At least in its earnings

Private cloud? Public cloud? Rackspace erases the difference

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Rackspace is going to stop distinguishing between the money it makes from public cloud and what it derives from “dedicated” cloud, a category that encompasses a bunch of options.

Well that’s one way to sidestep the whole “is private cloud dead?” debate.

The move may show a fanatical obsession on managed cloud or indicate that Rackspace is giving up on public cloud where leader, [company]Amazon[/company] Web Services, is contending with growing threats from [company]Microsoft[/company] Azure and[company] Google[/company] Cloud Platform. Or both. Tomato, tomahto.

On the fourth quarter earnings call Tuesday, CEO Taylor Rhodes reiterated that “managed cloud” versus the wild-west of unmanaged public cloud is where [company]Rackspace[/company] is focused. And its financial earnings will reflect that going forward. No longer will Rackspace put its public cloud revenue in one bucket and combined private cloud, managed hosting, managed services all into the dedicated cloud revenue bucket.

In an interview after the call, Rhodes acknowledged that most new “greenfield” applications will be built for public cloud deployment over a ten-year time frame. But, there are also many legacy applications that will stay either stay where they are or move to a single-tenant private cloud situation. And there is demand for well-managed specialized clouds for different workloads, Rhodes said.

rax q4 2The accounting changes were made in part to keep Rackspace sales people from selling the wrong cloud to the wrong customer, he said. “We have a dilemma in that we switched from a horizontal position in cloud … to [cloud for] particular workloads. We want to be the best at supporting Oracle commerce and we will be the best at managing that with a highly opinionated point of view on whether Oracle commerce should be a single-tenant or multi-tenant implementation.” I’m guessing that single-tenant will be the answer here.

Rackspace sales people shouldn’t be rewarded “perversely” for selling multi-tenant when single tenant is best, he said.

Overall, the company posted net income of 26 cents per share, surpassing consensus estimates of 19 cents per share, but it missed on revenue, logging $472.2 million where analysts expected $474 million.

rax public cloud ytd

5 Responses to “Private cloud? Public cloud? Rackspace erases the difference”

  1. Just as AWS is about to report its revenue separately in the Amazon quarterly results, Rackspace are merging the detail of their product lines into one line. Why?

    Everyone thinks AWS is the leader in public cloud. There’s many reasons to believe this but we don’t actually know – soon, we will. Amazon are now confident in their numbers, and significant growth they’ve been seeing, that they’re ready to show off.

    In contrast, Rackspace public cloud is growing as a low rate – around 5% for Sep 2014 to Dec 2014 and “dedicated cloud” is only 1.6% for the same period. This is just one quarter but I’d bet when AWS release their results, growth is significantly better.

    This is because Rackspace are being attacked on their old business (which they have nicely renamed “dedicated cloud”, whatever that means) and their “public cloud” can’t compete with AWS. Both lines of business are being attacked.

    Rackspace are rightly re-positioning themselves as a managed provider but this move has to be only to do with bolstering the overall growth figures with the two lines combined. If it was just a sales incentive issue where they want to push public cloud rather than their old dedicated server product, they should just change the sales structure. If they truly want to get better solutions for their customers that will help their numbers anyway.

  2. When it comes to virtualization solutions with more room to handle spikes, especially around game release days or thanksgiving sales .. the unmanaged world of public cloud is worth it’s weight, but for secure data, in this day and age of security breaches is very much something which will still depend on private vm spaces. And given that Cisco and Rackspace didn’t converge does make it reasonably sluggish mover at the hypervisor layer integration and security fronts.. if not the marketing budget aspect. bit. ly/1uF q 5WD

  3. The argument that changing how something is accounted for on the income statement is going to somehow drive a certain sales behavior is weak.

    This is a case where the simplest explanation is probably the most accurate one . Rackspace is not wanting to be compared apples-to-apples with AWS, Google, Microsoft, etc. The fact remains Rackspace is growing slower, has a smaller revenue base than AWS even when you combine all of the other “cloud” stuff. More parlor tricks.