Where Are Our Customers Taking Us?

SVP and General Manager of Rackspace Enterprise Applications Mark Clayman and VP of Enterprise Applications Gina Murphy at Rackspace HQ in San Antonio, TX

At Rackspace, we regularly remind ourselves to let our customers pull us toward our future.

Sometimes they have to yank us there because what they want us to do for them is hard. If it were easy, someone else would already be doing it. That’s why, after starting as a Linux hosting shop almost two decades ago, we added expertise and support for Windows — which now accounts for 40 percent of our managed hosting business. That’s why we later added three flavors of private cloud. And expertise and support for customers who use AWS and Microsoft Azure (and, soon, the Google Cloud.)

Most recently, our enterprise and mid-market customers have urged us to extend our services further “up the stack” to the application level. Specifically, they want us to offer management for enterprise applications. These include Enterprise Resource Planning (ERP) applications in the Oracle and SAP ecosystems, as well as applications for business intelligence and analytics, and data warehousing and integration systems. Customers use these applications to manage mission-critical business functions such as manufacturing, logistics, procurement, supply chain and financial operations.

These applications are powerful. They’re also complex and expensive to run. Companies are looking for help managing and optimizing them to ensure they are delivering the most business value. What’s more, customers prefer to have the same partner manage their enterprise applications along with their single-tenant and public cloud solutions.

Our customers want these capabilities right now — much sooner than we can develop them internally. So, we’ve decided to buy the help they need, by acquiring TriCore Solutions, one of the leaders in enterprise application management.

This acquisition is by far the largest we’ve ever made, and we’re making it for four main reasons:

  1. It will enable us to better serve both our existing customers and new customers who want their IT services partner to offer enterprise application management, along with managed public and private clouds. This acquisition expands the Rackspace ecosystem and enhances our singular focus on being the one-stop shop for companies seeking to move out of their corporate data centers. TriCore’s management team and the expertise of its workforce will also allow us to expand into other application hosting services that our customers want us to provide. We are committed to pursuing these opportunities.
  1. TriCore is a great culture fit with Rackspace. Its leaders and its 513 employees share our passion for workplace engagement, employee development and exceptional customer service. During our 18 years in business, we’ve never made an acquisition larger than 60 employees, and culture concerns have been one of the reasons for that. We think TriCore will like the unique culture we’ve built, and will contribute to it.
  1. Operating as a private company gives us several advantages, including making it easier to pursue large, transformative transactions and make longer-term bets. Acquiring TriCore is an excellent example of a bold move that we can make as a private company, and that would have been difficult to make as a public company.
  1. Our business has never been stronger. We hit record levels on every key financial metric — revenue, profit and cash flow — in 2016. We are generating cash that we can reinvest for growth — including in our managed services for customers who use AWS and Microsoft Azure, which have grown more than tenfold over the past 12 months. Apollo and its partners and our board take a long view and are helping us make investments that will pay off over several years. They are helping us play to win.

At Rackspace, we are going after a big prize — to become the world’s most trusted IT services partner. That prize will be awarded by our customers, one by one. We can win them over by providing expertise and exceptional customer support at a global scale, and with the unbiased approach of a trusted advisor. By building technology to improve our service capabilities. By offering each customer the highest-performing, most cost-efficient solution for each of its workloads, across any of the leading public and private clouds, and managed hosting. And ultimately, by investing in the customers who invest in us.

Our acquisition of TriCore signals more big investments to come:

— We continue to add features to our managed services for AWS and Microsoft Azure services so that customers can gain deeper insights into their cloud environments, control their costs and maintain security protocols. For example, we will be launching a new product called Waypoint, which will automate account review information and give customers on-demand access to it.

— We will launch the beta for our new managed services for the Google Cloud in July, with general availability coming in the fall. Later in the year, we will launch a higher-touch service level where we embed Rackers with customer development teams, to help them achieve the highest performance, cost-efficiency and reliability on each public cloud platform, in an automated fashion.

— We recently invested in tooling and solution architects to migrate customers from their own data centers to either private clouds or AWS environments (already in the first five months of this year, we’ve seen more migration opportunities from corporate DCs to AWS than we did in all of 2016).

— We will open our new German data center in Frankfurt in early July and have already signed up major customers based in German-speaking countries, along with global enterprises based elsewhere. The early success of this geographic expansion has us examining larger plans for international growth.

— We’re working on new ways to help customers tap the power of VMware at the lowest total cost. We’ve recently added software defined storage and network capabilities in our VMware private cloud offers, with managed vSAN and managed NSX. And, we’re exposing the advanced orchestration functionality of vRealize.

— We’re beginning to integrate several off-the-shelf technologies to create a seamless experience for customers who use multiple clouds. This effort will, for example, give customers a single management console where they can gain insights into the performance of distinct workloads running on different platforms: whether on private clouds, public clouds or managed hosting.

In each of these investments, we’re being pulled by customers who demand more, demand better and demand it now.  If you’re a customer, a prospective customer or a partner, we would love to hear your feedback. Please email me at matt.bradley@rackspace.com.

Matt Bradley leads strategy and corporate development for Rackspace. He joined Rackspace eight years ago and, during this period, has helped grow the company to more than $2 billion in revenue. He has led a number of major strategy initiatives, including Rackspace’s $4 billion go-private sale to Apollo and Rackspace’s pivot to provide managed services for AWS, Azure and Google. Prior to joining Rackspace, he served as an investment banking analyst at Morgan Stanley, advising technology and telecom companies. Matt holds a BS degree from The University of Virginia and an MBA from The Wharton School of the University of Pennsylvania.



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