14 ms·

Rackspace founder says it’s ‘on trajectory of death.’

208 points by dctoedt 4y ago

gorjusborg 4y ago
https://archive.is/ISYqD https://archive.is/ISYqD
alberth 4y ago
Rackspace was one of the first big "cloud" companies, before cloud was a word. They went in the direction of OpenStack, which didn't pan out. While at the sametime, Amazon ran the "Oracle playbook" and started offering Apps.
- ajross 4y ago
  It wasn't OpenStack, that was just the attempt to recover. Rackspace just lost. They failed to grow into a market leader before their industry commoditized. When you're in the early rush, growth is all that matters. But now if you want to compete with AWS, you need to be cheaper to operate than they are, and that's extremely hard if you're not at their scale. GCP and Azure can do it, little companies can't.
  - gamegoblin 4y ago
    The one caveat here is that little companies can compete in particular niches in which they can provide a more tailored solution. For instance, Lambda Labs is "AWS for ML". They have GPU cloud instances with pre-configured ML packages and a network attached filesystem. That's all you need. The other day, I wanted to run Stable Diffusion, but I don't have a GPU. I went to spin up a GPU instance in AWS, but got hit with a quota limit. By default, AWS accounts have a quota limit of 0 for GPU instances. Presumably to prevent fraudulent crypto mining. You have to file a support ticket that is manually looked at by humans to get this limit raised. In my case, it took 4 days for them to raise it. I had an A100 instance running in minutes on Lambda Labs. It's significantly cheaper than AWS, too. I'll be using Lambda Labs for all my future GPU needs, significantly better experience.
    - strgcmc 4y ago
      I get your point about small companies occupying a niche as their distinct competitive advantage, but in this case, one has to ask the obvious question: why doesn't Lambda Labs have a problem with fraudulent crypto mining, if the bar for entry is so low and it's so much easier to be up and running in minutes? And whatever the answer is, one hopes that there is some particular reason why Lambda Labs doesn't think AWS could replicate it... otherwise, it wouldn't be a durable enough moat to defend their business model long-term.
      - marcosdumay 4y ago
        That's quite easy to explain. They don't have a problem because the people that contract them do it explicitly to run GPUs. They don't have to protect a massive number of people that don't exactly know what they are hiring.
        strgcmc 4y ago
        That makes sense under a certain set of assumptions I suppose, namely that you might think AWS's problem arises mostly from normal customers not realizing that someone has hijacked their account to run GPU crypto mining without their knowledge, because GPU instances were not their intended use case. So "people that don't know what they are hiring" is the failure mode you're concerned with. But I wonder more about, say a fraudster using stolen credit cards or gift card abuse, to open an account, or abuse a free trial, and if Lambda Labs makes it super easy and low friction to start up a GPU, then the fraudster can open an account, mine crypto immediately, rack up as much crypto as they can for days or a month until billing fails or trial expires, and just try to squeeze Lambda for as much computing power as they can subject to Lambda’s ability to detect fraud. Low friction for customers, usually translates directly to higher risk of abuse. AWS adds its limits and friction for a reason, not because they enjoy making life harder (esp. since, easier for customers == more business/revenue).
    - godzillabrennus 4y ago
      Niches like this are often ephemeral and poor uses of capital in the long run. Early on they prove a need exists and can be profitably satiated with the right solution. As long as the market stays minuscule the company introducing the solution has a moat to be a lifestyle business. Once the market is sizable enough though a big guy just offers the same service and consumes the market share.
  - sixothree 4y ago
    I think the ability to compete with AWS and Azure has crossed a threshold. If I tell a customer we host their data on a platform that is not AWS or Azure, we will have a lot of explaining to do before the answer is accepted. If I tell them it's on AWS they will simply ask a set of particular questions about patterns and practices.
- nunez 4y ago
  Good point about OpenStack. If it had succeeded, Rackspace would have been in a much better spot. They invested a ton into it.
  - pas 4y ago
    Not really. I mean it in both interpretations. Amazon basically invested years and years of profits into AWS, Rackspace did nothing like that. (Nor did they really attempted to do it. And if OpenStack somehow "won" just like k8s won, Amazon would just sell that too.)
- johnvanommen 4y ago
  OpenStack is more popular than ever. I always find it odd that people dismiss it.
  - pas 4y ago
    Sure, but public cloud exploded a thousand-fold, while private clouds are just a niche. People standardized on Terraform, there are no big OpenStack hosting providers, there's not even a big group of small providers, etc.
dmix 4y ago
> He puts the blame for Rackspace’s deepening financial struggles — it’s posted a steady string of quarterly losses, and the value of its stock has fallen 80 percent in the past year — on its replacement of tech-oriented leadership with board members and managers “who don’t have any connection with the product. This seems to be the natural cycle for the vast majority of business, especially when the original founders leave or get pushed out. They enter a long period of stagnancy before the weight builds up and it collapses, or more often gets absorbed into a larger firm seeking a monopoly. The longer term Google/Meta stories are the rare exception. And that's not always a bad thing by any means.
- capableweb 4y ago
