Feeds

Shift to clouds pumps up Rackspace Hosting

Managed hosting growing, too

Choosing a cloud hosting partner with confidence

The customers and money keep rolling in for OpenStack cloud fabric co-sponsor Rackspace Hosting.

In the third quarter ended in September, revenues at Rackspace grew by 32.5 per cent to $264.6m. Managed hosting, the traditional unvirtualized hosting business that the company was founded to do, still represents the largest piece of the company's business at $213.9m, and is still growing – by a very healthy 23.7 per cent in Q3, in fact.

But the compute and storage cloud business, which Rackspace is in the midst of transferring from its homegrown code to the OpenStack cloud fabric that it created in conjunction with NASA, exploded by 89.3 per cent to $50.7m in the quarter. Net income was just a tad under $20m, up 69.2 per cent year-on-year.

For the three months, Rackspace had sales of $741.8m, up 31.1 per cent, and is well on its way to break $1bn in sales this year.

Rackspace sells compute cycles and gigabytes of data for a living, so it spends heavily on infrastructure and the people to support it. At the end of the quarter, Rackspace had 161,422 customers, up 36 per cent, and had 78,717 servers in its two data centers (a big one in San Antonio and a little one in London), up 23 per cent. So right there, you can see that the shift from managed hosting to virtualized cloud computing is helping to boost the utilization on Rackspace's machines, therefore increasing its profit margins because it doesn't have to buy as many servers as it used to in the old days.

The hypervisor is the new rack and the VM is the new server, is the best way to think about it.

Rackspace might be "maniacal" about tech support, but it is limiting its hiring not only to control costs, with its workforce only growing by 21.4 per cent in the quarter to 3,799 employees – or "rackers", as they are called in the peppy speech of company employees.

But this isn't just a matter of cost control. Lanham Napier, president and CEO at Rackspace, said in a conference call with Wall Street analysts on Monday that the company was in a talent war with other cloud builders, including hyperscale web operators, telcos, and traditional hosting providers that are building clouds, or the IT suppliers that want to.

In the third quarter, Rackspace financed $23.2m in equipment and bought another $53.6m in gear to support customers' gear. The company also shelled out $16.7m to expand its data centers, and another $14.3m in capitalized software costs. For the full year, Rackspace expects to spend somewhere between $350m to $360m on capital investments, which is at the high end of its range and which is driven by increasing customer demand. Rackspace is not, says Napier, adding servers to its data centers and hoping to get business for them.

Rackspace ended the quarter with 227,988 square feet of data center space, up 56.9 per cent from the year-ago period, and 69 per cent of its was being utilized by racks of servers. Napier said that starting next quarter, Rackspace would stop measuring utilization in terms of floor space and shift to counting megawatts of power available and used, because floor space count is increasingly meaningless as servers became more dense. Power is the limiting factor in any data center these days.

Well, that and the economy.

Napier said in the call that the quarterly customer-base growth was at nine-tenths of a percent throughout 2011, which is about twice that of 2010 but still less than the 1.5 per cent monthly growth rate that the company had back in the days before the Great Recession hit in early 2008. ®

Top 5 reasons to deploy VMware with Tegile

More from The Register

next story
MI6 oversight report on Lee Rigby murder: US web giants offer 'safe haven for TERRORISM'
PM urged to 'prioritise issue' after Facebook hindsight find
Assange™ slumps back on Ecuador's sofa after detention appeal binned
Swedish court rules there's 'great risk' WikiLeaker will dodge prosecution
NSA mass spying reform KILLED by US Senators
Democrats needed just TWO more votes to keep alive bill reining in some surveillance
'Internet Freedom Panel' to keep web overlord ICANN out of Russian hands – new proposal
Come back with our internet! cries Republican drawing up bill
prev story

Whitepapers

Seattle children’s accelerates Citrix login times by 500% with cross-tier insight
Seattle Children’s is a leading research hospital with a large and growing Citrix XenDesktop deployment. See how they used ExtraHop to accelerate launch times.
Why CIOs should rethink endpoint data protection in the age of mobility
Assessing trends in data protection, specifically with respect to mobile devices, BYOD, and remote employees.
A strategic approach to identity relationship management
ForgeRock commissioned Forrester to evaluate companies’ IAM practices and requirements when it comes to customer-facing scenarios versus employee-facing ones.
High Performance for All
While HPC is not new, it has traditionally been seen as a specialist area – is it now geared up to meet more mainstream requirements?
Protecting against web application threats using SSL
SSL encryption can protect server‐to‐server communications, client devices, cloud resources, and other endpoints in order to help prevent the risk of data loss and losing customer trust.