Rackspace Buys Two Startups to Beat Amazon's Cloud

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Rackspace Hosting (s RAX) said today that it has agreed to buy startups Slicehost and Jungle Disk, a move aimed at boosting its Mosso cloud offerings in order to step up competition with Amazon’s Web Services. But whether or not Rackspace can successfully transition from being a hosting provider to a provider of a truly on-demand cloud offering remains to be seen.

The San Antonio, Texas-based company will spend up to $28 million on its two acquisitions, with $11.5 million payable in cash and stock, and the potential for up to $16.5 million in additional payouts of cash and stock based on certain performance criteria.

Slicehost, based in St. Louis, Mo., provides Xen-based virtual machine hosting and claims more than 15,000 “slices” online today. Atlanta-based Jungle Disk, meanwhile, offers a cloud storage product that allows folks to share cloud storage between multiple users through a secure, mountable network drive, as well as automatic backup. It uses Amazon’s Simple Storage Service for its backup and will continue to do so after the acquisition, but according to CEO and founder Dave Wright, will offer Rackspace’s Mosso service as well.

Rackspace also changed the names of its cloud products offered by its cloud hosting division. The company’s existing Hosting Cloud and CloudFS storage offerings are now known as Cloud Sites and Cloud Files, respectively. And it announced the creation of Cloud Server, to offer on-demand server access powered by the Slicehost acquisition. This does get Rackspace closer to a real cloud offering, but it’s still has some pieces to pull together to create an offering that rivals Amazon’s.

Amazon last month launched its own content delivery network for example. Rackspace is trying to keep up, through these acquisitions and even a CDN efforts also announced today. Rackspace signed a partnership agreement with Limelight Networks (s LLNW) to ensure the fast and reliable delivery of data to and from the Mosso cloud products. But Rackspace still appears to have a ways to go before it can beat Amazon at the web services game.

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RaiyaRaj

Now Amazon got good competitor. This will improve server hosting market. People was not much aware with cloud computing. Only big players were thinking for cloud computing, small sites with less traffic & less technical capability has not thought about it. I think this kind of competition will bring market to next level.

TrueCloud

I’ve been using Jungle Disk for over a year (after multiple updates) it has been really, really stable. What is strange about this news is that Jungle Disk has been using Amazon’s Web services (excess capacity) to deliver. Selfishly, will my files continue to be located on Amazon’s iron, or will they be transfered to RackSpace?

Either way, this kind of news bodes well for Cloud Computing in general. We believe that Cloud Computing will be the lubricant to get companies through this tough economic period. In our case, we are a NetSuite provider. Our career experiences were in the Fortune 500 IT arena. We were collectively blown away by the power of NetSuite compared to the systems our former company had spent millions on. The fact that Software as a Service (SaaS) makes access to amazing applications extremely affordable is critically necessary for companies to make progress when things are tight.

After you finish watching the Rackspace CEO talk about Cloud Computing, you might watch ours (35 year Fortune 500 CIO whose mantra has become “less IT”) do the same: http://www.youtube.com/watch?v=FgdjrLDLxuo

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