  > The longer term Google/Meta stories are the rare exception. And that's not always a bad thing by any means. Seemingly there are two types of companies: "Killers" and "To Be Killed". In order for you to grow like Google/Facebook, you need to "Kill" (acquire) other companies, who will be the ones who die, eventually. Rackspace went to way of being acquired, so eventually to be killed. Google/Facebook went the way of acquiring other companies. The only way to win is to not be either. Just a company that provides enough profits to cover the expenses and pay out bonuses whenever, but not acquire others nor be acquired by others.
- googlryas 4y ago
  Why does this happen? It seems to be self inflicted fatal wounding that businesses would try to avoid. Is it just principal/agent problem by those who are in a position to extract funds from the company? Do people think "it will be different this time!"?
  - vagrantJin 4y ago
    It seems you are seeking some logical, high minded reason. There isn't. It's all about money. Nothing more.
  - tinus_hn 4y ago
    Most businesses started by passionate technical founders fail as well, there is a selection bias in the big companies that are in the news. A lot is just luck, having a product that the market needs that can be sold at a profit without being undercut by competitors.
geenat 4y ago
>replacement of tech-oriented leadership with board members and managers “who don’t have any connection with the product." RIP
truthwhisperer 4y ago
[dead]
sidewndr46 4y ago
The downfall of Rackspace started even before the Apollo acquisition. It was obvious back then that the company no longer had anything unique to offer the market.
ehutch79 4y ago
At least their object storage service has super old ssl, and breaks under recent ubuntu lts versions, or really any ssl config that's reasonably secure. ETA for a fix? q2, q3 2023
hk1337 4y ago
I honestly didn't realize Rackspace was still around.
seltzered_ 4y ago
See also this wonderful article and discussion from a month ago: https://news.ycombinator.com/item?id=33966585 https://news.ycombinator.com/item?id=33966585 (rackspace, fanatical support, and their downtime / hack )
systems 4y ago
well, back to basics people are blaming the MBA for ruining this company, but I have to disagree, I think there is good MBAs and bad MBAs since the 90s, MBA are thought about change and agility rackspace failure is basic, they failed to adapt to change, and were not agile this is a basic , basic scenario they had a bad MBA, a good MBA would have seen this long before it happened and would have made necessary changes , companies change and adapt all the time led by good MBAs
aaronharnly 4y ago
We tried using Rackspace as an AWS reseller, as they were offering a better discount and support package than AWS directly at the time. Our experience was: * the "support" mainly acted as a slow and unreliable go-between to AWS support * their billing was manual, slow, and inaccurate (which was highly alarming!) * whenever we raised issues with their performance, they would try to sell us consulting services We are not renewing.
- bastawhiz 4y ago
  I wanted better CloudFront pricing and AWS referred me to Onica, which later got acquired by RS. Frankly I don't really use it, I just get better bandwidth pricing and they charge me for AWS support (I've only ever messaged AWS directly, not Onica/RS). Honestly I don't know what they get out of the deal except maybe a kickback on the support I'm required to pay for, but I'd have paid that anyway if AWS asks. If they die off, I guess I won't miss it, but I can't say it's been a problem.
bsuvc 4y ago
More anecdata: I'm working with a customer right now who will be moving all their apps off Rackspace to one of the big cloud providers later this year (work is underway currently).
mike503 4y ago
I've migrated multiple companies away from RS, usually to AWS. Very easy workloads and RS was charging them way too much without any useful support. This isn't surprising.
tzs 4y ago
They've pretty much guaranteed I won't return as a customer due to one extremely stupid thing they have done with accounts (at least as of the time I moved to another provider...I don't know if they have since changed this): deleting all your servers, storage, name server configuration and all other things you have set up does not reduce your monthly bill to $0. To reduce your monthly bill to $0 you must delete your account. An account using no services still gets hit with a $5/month fee for support [1]. That means that if I ever want something they offer and they have a slightly better deal than someplace I have an account with, their deal with have to be sufficiently better to be worth the hassle of creating a new account. That's fairly unlikely so I probably won't be back. [1] That fee was why I left. I just had one instance of the smallest VM they offered, plus storage for a couple backups, plus name service for my domain. The VM was used for a very low traffic website and hosting my email. When they added that $5/month support fee it raised my costs about 30%. I switched to Amazon Lightsail for my VM and switched from hosting my own email on my VM to hosting it with Fastmail. That comes to $8.32/month.
mgkimsal 4y ago
