Rackspace Hosting, Inc.By: Rita Seaton

Company Description

• Headquarters – San Antonio, TX• Founded 1998• Employs over 4000 “rackers” world-wide• NYSE – RAX• Vision – to be one of the world’s best service companies

((Yahoo! - ABC News Network, 2012)• Core Competency• Best in class customer support• Open IaaS and PaaS in the cloud

Company Revenue

– 2009 - $629 million– 2010 - $780.6 million– 2011 - $1,025.1 million– 2012 - TBD

Company Description

• Growth Drivers:– New customers– Recurring customers– Other cloud computing services acquired through

R&D and acquisitions

• Growth metrics– Based on the number of installations (existing

customers)

Company Description

• As of 12/31/2010• Serves over 120 countries• Serves over 197,000 business customers worldwide• Manages over 90,000 servers from data centers in Europe,

Asia and North America • 2,100,000 e-mail accounts• 417,000 cloud hosting domains• Enterprise Products• Rackconnect that integrates Rackspace Cloud and dedicated

hosting services.• Critical Sites service level that monitors mission-critical

customer data

Current Business Model

• Subscription-based• Recurring fee based on complexity of system and level of

service• Pay as you go public cloud services• 98% of our revenue on a recurring basis

Current Business Model

• Provides managed hosting, email and applications and cloud hosting services

• Provides superior customer service using their Fanatical Support® brand• philosophy to go above and beyond customers' expectations

• In 2013, building their own open, cloud-dedicated servers that others can also get

• Provides highly-customized hosting environments (e.g. SharePoint)• Provides quick and efficient turnaround• 100% uptime• Delivery on-demand IT infrastructure in the cloud• Uses OpenStack, an open-source framework for delivering cloud

computing technology• Strategy to create a cloud operating system that can run anywhere, gives

freedom and choice, drives unconstrained innovation (McCarthy, 2012)

• Requires massive technological expertise

Management Philosophy

• Focus on building promoters with employees and customers through their Net promoter System With employees, how?• Identify strengths or natural talents• Give people an opportunity to grow their own way• Nurture them to maturity• Focus on retaining talent• As Wayne Roberts of Rackspace described it:

“Each person is unique and I am fascinated by that uniqueness and how to get the most out of their talents. What “ingredients” (Strengths and Talents) do they possess, how do you draw out some of those “ingredients” (Unlock their passions), maybe add a little spice or ingredient modification (Learning and Development), mix (Leadership) and then bake (Experience) at the right temperature (Leadership and Culture)….So, think of people as casseroles and what they are, rather than what they aren’t. Accentuate those ingredients. And maybe help them add a little something when necessary. But never over-power the core ingredients. You won’t like the taste and no amount of baking will fix it…And if they are a broccoli rice casserole, then find the role in your organization where that dish is best served.”

(Roberts, 2010)

Major Competitors

• Amazon (AMZN): Who likes to give away products and services at a loss to sell more consumer goods.

• Red Hat (RHT): Focused on open source technology, including the cloud.

• IBM (IBM): Intent on becoming a bigger player in the cloud (but we think is a prime candidate to acquire Rackspace).

• Google (GOOG): Using their data center scale to offer platform-as-a-service. Vmware AWS

Customer Base

• Who are they?• Customers of any size that need:• eCommerce• SaaS• Mobile and Hybrid Applications• Integrated and dedicated infrastructure

• How many?• Over 190,000 customers worldwide

• Expanding monthly

Advertising and Marketing Methods

• Using the Net Promoter® system, customers help advertise (Bain Insights, 2012)

• Hire Cloud Evangelists (Rackspace, 2012)• Press Releases (Internet)• Events• Social Networks (FB, Twitter, LinkedIn)• Channel Partners•  Pay-per-click on search engines

Major Supply Chain

• Upstream• HP and Dell build servers for Rackspace (currently)• Rackspace to start building their own server – 2013• Open Compute Project suppliers

• Downstream• Service and Technology Partners Advertising Agencies• CMS Providers• IT Consultants• Web Designers/Developers• Systems Integrators• eCommerce Providers• MSPs• VARs• And more

Potential Strategic Areas for Improvement

• Diversification• Overcoming outages• Monitoring return on capital

References

• Bain Insights. (2012, September 20). How Rackspace Turns Customers Into Brand Fanatics. Retrieved from Forbes: http://www.forbes.com/sites/baininsights/2012/09/20/how-rackspace-turns-customers-into-brand-fanatics/

• McCarthy, J. (2012, August 7). Rackspace Racks Up Customers, Posts Q2 Gains. Retrieved from UBM Technologies: http://www.crn.com/news/cloud/240005127/rackspace-racks-up-customers-posts-q2-gains.htm

• Roberts, W. (2010, June 8). Talent Casseroles. Retrieved from Rackspace: http://rackertalent.com/strengths/talent-casseroles/

• Rackspace. (2012, December 17). Racker Talent. Retrieved from Rackspace: http://jobs.rackspace.com/job/San-Antonio-Cloud-Evangelist-US-Job-TX-78201/2337480/

• Rackspace. (n.d.). Rackspace Home. Retrieved January 28, 2013, from Rackspace: http://www.rackspace.com

• Yahoo! - ABC News Network. (2012, February 12). Form 10-K for RACKSPACE HOSTING, INC. . Retrieved from Yahoo Finance Annual Report: http://biz.yahoo.com/e/120217/rax10-k.html