Feeds

Rackspace refuses to enlist in cloud's latest price cutting war

When 100,000 servers isn't large enough

Maximizing your infrastructure through virtualization

+Analysis Cloud provider Rackspace will stand on the sidelines as Amazon, Google, and Microsoft slash prices in an attempt to destroy each other's profit margins.

The web hoster's chief technology officer, John Engates, told El Reg's cloud bureau by email that "Rackspace is not a commodity cloud provider," when we asked if it would match Amazon, Google, and Microsoft's latest price cuts.

"We pay close attention to market conditions and make periodic adjustments to ensure that our prices are competitive on a total-cost-of-performance basis," Engates told us via email. "We do not base our prices on competitors' rental rates for raw infrastructure. Rackspace has for 15 years charged premium prices for premium service, expertise, performance and reliability."

That commitment to "premium prices for premium service" may be tested in the coming months, given the large price differences that have appeared between Rackspace and rivals following recent price cuts.

A 15GB "Performance" cloud server on Rackspace with four virtual CPUs, 40GB of SSD system disk, and 150GB of SSD data disk now costs $0.68 per hour, for example, versus $0.280 for a (roughly equivalent, albeit lacking SSD storage) Google "n1-standard-4" server, or $0.280 for Amazon's (SSD included) "m3.xlarge".

Rackspace's public cloud division made $116m in revenue during the company's most recent financial quarter, compared with $291m in its traditional hosting business. As of February 2014 it had 103,886 servers deployed.

Given the rude health of its traditional business and the margin pressure brought about by moving to the less lucrative but strategically important public cloud model, Rackspace is in a tough position. It is not quite large enough to compete on price with the huge providers, but it is not small enough to completely ignore these price changes.

"Commodity providers of cloud infrastructure frequently cut their unit prices, and we expect that trend to continue. That's good for end users and also for Rackspace, which is itself a big buyer of cloud hardware and software, and regularly passes savings along to customers," Engates explained.

"We don't just rent out access to raw infrastructure. We provide specialist expertise to manage that infrastructure, as well as the complex applications and tools that run on top of it, so that customers can focus on their core business."

In other words: although Google, Microsoft, and Amazon are pummeling each other's prices into the ground, Rackspace plans to drift its costs down in a less drastic fashion. ®

The Power of One eBook: Top reasons to choose HP BladeSystem

More from The Register

next story
Sysadmin Day 2014: Quick, there's still time to get the beers in
He walked over the broken glass, killed the thugs... and er... reconnected the cables*
Auntie remains MYSTIFIED by that weekend BBC iPlayer and website outage
Still doing 'forensics' on the caching layer – Beeb digi wonk
SHOCK and AWS: The fall of Amazon's deflationary cloud
Just as Jeff Bezos did to books and CDs, Amazon's rivals are now doing to it
BlackBerry: Toss the server, mate... BES is in the CLOUD now
BlackBerry Enterprise Services takes aim at SMEs - but there's a catch
The triumph of VVOL: Everyone's jumping into bed with VMware
'Bandwagon'? Yes, we're on it and so what, say big dogs
Carbon tax repeal won't see data centre operators cut prices
Rackspace says electricity isn't a major cost, Equinix promises 'no levy'
Disaster Recovery upstart joins DR 'as a service' gang
Quorum joins the aaS crowd with DRaaS offering
prev story

Whitepapers

Implementing global e-invoicing with guaranteed legal certainty
Explaining the role local tax compliance plays in successful supply chain management and e-business and how leading global brands are addressing this.
Consolidation: The Foundation for IT Business Transformation
In this whitepaper learn how effective consolidation of IT and business resources can enable multiple, meaningful business benefits.
Application security programs and practises
Follow a few strategies and your organization can gain the full benefits of open source and the cloud without compromising the security of your applications.
How modern custom applications can spur business growth
Learn how to create, deploy and manage custom applications without consuming or expanding the need for scarce, expensive IT resources.
Securing Web Applications Made Simple and Scalable
Learn how automated security testing can provide a simple and scalable way to protect your web applications.