By now, everyone knows that Rackspace has entered a deal to be purchased by private equity firm Apollo Global Management for $4.3 billion. The deal culminates what has been a long path for Rackspace, beginning with its departure from Infrastructure as a Service and moving towards higher margin, higher value managed services.
Let’s analyze why Rackspace made this decision and what the future may hold for the company and the MSPs with whom they partner.
Public MSP Companies
There haven’t been a lot of public MSPs but Rackspace is certainly one of them. Wait, Rackspace is a MSP? Yes. They may have a data center, but at their core, they are a company delivering managed IT services. When Rackspace went public in 2008, it did so presumably The lack of MSPs who are traded publicly doesn’t mean a lot but it does suggest that the unique pressures of having to comply with laws unique to publicly held corporations.
Recently, we have seen evidence that the pressures of being a public company may be driving those few technology provider companies who are public to go private. Dell would be a prime example of such a company. When Dell decided upon its course to go private, that decision opened up a lot of new opportunities for Dell, beyond just the freedom from regulatory and reporting requirements. Dell gained the ability to maneuver more freely, to pursue strategies previously denied to them as a public company, and the removed constraints of chasing quarterly sales objectives inconsistent with the company and its customers.
Future of Rackspace
Just based on the experience we have with Dell, it seems likely that Rackspace will at least experience much greater freedom to pursue its corporate objectives in a way previously denied to them.
Will this move mean anything to MSPs partnering with Rackspace? I don’t think so. Rackspace has been an undeniable advocate for the channel and has been signing up MSPs as partners for years now. I think the IaaS path it attempted years ago is forever gone. Rackspace likely knows the commodity space of IaaS is already well penetrated by tech giants like Google, Amazon, and Microsoft.
What this leaves wide open for Rackspace is the growing market for private cloud. Its data centers and as a founding member of OpenStack, Rackspace is in a very good position to service private and hybrid cloud demands.
As a private company, Rackspace naturally will have new opportunities and may do things we never contemplated. It will be interesting to see what moves the company makes in the next year or two.
What is clear to me is the world of managed services is just not compatible with the regulatory pressures of being a public company.