, who host their equipment in Rackspace data centers in the US and Great Britain.

"Connectivity was an issue in Australia," said Fagan. "Japan is a tough place to start out doing business in Asia. You're limited to the Japanese market, and we saw a lot of barriers. One of the key things we look at in terms of data protection and customer privacy, and that's the main reason we crossed China off the list pretty quickly, bringing it down to a choice between Hong Kong and Singapore."

Fagan said Hong Kong offered the best choice on the company's key selection criteria. "In Singapore, from a conductivity standpoint, you're pretty much stuck with SingTel," said Fagan. "One of the other questions was, how do you get into mainland China? Clearly, we weren't going to start there, and Hong Kong was the best gateway."

Fagan said some Rackspace customers based in the Asia/Pacific region wanted to move from the US or UK data centers to the new Hong Kong facility, but said most of the Hong Kong clients are expanding their presence with Rackspace.

"We're bullish on our business," said Fagan. "Clearly the goal is not just to serve Hong Kong to increase our penetration in the Asia-Pacific market. One of the things we are looking at is what is the right strategy for data center infrastructure."

For the moment, Rackspace will follow the same model it established in the UK: start withcolocation and a small footprint, and then learn the market and assess future facility needs.

Rackspace has 114,749 square feet of technical space in seven data centers in San Antonio, Texas; Grapevine, Texas; Herndon, Virginia; and London. Rackspace has also leased 50,000 square feet of data center space in Slough, U.K., which is under construction and will be finished in July. Rackspace plans to consolidate two of its three existing UK data centers into the Slough facility.