Initial experiences with Rackspace in late 1999 and early 2000. I was amazed that every time I called 'support' I got a real live person. I called at 3am once on a Saturday, got a live person answering, and was connected with a competent support engineer in about 90 seconds. I was impressed. The server(s) we had cost a lot, but knowing you could connect with someone competent 24/7 was amazing. Then... a few months later... we had to use it, and it was good, but they were about 2 minutes away from wiping our main drive. We'd requested a new beefier server and requested either the drive be moved or everything copied over to the new server. Got a message new server was up - great. Logged in - nothing. Connect to old server? Nope - offline/disconnected. Ugh. Calling in got me a live person, and I stressed the urgency. We did get connected with someone, and they did find the right person, who was about to wipe the previous server. Crisis averted, but... immediately I start asking why the support ticket showed all requests as 'done' when... they weren't. We stayed a while longer, but it felt like they were growing too quickly even then to keep the 'fanatical support' model that initially attracted us. FWIW, I had a couple of dedicated servers at a small place in NH, and they were... $70-$80/month on average. The rackspace servers typically started at $500/month. I think we were paying about $1800/month for the setup in question at the time of the crisis. My belief in 'you get what you pay for' was impacted that day. I had another client years later (2010? 2012?) that used them and it felt like a completely different beast, far more generic and commodity like every other competitor, and I've never since looked at them again.
- jesterson 4y ago
  Exactly my experience with Rackspace.
- jeffwask 4y ago
  Similar experiences, they were amazing for the first couple years I was on a team that worked with them. They really provided amazing support and took a lot of the burden of managing infrastructure off our smaller teams. Then it changed, the writing was on the wall as public crowds grew but one of my last experience was of them wiping out one of my databases doing what should have been a non-destructive drive expansion. The kicker was they restored from backup, a backup from the previous evening and didn't bother to inform us. We found out when customers started calling asking where their previous days data was. Accidents happen but the whole cover up was unforgivable.
pyb 4y ago
This is what's technically known as a "Ratner moment".
- dreamcompiler 4y ago
  The founder in question no longer works there.
cratermoon 4y ago
At least the private-equity folks Apollo Management Group got their pound of flesh, though, eh?
brightball 4y ago
This sucks to see. I remember when it looked like Rackspace was going to be the primary competitor to AWS.
tristor 4y ago
I was a Racker from 2010 to 2014, I left shortly after Lanham did, I was also located in San Antonio near Castle until 2022. It's a very sad thing that Rackspace is dying, but I must concur with the assessment. Apollo, like most private equity firms, is a bunch of bean-counters who are focused on financializing acquisitions, using their assets as leverage to extract money, and then offloading it to bag holders in the market who ride it down into the abyss. When I left Rackspace they had no debt, a massive war chest, and a reasonably competitive product offering to AWS that could have been capitalized on. As soon as Lanham left and they put an MBA sales guy in as CEO (Taylor Rhodes), and I heard rumors they'd turned down an acquisition from a major tech company but were considering a sell-out, I left to go do startups, and so did many other top-tier Rackers. It used to be commonplace in South Texas (San Antonio / Austin) tech scene to meet new Rackers and talk to them about the old days, and just generally see Rackers having a huge presence in startups and tech. You still see a lot of former Rackers around, but they're all so far removed from those days now that this is not how we identify when we introduce ourselves. Not much new blood. Apollo decided it would be more financially sound to get rid of the core values, end "fanatical support", delete the fanatiguy logo and branding, and then lay off every single non-management American worker to replace them with 2-3 people working overseas from India. Rackspace support has been a boiler room bottom-barrel call center since at least 2019, and the pandemic massively accelerated what was already on the horizon. The company has been culturally dead and financially doomed far before the ransomware attack. The ransomware attack is just the final nail in the coffin. Apollo took a ~$5B company with no debt, loaded it up to do multiple acquisitions theoretically worth $2B ($7B if you're following) and made it worth less than $1B on market. Real geniuses there, who managed to completely destroy a solid American company that helped create a burgeoning tech scene outside of the Bay Area, so they could pocket the money personally as they drove the company into bankruptcy. It's unfortunately a tale as old as time, or at least as old as the 80s. Private equity is a bunch of sharks doing leveraged buyouts to con retail investors into holding the bag. Hasn't changed since I've been alive, and isn't likely to change before I die. The moment Rackspace sold to Apollo, they were on the trajectory of death. It just took awhile for reality to set in and consequences to catch up. I don't always agree with Yoo and I don't agree with everything he said in this article, but he's absolutely right about bean counters ruining tech companies.
thayne 4y ago
> This is not a company that’s on a trajectory of growth. They’re on a trajectory of death. Maybe Rackspace is on a trajectory of death, but this is a false dichotomy. It isn't (or at least shouldn't) be necessary to grow for a company to survive. If you are profitable, staying the same size is perfectly fine.
- simonh 4y ago
  If you're in a growing industry but you're not growing, then you're becoming less and less relevant to your potential and actual customers. In a business like their scale is crucial. It's not a stable situation to be in. Having said that they have been growing, their revenue is up, but so are their losses. They've just not managed to stay competitive.
- peytoncasper 4y ago
