Rackspace Buys Two Startups to Beat Amazon's Cloud

Rackspace Hosting 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 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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