Feeds

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

When 100,000 servers isn't large enough

Boost IT visibility and business value

+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. ®

Boost IT visibility and business value

More from The Register

next story
Pay to play: The hidden cost of software defined everything
Enter credit card details if you want that system you bought to actually be useful
HP busts out new ProLiant Gen9 servers
Think those are cool? Wait till you get a load of our racks
Shoot-em-up: Sony Online Entertainment hit by 'large scale DDoS attack'
Games disrupted as firm struggles to control network
Community chest: Storage firms need to pay open-source debts
Samba implementation? Time to get some devs on the job
Like condoms, data now comes in big and HUGE sizes
Linux Foundation lights a fire under storage devs with new conference
Silicon Valley jolted by magnitude 6.1 quake – its biggest in 25 years
Did the earth move for you at VMworld – oh, OK. It just did. A lot
prev story

Whitepapers

Gartner critical capabilities for enterprise endpoint backup
Learn why inSync received the highest overall rating from Druva and is the top choice for the mobile workforce.
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.
Rethinking backup and recovery in the modern data center
Combining intelligence, operational analytics, and automation to enable efficient, data-driven IT organizations using the HP ABR approach.
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.
Next gen security for virtualised datacentres
Legacy security solutions are inefficient due to the architectural differences between physical and virtual environments.