  The phrase usually used is a "leaky bucket". Sure a company can operate in a neutral space, but it's unlikely that overtime their revenue growth will match their customer churn. At the same time, a lack of growth limits how much can be invested on staying relevant in terms of R&D which further separates them from competitors with a positive growth trajectory. Its also incredibly hard to kickstart a growth engine once it has slowed down. The net result is a flywheel but in the opposite direction. PE buys companies like this to slow that negative growth flywheel down attempting to stay neutral until the investment is paid off at which point profit can be made. The long tail is massive attrition as well, because few people want to work at a sinking ship or rather a ship unwilling to invest internally. Neutral isn't bad, but it's very hard to exist.
- abigail95 4y ago
  Are there any examples of companies with flat profits that continue to exist years later, where the non-growth isn't caused by mistake or incompetence?
  - thayne 4y ago
    I'm sure there are plenty of local businesses and businesses with niche customer bases in this category.
sitkack 4y ago
Rackspace is a zombie company at this point. They lost a SAN during some maintenance, no backups, remote volumes lost. And first tier support can't debug Linux VM liveness issues. They have to talk file a ticket and get a Linux SME on the case.
watersb 4y ago
Malls are cool again. They could sell theirs.
angst_ridden 4y ago
I have some clients who host at Rackspace. They have old-school monolithic web-app architectures (single web server that also runs the application code, and a database server). They're never going to rebuild these legacy application -- the codebases are decades old, and comprise hundreds of thousands of line of code. The support at Rackspace has really cratered, and it's hard to have much faith in their technical capabilities anymore either. I'm no sysadmin, so I don't know if it's realistic to port this kind of architecture to AWS or Azure. Also, some are contractually obligated to host at a facility that offers "managed hosting" (although I suppose the exact wording could be weaseled) with uptime guarantees and staffing levels. I'm trying to figure out where I should recommend they move. It doesn't seem like a common use-case anymore.
- ElevenLathe 4y ago
  Assuming the application code is mostly stateless (it pulls all the data it needs from the database on every request), this kind of app is usually not a big deal to containerize and put on some cloud platform (AWS, GCP, Azure should all be about equivalent) and even get more 9s and scalability almost for free. This is essentially the Wordpress architecture, which every infra engineer (née sysadmin) in the industry has been asked to move from on-prem to cloud sometime in the past ten years. If the application code has non-disposable state in-memory then it's bit harder but can usually be done, especially if it's low-traffic enough to comfortably live on single Rackspace dedi now. Edit: I should also mention that if you're looking for somebody to do this kind of work for you, there are contact details in my profile. ;)
  - angst_ridden 4y ago
    I'll have to look into the web-server customizations. One of them has a custom Apache module for talking to a 3rd party mainframe, but that should theoretically be movable too (if it's the correct platform architecture). Of course, an Apache module's just C code, so how hard could it be to port to another architecture? But in all seriousness, I suspect it's a relatively simple UDP socket communication interface, so it is probably portable. Thanks for the mention of Wordpress. It is a similar architecture. I'll read up on how to move a Wordpress install, and use that as a model for testing one of these apps.
linuxftw 4y ago
Rackspace was taken private, saddled with a bunch of debt while the stuffing cash into Apollo's pocket, and then re-IPO'd so Apollo could fleece the market. Major IPOs go into 401ks, Wall street wins, the average American is left holding the bag. Rackspace currently has $5B in liabilities! Any fund manager that bough Rackspace after it re-IPO's should be in prison for fraud. The banks that underwrote the IPO should be in prison for fraud.
liberia 4y ago
Recently I went to sign up for Rackspace and their systems flagged me as 'Suspicious'. I tried registering without a VPN in a brand new session, and again: 'Suspicious'. I provided all the right details for them, correct contact and address, etc I wonder what their churn rate for auto-flagging away potential customers is? They are in the business of taking people's money in exchange for services right?
- LinuxBender 4y ago
  I've had what you describe happen recently with some wireless vendors. They flat out won't even acknowledge my own domains a valid email domains despite being so and following every possible best practice. No VPN and using a static IP no less. I ended up using a reseller that apparently has not gotten big enough to use the over-zealous tools just yet. One of my theories is that the older internet businesses probably lost most of their original developers, downsized their staff too much and had to shim something simplistic into their customer on-boarding flows and then found a turn-key solution that had a maximum protection setting that does not give insightful or accurate statistics. They are probably not even aware of all the lost financial opportunities.
gymbeaux 4y ago
The article is paywalled but I would imagine DigitalOcean is screwed for many of the same reasons. As things do in our industry, I fully expect cloud computing to die out in lieu of an “on-prem renaissance” where companies realize they can floor on-prem servers 24/7 for a one-time* cost instead of AWS nickel-and-diming for every little thing. It’s clear AWS (and Azure) are anticipating this because all their new stuff is very AWS-specific or very Azure-specific. God it would be basically impossible for my company to move away from AWS to another cloud, nevermind back to on-prem. Even AWS’s ElasticSearch aaS (OpenSearch) is diverging from ElasticSearch proper. AWS could double prices overnight and my company would pay it.

