Rackspace unplugs 250 staff to chase hot new products

It was either shallow cuts now or no cash for new product investments says CEO

Rackspace has revealed plans to trim six per cent of its workforce in the United States, and plenty of people elsewhere.

CEO Taylor Rhodes blogged the decision in a post titled “Hard Things: Cutting Current Costs to Invest in Our Future”.

The CEO positions the firings as a re-balancing act “focused mainly in areas where our workforce has grown more rapidly than our revenue.” Rhodes says other areas - Managed Security, OpenStack and VMware private clouds, managed services for AWS and Microsoft Azure- “are growing rapidly, at annualized rates in the high double digits.”

But he argues that if Rackspace doesn't swing the axe, it won't have the cash to make the investments it needs for new products.

“Our industry changes rapidly, and we don’t always have the luxury of making gradual changes to our workforce,” Rhodes wrote. “Sometimes more decisive action is required to seize the opportunity to invest in areas where our customers want our help. That’s where we find ourselves today.”

Rhodes says the company's tried to avoid the firings by cutting other costs. “In the months leading up to these layoffs, Rackers across our business worked persistently and creatively to trim as much spending as they could from areas other than headcount.”

But it looks like those efforts weren't enough to save some staff from the axe.

When Rackspace exited public ownership it was thought to have about 6,000 employees, the majority of which are in the United States. The Register understands that over 250 stateside employees will therefore be shed. Rhodes has planned “somewhat smaller reductions in our offices in other countries, through consultative processes governed by local laws.”

Rhodes' post argues that Rackspace's future remains bright, because rising demand for cloud will only bring rising demand for the company's cloud support services. The company will “continue to invest in new and better services”, he says, and will get them right because its new private owners give it “the flexibility to structure our business for long-term growth, in ways that would be difficult under the 90-day shot clock of the public markets.” ®

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