Rackspace Teams Up With Amazon
September 29 2015 - 9:30PM
Dow Jones News
Rackspace Hosting Inc., a seller of cloud-computing services, is
teaming up with Amazon.com Inc. to make it easier for corporate
customers to move computing operations from their own facilities to
Amazon Web Services, the retailer's cloud computing platform.
The partnership is set to be announced next week at a conference
for AWS users, according to two people familiar with the company's
plans.
Both Rackspace and Amazon declined to comment.
The deal mirrors an earlier agreement, announced in July, under
which Rackspace is helping companies that want to use Microsoft
Corp.'s Azure cloud-computing platform move their operations
there.
Introduced in 2006, AWS was billed a fast way for software
developers to gain access to basic computing power over the
Internet. The service has evolved, however, and today it offers a
broad array of options, from data warehousing to artificial
intelligence. AWS generated $1.82 billion in revenue and grew by
81% year-over-year during Amazon's most-recent quarter.
AWS's customers have evolved, too. The service initially was
popular with fast-growing Internet startups such as Netflix and
Airbnb. Two years ago, Amazon won a $600 million contract to set up
a cloud-computing system for the Central Intelligence Agency.
Today, AWS lists clients outside of the tech industry including
Nike Inc., Pfizer Inc., and Time Inc.
The deal would have been unthinkable just two years ago, when
Rackspace and AWS were fierce rivals. But in early 2014, Rackspace,
facing ever slimmer margins amid a cloud-computing price war,
withdrew from head-to-head competition with Amazon. Since then, it
has focused on offering higher-margin services.
Partnerships like the one between AWS and Rackspace will become
increasingly important as Amazon seeks to sell to more non-tech
companies, which are looking to move older corporate software to
AWS.
"For the average enterprise, to really get value out of the
cloud, they need a lot of help," said John Rymer a principal
analyst with Forrester Research.
That makes partners such as Rackspace "crucial" partners as
Amazon looks to build AWS into a $10 billion business, Mr. Rymer
said.
The deal apparently had been in the works for more than a month.
In an Aug. 10 conference call with financial analysts, Rackspace
CEO Taylor Rhodes was asked if his company might partner with AWS.
"We are working on it and we have big plans," he said.
Write to Robert McMillan at Robert.Mcmillan@wsj.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires
(END) Dow Jones Newswires
September 29, 2015 21:15 ET (01:15 GMT)
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