208 points by dctoedt 4y ago

https://archive.is/ISYqD https://archive.is/ISYqD

Rackspace was one of the first big "cloud" companies, before cloud was a word. They went in the direction of OpenStack, which didn't pan out. While at the sametime, Amazon ran the "Oracle playbook" and started offering Apps.

ajross 4y ago
It wasn't OpenStack, that was just the attempt to recover. Rackspace just lost. They failed to grow into a market leader before their industry commoditized. When you're in the early rush, growth is all that matters. But now if you want to compete with AWS, you need to be cheaper to operate than they are, and that's extremely hard if you're not at their scale. GCP and Azure can do it, little companies can't.
- gamegoblin 4y ago
  The one caveat here is that little companies can compete in particular niches in which they can provide a more tailored solution. For instance, Lambda Labs is "AWS for ML". They have GPU cloud instances with pre-configured ML packages and a network attached filesystem. That's all you need. The other day, I wanted to run Stable Diffusion, but I don't have a GPU. I went to spin up a GPU instance in AWS, but got hit with a quota limit. By default, AWS accounts have a quota limit of 0 for GPU instances. Presumably to prevent fraudulent crypto mining. You have to file a support ticket that is manually looked at by humans to get this limit raised. In my case, it took 4 days for them to raise it. I had an A100 instance running in minutes on Lambda Labs. It's significantly cheaper than AWS, too. I'll be using Lambda Labs for all my future GPU needs, significantly better experience.
  - strgcmc 4y ago
    I get your point about small companies occupying a niche as their distinct competitive advantage, but in this case, one has to ask the obvious question: why doesn't Lambda Labs have a problem with fraudulent crypto mining, if the bar for entry is so low and it's so much easier to be up and running in minutes? And whatever the answer is, one hopes that there is some particular reason why Lambda Labs doesn't think AWS could replicate it... otherwise, it wouldn't be a durable enough moat to defend their business model long-term.
    - marcosdumay 4y ago
      That's quite easy to explain. They don't have a problem because the people that contract them do it explicitly to run GPUs. They don't have to protect a massive number of people that don't exactly know what they are hiring.
      - strgcmc 4y ago
        That makes sense under a certain set of assumptions I suppose, namely that you might think AWS's problem arises mostly from normal customers not realizing that someone has hijacked their account to run GPU crypto mining without their knowledge, because GPU instances were not their intended use case. So "people that don't know what they are hiring" is the failure mode you're concerned with. But I wonder more about, say a fraudster using stolen credit cards or gift card abuse, to open an account, or abuse a free trial, and if Lambda Labs makes it super easy and low friction to start up a GPU, then the fraudster can open an account, mine crypto immediately, rack up as much crypto as they can for days or a month until billing fails or trial expires, and just try to squeeze Lambda for as much computing power as they can subject to Lambda’s ability to detect fraud. Low friction for customers, usually translates directly to higher risk of abuse. AWS adds its limits and friction for a reason, not because they enjoy making life harder (esp. since, easier for customers == more business/revenue).
  - godzillabrennus 4y ago
    Niches like this are often ephemeral and poor uses of capital in the long run. Early on they prove a need exists and can be profitably satiated with the right solution. As long as the market stays minuscule the company introducing the solution has a moat to be a lifestyle business. Once the market is sizable enough though a big guy just offers the same service and consumes the market share.
- sixothree 4y ago
  I think the ability to compete with AWS and Azure has crossed a threshold. If I tell a customer we host their data on a platform that is not AWS or Azure, we will have a lot of explaining to do before the answer is accepted. If I tell them it's on AWS they will simply ask a set of particular questions about patterns and practices.
nunez 4y ago
Good point about OpenStack. If it had succeeded, Rackspace would have been in a much better spot. They invested a ton into it.
- pas 4y ago
  Not really. I mean it in both interpretations. Amazon basically invested years and years of profits into AWS, Rackspace did nothing like that. (Nor did they really attempted to do it. And if OpenStack somehow "won" just like k8s won, Amazon would just sell that too.)
johnvanommen 4y ago
OpenStack is more popular than ever. I always find it odd that people dismiss it.
- pas 4y ago
  Sure, but public cloud exploded a thousand-fold, while private clouds are just a niche. People standardized on Terraform, there are no big OpenStack hosting providers, there's not even a big group of small providers, etc.

dmix 4y ago

> He puts the blame for Rackspace’s deepening financial struggles — it’s posted a steady string of quarterly losses, and the value of its stock has fallen 80 percent in the past year — on its replacement of tech-oriented leadership with board members and managers “who don’t have any connection with the product. This seems to be the natural cycle for the vast majority of business, especially when the original founders leave or get pushed out. They enter a long period of stagnancy before the weight builds up and it collapses, or more often gets absorbed into a larger firm seeking a monopoly. The longer term Google/Meta stories are the rare exception. And that's not always a bad thing by any means.

