Rackspace Inks Deal With Microsoft Azure, Source Says An Alliance With Amazon Web Services Is Next

Rackspace CEO Taylor Rhodes Monday revealed a new alliance with Microsoft Azure at the Microsoft Worldwide Partner Conference. But Rackspace also is preparing an Amazon Web Services alliance as well, CRN has learned, bringing its trademark "Fanatical Support" offering to the world's two biggest clouds, both competitors of its own Infrastructure-as-a-Service offering.

A channel partner of both AWS and Rackspace told CRN the San Antonio-based IaaS and co-location provider approached his company with an offer to participate in a beta program in which Rackspace would manage and provide support for his customers hosting workloads in Amazon's cloud.

"They are going to wrap their managed 'Fanatical Support around AWS and essentially become an Amazon reseller," he said.

[Related: Here's Who Made Gartner's 2015 Cloud IaaS Magic Quadrant]

"It left me wondering, 'What's the plan for their own cloud environment?' " the partner said.

John Engates, Rackspace's CTO, wouldn't comment on AWS specifically when asked by CRN, only saying "today we’re focused on the exciting launch of Rackspace Fanatical Support for Microsoft Azure."

But Engates did add the company's strategy as a managed cloud provider allows the "opportunity to introduce Fanatical Support on other industry-leading cloud platforms in the future."

The partner solicited for the beta program also told CRN -- before the information was made public -- that the Rackspace representative said the company was doing a similar deal with Microsoft's Azure IaaS offering.

Rhodes told Microsoft partners gathered in Orlando, Fla., for the Microsoft Worldwide Partner Conference that Rackspace had been supporting customers on Microsoft platforms for a dozen years, most recently with Office 365, Microsoft's office productivity SaaS suite.

"We've got a long legacy of working together for our customers," Rhodes said. "We have found with our customers that we can do it more cost-effectively for them than they can do it themselves."

Rhodes said Rackspace saw itself as customers' "expert extension of their team that can make Azure more powerful for them," mentioning a recent project with the fraud investigations division at Ernst & Young.

According to the partner, the Rackspace representative who solicited his involvement in the beta program said the company had been planning to offer MSP services for rival IaaS providers for about 10 months. That suggests the partnerships already were in the works about the time Rackspace withdrew itself from the market last September after rejecting acquisition bids.

Rackspace had spent months looking for a buyer, but ultimately said it would remain independent and doubled down on its managed cloud approach.

The partner told CRN that Rackspace is aware of lost opportunities with his firm to Amazon Web Services.

"Part of it is our rep knows we have tried the Rackspace cloud offering, and it's so far behind where Amazon is and eight out of 10 times it can't keep up to the things we're trying to do to be cutting edge and be responsive to our clients," the partner said.

The 20 percent of the cases in which his company uses Rackspace often stems from customers insisting on certain compliance standards or resisting a pure-cloud environment, he said.

In November, Amazon Web Services launched an MSP competency. It will be interesting to see if Rackspace earns it, the partner said. Rackspace was one of Microsoft's first Cloud Solution Provider partners last year.

Rackspace partnering with a rival IaaS provider had been, to some extent, expected for several months. Rhodes, who got the CEO job at Rackspace after the acquisition bid was dropped, put the idea forward several times.

A month after Rhodes became CEO, Rackspace became a Google for Work Premier SMB Reseller. But the partnership with Google fell short of offering managed IaaS on the Google Cloud Platform, although that type of a deal has also been the topic of rampant speculation.

Rhodes alluded to the possibility of a major partnership in March, when he told Bloomberg News that Rackspace "may at some point offer support on top of Amazon’s cloud.’

In May, during the company's first-quarter earnings call, Rhodes told investors such a move "makes sense and is consistent with our heritage." He said the company was talking to other providers about a partnership.

The Microsoft deal involves support and in some cases monitoring services, with Rackspace reselling Microsoft's public cloud to some customers. There's also a hybrid solution with Rackspace's OpenStack-powered private cloud and Azure as the public component.

Amazon Web Services didn't respond to a request for comment.

PUBLISHED JULY 13, 2015