Rackspace Launches CloudServers, a Cloud for Big Companies

Rackspace today is expected to announce its own on-demand computing product, CloudServers. The service is built on the company’s acqusition of Slicehost last year and will offer the same services as Amazon Web Services’ Elastic Compute Cloud. It’s also a cornerstone of Rackspace’s attempts to build out a cloud computing environment that will rival those of Amazon.com, GoGrid and other true cloud computing providers.

A few weeks ago, I spent a couple hours at the Rackspace headquarters in San Antonio chatting with Lew Moorman, chief strategy officer, and Johnathan Bryce, co-founder of Rackspace’s cloud efforts, about the company’s plans for the cloud. Rackspace, which built out its business (and earned $21.7 million last year on sales of $531.9 million) on hosting dedicated servers, has been building a cloud for more than a year. The goal is to offer clients the ability to stay on dedicated servers with the promise of the cloud in case of overflow. Clients can also choose to stick with dedicated servers or migrate entirely to the cloud. This hybrid strategy means Rackspace can offer a fairly unique product, as Amazon, IBM and HP all lack either the dedicated hosting business or the true cloud computing technology. For now, Rackspace may find its closest competitor in ServePath, which has a product called GoGrid Cloud Connect that ties its dedicated hosting business and the GoGrid compute cloud together.

Rackspace is in a similar boat as large software vendors that are trying to build a software as a service, or SaaS, business while protecting their shrinkware. Offering a smooth flow of data between both dedicated and cloud resources gives Rackspace the chance to ride the transition from dedicated computing to cloud computing, while minimizing cannibalization of its hosted business as customers move to the cloud. For many businesses who are worried about issues associated with throwing their data in the cloud, this could be a way to get them familiar with the model.

A hybrid strategy and moving quickly on the cloud trend should help Rackspace stay afloat — and perhaps even speed ahead.

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