capableweb 4y ago
> The longer term Google/Meta stories are the rare exception. And that's not always a bad thing by any means. Seemingly there are two types of companies: "Killers" and "To Be Killed". In order for you to grow like Google/Facebook, you need to "Kill" (acquire) other companies, who will be the ones who die, eventually. Rackspace went to way of being acquired, so eventually to be killed. Google/Facebook went the way of acquiring other companies. The only way to win is to not be either. Just a company that provides enough profits to cover the expenses and pay out bonuses whenever, but not acquire others nor be acquired by others.
googlryas 4y ago
Why does this happen? It seems to be self inflicted fatal wounding that businesses would try to avoid. Is it just principal/agent problem by those who are in a position to extract funds from the company? Do people think "it will be different this time!"?
- vagrantJin 4y ago
  It seems you are seeking some logical, high minded reason. There isn't. It's all about money. Nothing more.
- tinus_hn 4y ago
  Most businesses started by passionate technical founders fail as well, there is a selection bias in the big companies that are in the news. A lot is just luck, having a product that the market needs that can be sold at a profit without being undercut by competitors.

geenat 4y ago

>replacement of tech-oriented leadership with board members and managers “who don’t have any connection with the product." RIP

truthwhisperer 4y ago

[dead]

sidewndr46 4y ago

The downfall of Rackspace started even before the Apollo acquisition. It was obvious back then that the company no longer had anything unique to offer the market.

ehutch79 4y ago

At least their object storage service has super old ssl, and breaks under recent ubuntu lts versions, or really any ssl config that's reasonably secure. ETA for a fix? q2, q3 2023

hk1337 4y ago

I honestly didn't realize Rackspace was still around.

seltzered_ 4y ago

See also this wonderful article and discussion from a month ago: https://news.ycombinator.com/item?id=33966585 https://news.ycombinator.com/item?id=33966585 (rackspace, fanatical support, and their downtime / hack )

systems 4y ago

well, back to basics people are blaming the MBA for ruining this company, but I have to disagree, I think there is good MBAs and bad MBAs since the 90s, MBA are thought about change and agility rackspace failure is basic, they failed to adapt to change, and were not agile this is a basic , basic scenario they had a bad MBA, a good MBA would have seen this long before it happened and would have made necessary changes , companies change and adapt all the time led by good MBAs

aaronharnly 4y ago

We tried using Rackspace as an AWS reseller, as they were offering a better discount and support package than AWS directly at the time. Our experience was: * the "support" mainly acted as a slow and unreliable go-between to AWS support * their billing was manual, slow, and inaccurate (which was highly alarming!) * whenever we raised issues with their performance, they would try to sell us consulting services We are not renewing.

bastawhiz 4y ago
I wanted better CloudFront pricing and AWS referred me to Onica, which later got acquired by RS. Frankly I don't really use it, I just get better bandwidth pricing and they charge me for AWS support (I've only ever messaged AWS directly, not Onica/RS). Honestly I don't know what they get out of the deal except maybe a kickback on the support I'm required to pay for, but I'd have paid that anyway if AWS asks. If they die off, I guess I won't miss it, but I can't say it's been a problem.

bsuvc 4y ago

More anecdata: I'm working with a customer right now who will be moving all their apps off Rackspace to one of the big cloud providers later this year (work is underway currently).

mike503 4y ago

I've migrated multiple companies away from RS, usually to AWS. Very easy workloads and RS was charging them way too much without any useful support. This isn't surprising.

tzs 4y ago

They've pretty much guaranteed I won't return as a customer due to one extremely stupid thing they have done with accounts (at least as of the time I moved to another provider...I don't know if they have since changed this): deleting all your servers, storage, name server configuration and all other things you have set up does not reduce your monthly bill to $0. To reduce your monthly bill to $0 you must delete your account. An account using no services still gets hit with a $5/month fee for support [1]. That means that if I ever want something they offer and they have a slightly better deal than someplace I have an account with, their deal with have to be sufficiently better to be worth the hassle of creating a new account. That's fairly unlikely so I probably won't be back. [1] That fee was why I left. I just had one instance of the smallest VM they offered, plus storage for a couple backups, plus name service for my domain. The VM was used for a very low traffic website and hosting my email. When they added that $5/month support fee it raised my costs about 30%. I switched to Amazon Lightsail for my VM and switched from hosting my own email on my VM to hosting it with Fastmail. That comes to $8.32/month.

