The Case for Rackspace as a Cloud Crown Jewel


Verizon announcing plans to buy Terremark for $1.4 billion is a big deal in the cloud computing world, but I don’t think Terremark will be the biggest winner as a result of the acquisition. Stacey suggested Savvis as a potential beneficiary, but, as I discuss in my Weekly Update at GigaOM Pro, I think Rackspace looks great as the company straddling the line between the MSP and cloud worlds.

I wrote recently that Gartner got it wrong with its Magic Quadrant for Web Hosting and Cloud Infrastructure as a Service because the two really are two different beasts, and I stand by that position. MSPs have a variety of hosting options both dedicated and shared, enterprise-grade contracts, skin-in-the-game SLAs and general support that make them very appealing to large companies and governments that want to move workloads to the cloud, but their primary businesses are not cloud computing. Terremark is a prime example of this. Overall, Terremark is predicting cloud revenues of $30 million for its fiscal year 2010 (which ended Dec. 31) out of total revenues predicted to be $350-$353 million.

Cloud-first providers, on the other hand, generally don’t have dedicated infrastructure and focus their operations on providing a true self-service experience far removed from the traditional IT procurement cycle. This approach is more appealing to developers, and even smaller companies without strict regulatory compliance requirements, who want real change in how they buy and procure IT. Granted, it has a larger percentage of a smaller pie, but it’s estimated that Amazon Web Services revenues topped $500 million in 2010 — more than the entirety of Terremark’s revenue.

Right smack in the middle of both these camps lies Rackspace, which amassed $565.8 million in revenue during the first three quarters of 2010, of which 12.2 percent — $69.2 million — came from cloud computing. The latter number has been growing with each quarter and should only continue to rise as Rackspace furthers the integration between its stalwart managed hosting business and its cloud business, and when its much-ballyhooed OpenStack cloud-platform software becomes production-ready. At that point, many think Rackspace will be the largest in an ecosystem of cloud providers all running the same foundational software, which has developers very excited. One recent analysis already has Rackspace neck and neck with Amazon Web Services in terms of the number of top 500,000 web sites hosted.

If Terremark ends being just the first domino to fall, and if cloud computing is the driver, Rackspace might be the biggest.

Read the full post here.

Image courtesy of Flickr user Somma.

Related content from GigaOM Pro (sub req’d):

You're subscribed! If you like, you can update your settings


Comments have been disabled for this post