Rackspace Hosting Expands in Austin

By ANDREW MOORE
Reporter with Silicon Hills News

Cloud computing company Rackspace Hosting Inc. has a new home in Austin.
The company moved into an 87,000 square foot location next to I-35 in north Austin in October. The offices can accommodate more than 500 employees. The web hosting company currently has 400 people – adding around 100 employees per year for the last two years. Rackspace wants to hire 50 more employees this year.
Rackspace, founded in 1998 in San Antonio, has more than 3,000 employees in San Antonio at its headquarters in the former Windsor Park Mall on Walzem Road. The company also has an office in San Francisco. Rackspace reported revenue of $1.24 billion last year and net income of more than $100 million. The company has a market cap of more than $9 billion.
Rackspace attributes the steady growth over the last few years to its service-oriented business model of web hosting.
“When you call you get a human, not an IVR,” says Rackspace Community Affairs Leader Bill Blackstone. “You get routed to your team that you know by name… literally in five rings.”
According to Blackstone, the support teams are fully authorized to make important decisions and resolve a customer’s issue without having to check with a supervisor or another department. They are also available at any hour. It all fits into Rackspace’s often touted motto of providing “fanatical support”.
But the support aspect is only one of the four pillars of service to which Rackspace attributes its success. The other three: The security found in physical dedicated servers, the scalability found in virtual servers, and the ability to combine physical and virtual servers to fit a client’s need.
“The combination of those is something that doesn’t exist elsewhere,” says Blackstone.
Rackspace also has an advantage in being the co-founder of the new standard-setting cloud computing platform called OpenStack. Developed in partnership with NASA, Rackspace helped set the standards for OpenStack that are now used industry-wide. The new technology is open-source and available for anyone to use. As a result, over 850 organizations are currently working to further improve the technology. While this means that any competitor can provide OpenStack service, Rackspace hopes to retain the lion’s share of potential new customers due to their reputation for support and their status as a leader in the OpenStack technology.
“We still believe that at the end of the day it’s not necessarily the actual technology, but the service that makes the difference,” said Blackstone.
National economic pressures have also impacted Rackspace’s success. While the ongoing recession has stunted Rackspace’s national growth to 30 percent a year – it was originally projected at more than 50 percent – it has caused a higher interest in the profitability of cloud computing. Austin Site leader Max Thoene says that much of the market had been resistant to the concept of cloud computing before the recession.
“The folks that were established that were doing this were like, ‘No, I like my physical server,’ even though it was only 6 percent utilized,” says Thoene.
But as the recession hit, companies feeling the pinch were forced to take a look at cloud services for the cost savings that they desperately needed. As a result, many made the big leap to cloud technology within the last few years. Thoene sees it as a glass-half-full situation.
“It really served as a vehicle to get people to kick the tires and look under the hood of cloud a lot more closely than they would have (otherwise),” said Thoene.
In fact, the International Data Corporation (IDC) — a market research firm — has released an often quoted prediction that “80 percent of new commercial enterprise apps will be deployed on cloud platforms” by the end of 2012 – a major swing for the hosting industry since the 2008 recession. Rackspace is second only to Amazon in the cloud computing industry and is sure to benefit from new cloud-using companies.
Rackspace Hosting is also enjoying the advantages of an Austin location. Just one of many tech companies expanding in Austin, Rackspace is experiencing rapid growth due to the city’s educated population and its popularity as a place to relocate talent. The local tech scene provides an ideal recruitment spot for Rackspace.
“We find that there is a great cross section in Austin that has both the technical skill and the service leadership type of skill set that we are looking for,” says Thoene.
According to Austin Technology Council President Julie Huls, this is a common trend for tech companies in the Austin area.
“Companies the size of Rackspace — which are growing at the same pace — are attracted to Austin for its culture. I think we have ample talent as it relates to certain skill sets. We have a very creative workforce here,” says Huls.
In fact, Rackspace enjoys a special symbiotic relationship with the hotbed of tech start-ups in Austin. It works with both the Greater Austin Chamber of Commerce and the Austin Technology Council to invest in new start-ups. They also sponsor fairs – such as Chamberfest – and provide mentoring for new companies trying to get off the ground. In turn, many of those companies can then take advantage of potential cost savings with Rackspace’s cloud services – gaining the company more customers in the long run.
Thoene sees Rackspace’s tech community involvement as something that benefits both the company and the City of Austin by creating a healthy business environment.
“It’s a win-win,” says Thoene. “It’s a win for Rackspace because we get great people and it’s a win for Austin because we keep people employed.”

Story and photos by Andrew Moore