mgkimsal 4y ago

Initial experiences with Rackspace in late 1999 and early 2000. I was amazed that every time I called 'support' I got a real live person. I called at 3am once on a Saturday, got a live person answering, and was connected with a competent support engineer in about 90 seconds. I was impressed. The server(s) we had cost a lot, but knowing you could connect with someone competent 24/7 was amazing. Then... a few months later... we had to use it, and it was good, but they were about 2 minutes away from wiping our main drive. We'd requested a new beefier server and requested either the drive be moved or everything copied over to the new server. Got a message new server was up - great. Logged in - nothing. Connect to old server? Nope - offline/disconnected. Ugh. Calling in got me a live person, and I stressed the urgency. We did get connected with someone, and they did find the right person, who was about to wipe the previous server. Crisis averted, but... immediately I start asking why the support ticket showed all requests as 'done' when... they weren't. We stayed a while longer, but it felt like they were growing too quickly even then to keep the 'fanatical support' model that initially attracted us. FWIW, I had a couple of dedicated servers at a small place in NH, and they were... $70-$80/month on average. The rackspace servers typically started at $500/month. I think we were paying about $1800/month for the setup in question at the time of the crisis. My belief in 'you get what you pay for' was impacted that day. I had another client years later (2010? 2012?) that used them and it felt like a completely different beast, far more generic and commodity like every other competitor, and I've never since looked at them again.

jesterson 4y ago
Exactly my experience with Rackspace.
jeffwask 4y ago
Similar experiences, they were amazing for the first couple years I was on a team that worked with them. They really provided amazing support and took a lot of the burden of managing infrastructure off our smaller teams. Then it changed, the writing was on the wall as public crowds grew but one of my last experience was of them wiping out one of my databases doing what should have been a non-destructive drive expansion. The kicker was they restored from backup, a backup from the previous evening and didn't bother to inform us. We found out when customers started calling asking where their previous days data was. Accidents happen but the whole cover up was unforgivable.

pyb 4y ago

This is what's technically known as a "Ratner moment".

dreamcompiler 4y ago
The founder in question no longer works there.

cratermoon 4y ago

At least the private-equity folks Apollo Management Group got their pound of flesh, though, eh?

brightball 4y ago

This sucks to see. I remember when it looked like Rackspace was going to be the primary competitor to AWS.

tristor 4y ago

I was a Racker from 2010 to 2014, I left shortly after Lanham did, I was also located in San Antonio near Castle until 2022. It's a very sad thing that Rackspace is dying, but I must concur with the assessment. Apollo, like most private equity firms, is a bunch of bean-counters who are focused on financializing acquisitions, using their assets as leverage to extract money, and then offloading it to bag holders in the market who ride it down into the abyss. When I left Rackspace they had no debt, a massive war chest, and a reasonably competitive product offering to AWS that could have been capitalized on. As soon as Lanham left and they put an MBA sales guy in as CEO (Taylor Rhodes), and I heard rumors they'd turned down an acquisition from a major tech company but were considering a sell-out, I left to go do startups, and so did many other top-tier Rackers. It used to be commonplace in South Texas (San Antonio / Austin) tech scene to meet new Rackers and talk to them about the old days, and just generally see Rackers having a huge presence in startups and tech. You still see a lot of former Rackers around, but they're all so far removed from those days now that this is not how we identify when we introduce ourselves. Not much new blood. Apollo decided it would be more financially sound to get rid of the core values, end "fanatical support", delete the fanatiguy logo and branding, and then lay off every single non-management American worker to replace them with 2-3 people working overseas from India. Rackspace support has been a boiler room bottom-barrel call center since at least 2019, and the pandemic massively accelerated what was already on the horizon. The company has been culturally dead and financially doomed far before the ransomware attack. The ransomware attack is just the final nail in the coffin. Apollo took a ~$5B company with no debt, loaded it up to do multiple acquisitions theoretically worth $2B ($7B if you're following) and made it worth less than $1B on market. Real geniuses there, who managed to completely destroy a solid American company that helped create a burgeoning tech scene outside of the Bay Area, so they could pocket the money personally as they drove the company into bankruptcy. It's unfortunately a tale as old as time, or at least as old as the 80s. Private equity is a bunch of sharks doing leveraged buyouts to con retail investors into holding the bag. Hasn't changed since I've been alive, and isn't likely to change before I die. The moment Rackspace sold to Apollo, they were on the trajectory of death. It just took awhile for reality to set in and consequences to catch up. I don't always agree with Yoo and I don't agree with everything he said in this article, but he's absolutely right about bean counters ruining tech companies.

thayne 4y ago

> This is not a company that’s on a trajectory of growth. They’re on a trajectory of death. Maybe Rackspace is on a trajectory of death, but this is a false dichotomy. It isn't (or at least shouldn't) be necessary to grow for a company to survive. If you are profitable, staying the same size is perfectly fine.

