Rackspace To Acquire App Management Specialist TriCore Solutions

Rackspace said Thursday it has agreed to acquire TriCore Solutions, an application management specialist with global reach that will help the managed cloud provider move its capabilities up the enterprise stack.

The biggest acquisition in Rackspace's history, revealed a day after a new CEO was named to helm the company, marks the latest of several strategic shifts for the cloud hosting and managed services provider based in San Antonio, Texas.

TriCore focuses on managing enterprise applications – particularly mission-critical Oracle E-Business Suite and SAP solutions. The Boston-based solution provider offers technical support, monitoring, provisioning and custom development services to integrate those systems with other workloads.

[Related: Rackspace Launches Global Solutions And Services Business]

Application management is a business that Rackspace customers had been asking the company to enter, Rackspace vice president of corporate development Matt Bradley told CRN.

Rackspace had been resisting moving up the stack from infrastructure to apps, he said, but ultimately couldn't ignore the multi-billion-dollar opportunity presented by the rapidly growing global ERP market that Oracle and SAP ecosystems dominate.

Like Rackspace, TriCore is closely aligned with Amazon Web Services, but also partners with Amazon's two major hyper-scale competitors: Microsoft Azure and Google Cloud.

There are other synergies, said Bradley.

"They, like us, view professional services as something that is important to having a long-term managed services revenue stream," Bradley said, adding about 85 percent of TriCore revenue comes from managed services and the remaining 15 percent from consulting.

The culture was also a good fit – in line with Rackspace's casual workplace attitude and emphasis on onboarding and training employees to develop skills around bleeding-edge technologies, he said.

Beyond its Boston headquarters, TriCore has offices in Wisconsin, Pennsylvania and India.

Rackspace has transformed its business model in recent years, starting with the embrace of former Infrastructure-as-a-Service competitors – striking partnerships with Microsoft Azure and AWS, and more recently Google Cloud Platform.

Privatization spurred another major strategic shift. When Rackspace was acquired last year by Apollo Global Management, it freed the company to rejig its business model and "focus on the things that matter," Bradley said.

Rackspace has also been "getting better before the stack," with investments in professional services and architecture guidance; and "above the stack," with new managed security and compliance services, Bradley told CRN.

While Rackspace didn't disclose the cost of TriCore, Bradley confirmed it to be the most the company ever paid for an acquisition. TriCore has more than 500 employees, he said.

Leveraging TriCore expertise and resources, Rackspace will explore three delivery models for enterprise applications: on-premises, hosted private cloud, and public cloud.

And it will keep attacking the midmarket – TriCore's "sweet spot" are customers with revenue somewhere between $300 million and $5 billion, a segment where Rackspace is also strong, he said.

The acquisition was partly motivated by a survey Rackspace recently conducted of its largest 4,000 customers, in which more than 40 percent expressed plans to upgrade or migrate large enterprise applications over the next two years. The vast majority of them were still running those applications in corporate data centers, Bradley told CRN.

While the deal doesn't formally close until June, the two companies are already jointly selling to customers and have started planning their integration.

Mark Clayman, TriCore's current president and CEO, will take a senior operational role at Rackspace, and his team will be kept in tact, Bradley said.