Rackspace CEO Takes a Positive Spin from AWS for OpenStack Growth

by Sean Michael Kerner

Rackspace grows revenues and sees real potential for private clouds running OpenStack.

Rackspace reported its first quarter fiscal 2015 results on May 11, with company executives sounding very optimistic about the company's future prospects.

For the quarter, Rackspace reported net revenue of $480 million, for a 14.1 percent year-over-year gain. Net income for the first quarter was reported at $28.4 million, up from $25.4 million in the first quarter of 2014.

While Rackspace was reporting its own financial results, one of the questions that came up on the company's analyst call was Rackspace's view on OpenStack - RoundedAmazon's recently reported first quarter 2015 financial results, which for the first time broke out Amazon Web Services (AWS) cloud earnings.

For the quarter, AWS, revenue was reported at $1.57 billion, for a 49 percent year-over-year gain. Operating income from AWS was reported at $265 million, for an 8 percent year-over-year gain.

Taylor Rhodes, President and CEO of Rackspace, commented during his company's earnings call that the AWS results show a few key trends.

"First of all, obviously, they are by far the leader in what we call, unmanaged or infrastructure-only space," Rhodes said. "But the good news for all of us in the industry is that they are not only large and growing fast, but they're also profitable."

Rhodes added that the fact Amazon is able to compete and grow at a strong rate while still maintaining healthy profitability may speak to how much of an emphasis the price war is in terms of the currency of competition going forward. Rhodes emphasized that the AWS results are good news for the cloud industry overall.

"That's a big market and there's room for multiple players — room for the unmanaged cloud as well as the managed cloud segment to do very well," Rhodes said.


Rackspace's cloud fortunes today are somewhat tied to the open-source OpenStack cloud platform, which it helped to create. Rhodes sees potential for OpenStack both in the public cloud space as well as the private.

"The market is warming up to OpenStack in terms of its readiness," Rhodes said. "There are clearly paths still ahead of us around tools and functionality to be able to make OpenStack an at-parity stack, compared to a more mature technology stack, but I think the progress is increasing there."

Rhodes said that Rackspace is seeing OpenStack take a very private cloud-oriented path and the people pushing for OpenStack adoption are CTOs and CIOs, who are traditionally running VMware.

"This is not a rip-and-tear from one old to a new, but it is a statement about intent in the future to have more than one option in terms of the stacks they choose to run production," Rhodes said.

"We see building signals in our pipeline certainly that private cloud is the biggest manifestation, the new manifestation for OpenStack," Rhodes continued, "and that the pace of readiness of OpenStack is picking up and more and more enterprise-grade customers are getting serious about doing something big with it."

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Sean Michael Kerner is a senior editor at ServerWatch and InternetNews.com. Follow him on Twitter @TechJournalist.

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This article was originally published on Tuesday May 12th 2015
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