Rackspace downsizes public cloud support department, re-assigns employees to private cloud

Kristen Mosbrucker | San Antonio Business Journal
Feb 29, 2016

Rackspace Hosting Inc. followed through this week on a move to restructure its public cloud department that the managed cloud computing giant's CEO mentioned to investors during the company's fourth-quarter earnings call.

About 90 of Rackspace's (NYSE:RAX) more than 6,100 employees are in the process of being re-assigned, while it's undetermined whether anyone will be laid off, said Rob Discher, the company's director of global communications.

At the same time, Rackspace said in an emailed statement that the company regularly aligns "Rackers to fast-growing areas of our business and may from time to time eliminate some roles in areas where we choose to reduce our investment."

The company said it helps those whose jobs are eliminated to try and find new roles within the company and that many do so. Rackspace also said it anticipates that its workforce will continue to grow this year.

The reason for the current realignments is to shift existing employees in public cloud marketing and engineering into more profitable service departments like private and hybrid cloud computing. The company told investors existing businesses will likely stay on board in the Rackspace public cloud and not migrate data. Instead, there would be more of a slow-down in new accounts.

“More and more new cloud workloads are heading towards AWS and Azure," CEO Taylor Rhodes said during the company's fourth-quarter earnings call with investors about Amazon Web Services and Microsoft Azure. "Without those incremental workloads, we expect the growth rate for our OpenStack public cloud to slow in 2016.”

Public cloud computing is the service in which Rackspace initially went head-to-head against Amazon Web Services prior to a partnership that went into effect in 2015. But Amazon's prices undercut the local technology firm. Microsoft Azure is a public and private cloud computing offering that Rackspace also supports. The company's strategy is to offer new joint cloud customers auxiliary services and hone in on potential opportunity in private and hybrid cloud options.

"For that reason, we are shifting engineering and marketing resources from our OpenStack public cloud to our new offers, including our OpenStack private cloud, which is growing in the high double digits," Rhodes said.