A Reimaged Rackspace To Step Up Hyper-V and VMware Support

Rackspace, which over the past few years tried to transform itself into the leading OpenStack cloud provider, is shifting gears. The large San Antonio-based service provider last week began emphasizing a portfolio of dedicated managed services that let enterprises run their systems and applications on their choice of virtual platforms -- Microsoft's Hyper-V, VMware's ESX or the open source OpenStack platform.

The new Hyper-V-based managed services include for the first time the complete System Center 2012 R2 stack, including Windows Server and Storage Spaces. The orchestrated services are available as dedicated single-tenant managed services for testing and are set for general availability in the United States in November, followed by the United Kingdom and Sydney in the first quarter of next year. Insiders had long pushed the company to offer Hyper-V-based managed services but until recently, it was met with resistance by leadership that wanted to stick with VMware for hosted services.

Months after Rackspace CEO Lanham Napier stepped down in February and the company retained Morgan Stanley to seek a buyer in May, the company last week said it didn't find a buyer and decided to remain independent, naming Rackspace President Taylor Rhodes as the new CEO. A day later, the company said it's no longer just emphasizing OpenStack. Instead, the company is promoting its best-of-breed approach with Hyper-V, VMware and OpenStack.

I caught up with CTO John Engates at a day-long analyst and customer conference in New York, where he explained the shift. "The vast majority of IT is still done today in customer-run datacenters by IT guys," Engates explained. "The small fraction of what's going to the cloud today is early stage applications and they're built by sometimes a sliver of the IT organization that's sort of on the bleeding edge. But there are a lot of applications that still move to the cloud as datacenters get old, as servers go through refresh cycles. But they won't necessarily be able to go to Amazon's flavor of cloud. They will go to VMware cloud, or a Rackspace-hosted VMware cloud, or a Microsoft-based cloud."

In a way, Rackspace is going back to its roots as the company was born as a hosting provider until a few years ago when it decided to base its growth on competing with large cloud providers by building out its entire cloud infrastructure on OpenStack to offer an option to Amazon Web Services cloud offerings, with the added benefit of offering its so-called "fanatical support." Rackspace codeveloped OpenStack with NASA as an open source means of offering portable Amazon-compatible cloud services. While it continued to offer other hosting services including a Microsoft-centric Exchange, Lync and SharePoint managed services offering, it was a relatively small portion of its business, ran only on VMware and remained in the shadow of Rackspace's OpenStack push.

A report released by 451 Research shows OpenStack, though rapidly growing, accounts for $883 million of the $56 billion market for cloud and managed services. "Rackspace for a long time was seen part and parcel of the Amazon world with public cloud and they're clearly repositioning themselves around the fastest growing, most important part of the market, which is managed cloud and private cloud," said 451 Research Analyst and Senior VP Michelle Bailey. "They can do cloud with customer support, which is something you don't typically get with the larger public provides. They have guarantees around availability, and they'll sign a business agreement with customers, which is what you'll see from traditional hosting and service providers."

Like others, Bailey said there's growing demand for managed services based on Hyper-V-based single-tenant servers. "With the Microsoft relationship they're able to provide apps," she said. "So you're able to go up the stack. It's not just the infrastructure piece that you're getting with Microsoft but specifically Exchange, SharePoint and SQL Server. These are some of the most commonly used applications in the market and Microsoft has made it very good for their partners to be able to resell those services now. When you get into an app discussion with a customer, it's a completely different discussion."

Jeff DeVerter, general manager for the Microsoft private cloud practice at Rackspace, acknowledged it was a multi-year effort to get corporate buy-in for offering services on Hyper-V and ultimately the Microsoft Cloud OS stack. "I had to convince the senior leadership team at Rackspace that this was the right thing to do," said DeVerter. "It was easier to do this year than it was in previous years because we were still feeling our way from an OpenStack perspective. If you look at the whole stack that is Microsoft's Cloud OS, it really is a very similar thing to what the whole stack of OpenStack is. Rackspace has realized the world is not built on OpenStack because there really are traditional enterprise applications [Exchange, Lync and SharePoint] that don't fit there. They're not written for the OpenStack world."

DeVerter would know, having come to the company six years ago as a SharePoint architect and helped grow the SharePoint, Exchange and ultimately Lync business to $50 million in revenues. Aiding that growth was the Feb. 2012 acquisition of SharePoint 911, whose principals Shane Young and Todd Klindt and helped make the case for moving those platforms from VMware to Hyper-V.

Posted by Jeffrey Schwartz on 09/26/2014 at 7:46 AM