Rackspace Sharpens Its Focus on Hybrid Cloud

SAN FRANCISCO - For many cloud-watchers, Rackspace Hosting has been viewed as a rival to Amazon Web Services in the public cloud arena. But this week the company is touting the power of hybrid clouds, and showcasing a marquee brand implementing a private cloud using Rackspace's OpenStack cloud.

In a session at the GigaOm Sturcture conference Wednesday, Fidelity Investments said it is a new Rackspace customer and is using OpenStack for its private cloud, and will eventually transition to a hybrid cloud environment. "The OpenStack relationship is important to us because of the community behind it and the broad support," said Fidelity Technology Group VP Keith Shinn, who added that Fidelity would work within the OpenStack community to develop enterprise features for private clouds.

Rackspace CTO John Engates said customers have outgrown the public-only cloud.

"For a few years, we drank the Kool Aid and believed everyone was going to the public cloud," said Engates."The public cloud was intoxicating but we're starting to see an alternative and that hybrid is the end state."

'Hybrid Cloud is the Future'

Engates later expanded upon that theme in a blog post.

"The hybrid cloud changes the game," he wrote. "It eliminates the tradeoffs and empowers customers to leverage an infrastructure that makes the most sense for their applications while also building toward a future where a single cloud – whether public or private – or dedicated hardware alone isn’t the perfect fit. It helps them build toward a future where their workloads live in the environment that makes the most sense at the time and can move when the needs grow and change.

"The open hybrid cloud is the future, and we’re here to help you get there," Engates concluded.

Rackspace Playing to Its Strength

Some may see Rackspace's new emphasis on hybrid cloud as a strategic pivot in a changing market. Over the past two quarters, the company has seen the growth rate for its public cloud services begin to moderate. Investors have sold off shares of Rackspace due to these concerns.

But judging Rackspace solely on the basis of its public cloud revenue has always provided a partial view of its value. The San Antonio company has long been one of the world's largest managed hosting companies, with a base of enterprises and SMBs turning to Rackspace for its combination of hosted hardware and Fanatical Support. In in its most recent quarter, managed hosting accounted for 75 percent of revenue for Rackspace, with $271 million from managed hosting and $90 million from public cloud.

For many of the company's 200,000 customers, a private cloud is an easier entry point to cloud services than public cloud.