simonh 4y ago
If you're in a growing industry but you're not growing, then you're becoming less and less relevant to your potential and actual customers. In a business like their scale is crucial. It's not a stable situation to be in. Having said that they have been growing, their revenue is up, but so are their losses. They've just not managed to stay competitive.
peytoncasper 4y ago
The phrase usually used is a "leaky bucket". Sure a company can operate in a neutral space, but it's unlikely that overtime their revenue growth will match their customer churn. At the same time, a lack of growth limits how much can be invested on staying relevant in terms of R&D which further separates them from competitors with a positive growth trajectory. Its also incredibly hard to kickstart a growth engine once it has slowed down. The net result is a flywheel but in the opposite direction. PE buys companies like this to slow that negative growth flywheel down attempting to stay neutral until the investment is paid off at which point profit can be made. The long tail is massive attrition as well, because few people want to work at a sinking ship or rather a ship unwilling to invest internally. Neutral isn't bad, but it's very hard to exist.
abigail95 4y ago
Are there any examples of companies with flat profits that continue to exist years later, where the non-growth isn't caused by mistake or incompetence?
- thayne 4y ago
  I'm sure there are plenty of local businesses and businesses with niche customer bases in this category.

sitkack 4y ago

Rackspace is a zombie company at this point. They lost a SAN during some maintenance, no backups, remote volumes lost. And first tier support can't debug Linux VM liveness issues. They have to talk file a ticket and get a Linux SME on the case.

watersb 4y ago

Malls are cool again. They could sell theirs.

angst_ridden 4y ago

I have some clients who host at Rackspace. They have old-school monolithic web-app architectures (single web server that also runs the application code, and a database server). They're never going to rebuild these legacy application -- the codebases are decades old, and comprise hundreds of thousands of line of code. The support at Rackspace has really cratered, and it's hard to have much faith in their technical capabilities anymore either. I'm no sysadmin, so I don't know if it's realistic to port this kind of architecture to AWS or Azure. Also, some are contractually obligated to host at a facility that offers "managed hosting" (although I suppose the exact wording could be weaseled) with uptime guarantees and staffing levels. I'm trying to figure out where I should recommend they move. It doesn't seem like a common use-case anymore.

ElevenLathe 4y ago
Assuming the application code is mostly stateless (it pulls all the data it needs from the database on every request), this kind of app is usually not a big deal to containerize and put on some cloud platform (AWS, GCP, Azure should all be about equivalent) and even get more 9s and scalability almost for free. This is essentially the Wordpress architecture, which every infra engineer (née sysadmin) in the industry has been asked to move from on-prem to cloud sometime in the past ten years. If the application code has non-disposable state in-memory then it's bit harder but can usually be done, especially if it's low-traffic enough to comfortably live on single Rackspace dedi now. Edit: I should also mention that if you're looking for somebody to do this kind of work for you, there are contact details in my profile. ;)
- angst_ridden 4y ago
  I'll have to look into the web-server customizations. One of them has a custom Apache module for talking to a 3rd party mainframe, but that should theoretically be movable too (if it's the correct platform architecture). Of course, an Apache module's just C code, so how hard could it be to port to another architecture? But in all seriousness, I suspect it's a relatively simple UDP socket communication interface, so it is probably portable. Thanks for the mention of Wordpress. It is a similar architecture. I'll read up on how to move a Wordpress install, and use that as a model for testing one of these apps.

linuxftw 4y ago

Rackspace was taken private, saddled with a bunch of debt while the stuffing cash into Apollo's pocket, and then re-IPO'd so Apollo could fleece the market. Major IPOs go into 401ks, Wall street wins, the average American is left holding the bag. Rackspace currently has $5B in liabilities! Any fund manager that bough Rackspace after it re-IPO's should be in prison for fraud. The banks that underwrote the IPO should be in prison for fraud.

liberia 4y ago

Recently I went to sign up for Rackspace and their systems flagged me as 'Suspicious'. I tried registering without a VPN in a brand new session, and again: 'Suspicious'. I provided all the right details for them, correct contact and address, etc I wonder what their churn rate for auto-flagging away potential customers is? They are in the business of taking people's money in exchange for services right?

LinuxBender 4y ago
I've had what you describe happen recently with some wireless vendors. They flat out won't even acknowledge my own domains a valid email domains despite being so and following every possible best practice. No VPN and using a static IP no less. I ended up using a reseller that apparently has not gotten big enough to use the over-zealous tools just yet. One of my theories is that the older internet businesses probably lost most of their original developers, downsized their staff too much and had to shim something simplistic into their customer on-boarding flows and then found a turn-key solution that had a maximum protection setting that does not give insightful or accurate statistics. They are probably not even aware of all the lost financial opportunities.

gymbeaux 4y ago

The article is paywalled but I would imagine DigitalOcean is screwed for many of the same reasons. As things do in our industry, I fully expect cloud computing to die out in lieu of an “on-prem renaissance” where companies realize they can floor on-prem servers 24/7 for a one-time* cost instead of AWS nickel-and-diming for every little thing. It’s clear AWS (and Azure) are anticipating this because all their new stuff is very AWS-specific or very Azure-specific. God it would be basically impossible for my company to move away from AWS to another cloud, nevermind back to on-prem. Even AWS’s ElasticSearch aaS (OpenSearch) is diverging from ElasticSearch proper. AWS could double prices overnight and my company would pay it.