

Cloud services and support specialist Rackspace Inc. has revealed plans to lay off 6 percent of its staff, including about 250 of its U.S.-based workforce.
Rackspace Chief Executive Taylor Rhodes broke the news in a Feb. 7 blog post, where he positioned the move as a kind of balancing act. In particular, the layoffs are focused in areas where the company’s workforce has grown faster than its revenues. They are necessary to ensure the company has enough cash on hand to make the investments in new products, he added.
However, Rhodes also pointed out that the company’s core services, such as its Managed OpenStack and Managed VMware offerings, plus its managed services for Amazon Web Services and Microsoft Azure, remain unaffected as they are “growing rapidly at annualized rates in the high double digits.”
“Our industry changes rapidly, and we don’t always have the luxury of making gradual changes to our workforce,” Rhodes wrote. “Sometimes more decisive action is required to seize the opportunity to invest in areas where our customers want our help. That’s where we find ourselves today.”
Rhodes stressed that the company had done everything possible to avoid laying off staff by cutting costs elsewhere, but admitted that those were not enough to prevent cuts in the workforce.
News of the layoffs comes about six months after Rackspace exited public ownership after being bought out for $4.3 billion by private equity firm Apollo Global Management LLC. The company had struggled to turn over a profit in the months preceding that buyout, after seeing its early lead in the public cloud eclipsed by companies like Amazon Web Services and Microsoft Azure. Rackspace has since repositioned itself as an adviser and support service for other leading cloud platforms, and is believed to have gone private in order to complete this transition away from the scrutiny of public shareholders.
Rackspace had around 6,000 stateside employees at the time it went private, which would mean around 250 of those are likely to lose their jobs, together with “smaller reductions” in its overseas offices.
Despite the bad news, Rhodes remained upbeat about the company’s future, saying the rapid adoption of public cloud would ensure rising demand for its specialist support services. As such, Rackspace intends to “invest in new and better services” in a way that would have been “difficult under the 90-day shot clock of the public markets,” Rhodes explained.
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