Interview Rackspace president and CEO Taylor Rhodes ascended to the latter role just last month, so when our Sydney bureau was offered the chance for a chat, we jumped at it. Here's what Rhodes had to say about Rackspace's decision to stand alone, what it's like watching AWS and Google fight giants fight and more.
The Register: Rackspace recently decided not to pursue a merger or acquisition. Why did you decide to stand alone?
Rhodes: It is super simple. Cloud is big. It is early stage. The main market has just started moving. We feel super-well positioned compared to others coming at cloud from legacy positions. We feel we have a running start and with our positioning around service and support leadership we have a huge opportunity. We feel better to go after that ourselves rather than teaming with somebody who comes from a legacy hardware or software background.
The Register: What's the difference between your “fanatical support” position and your recent move into managed services.
Rhodes: Fanatical support was our code name for managed services. Managed cloud is simply an articulation of a belief we have.
In the cloud era we think the cloud is bifurcating. There's un-managed cloud where you get an owner's manual and there's an assumption you are competent enough to run the 98 APIs and all the other things you need.
Another part of the market will say that's something they can't or chose not to do.
I view cloud as an important evolution in the way compute is consumed, but it does not take away the need to decide who is going to manage it for you.
We may say in the future that because our core proposition is that management that we get to a point where we announced we will do fanatical support for Google apps [as the company did this week – Ed] . That's an example of us extending our service model to Google stuff but using their data centres. But that doesn't make sense for all our customers.
The Register: Word on the street was that your talks with HP and CenturyLink weren't necessarily about acquisition. Perhaps you were discussing how to expand without the capital costs of building clouds.
Rhodes: We are openly and very aggressively pursuing options to use other people's data centres and capital. Think about the Google announcement: it all runs on their capital. Where we add value is running a service around Google apps for Google customer. Think of that as the first step towards that model.
We are very actively involved in conversations with a number of different parties, especially in international countries where a service provider has a large footprint, large client base and a great brand that allows us to add value by using their capital.
We don't have to add value inside the data centre. It's managing applications, that's the complex part where we want to play.
The Register: Why do you need to be more capital-light?
Rhodes: To enter new markets. And if we can get more capital-light in the future while sticking to our higher-margin businesses, why wouldn't you do that?
Think about our data centre here in Sydney: it's in a Digital Realty facility. We don't add value with the data centre. We add value with software and practices inside of that data centre.
The Register: How do you find people react to OpenStack? I saw a tweet this week that if there were a computer game called 'Sysadmin' the final boss would be OpenStack.
Rhodes: I look at OpenStack as a four and a half year old thing, so it will take time to mature.
We see OpenStack taking on a private cloud flavour. I think there was a period of time when we and others were thinking OpenStack would become a large, multi-tennant cloud play. It is still there, but we see the market seems to be going to OpenStack being a private cloud option.
That's where we are focusing our development efforts. So we see a Microsoft stack, a VMware stack and an OpenStack. It is important to us but it needs to be treated as one of the players.
The Register: Does it disappoint you that OpenStack has gone in that direction?
Rhodes: No. Smart people tell you that about 20 per cent of workloads are in the cloud. OpenStack is a target for that other 80 per cent when people want to get off expensive VMware software.
If there was a video game called Sysadmin, the final boss fight would be OpenStack.— Justin Clayton (@justinclayton42) October 6, 2014
The Register: How are you finding the server market? Does ARM appeal?
Rhodes: If you look at the Open Compute project, I think life is too hard now if you are a chip-maker or branded box maker.
Nothing in the cloud has a badge on it. People want to buy a service, they don't care if it is an HP server. They don't care if it is a Dell server.
I think Open Compute points to the fact that at scale companies figured out a long time ago how not to buy those branded servers.
I think the future of infrastructure in general continues to commoditise, and that will force those players to find their next value add.
We have a lot of Open Compute servers going out and that lowers costs for customers?
The Register: Would ARM servers lower costs?
Rhodes: There's talk of containers changing economics. I think there is emerging stuff that will change the power consumption. All of those things show we can get more efficient with the capital we use.
The Register: Do customers ever ask if you'd run legacy platforms in the cloud? AWS tells me they get asked to put an AS/400 service up.
Rhodes: No, because the answer to running a cloud is to eliminate complexity.
A lot of people in phase one of cloud put legacy apps in the cloud to get cost reductions. But what they found is that if you do not re-architect the cloud you do not get the benefit. I think that is why it will take a while for the main market to move. Now it is test and dev or new apps. Some legacy apps will never go to the cloud.
The Register: Australia's government yesterday issued new cloud guidelines that said agencies should “Use ICT refresh points as a trigger for evaluating cloud services”. Is that what you're seeing: companies move at inflection points?
Rhodes: It is. People decide to design their next application in the cloud.
Here's a big trend. We see VMware has an 80 per cent plus share of the virtualisation market. Those apps have been the CIO's primary productivity driver because they enabled server rationalisation. But there's no productivity left, so they are looking at those VMware workloads and putting them into a PaaS model and then looking at their new applications in a cloud model.
The Register: Are you suggesting that business case for the hybrid cloud model of one management console spanning on-premises and public cloud erodes? When you have an application that taps into elastic cloud resources as and when needed or for some day-to-day operations?
Rhodes: I think there is more talk about that scenario than reality. I think everybody thought this would be a case for the cloud. I think people are now saying they will develop greenfield apps for the cloud purposefully.
The hybrid use case we see now is a combination of single and multi-tennancy. Your data centre and our data centre. The ability to move workloads around.
The Register: It's tough to make money in infrastructure-as-a-service, but the big players are still finding ways to cut prices.
Rhodes: You know what's brilliant right now? Google is making life very hard for AWS. When Google announced 40 and 60 per cent price cuts, it was a genius move because Google had very little revenue at risk. So launching a huge price cut on something that doesn't cost you much but will cost your competitor a couple of billion dollars … if you saw Amazon' Q2 their cloud shrank. That was largely because of the price cut they had to respond to.
We see Google as very serious about cloud. They will have a product primarily appealing to the dev crowd, just like Amazon. We see those two colliding and over time we will see how their offers evolve away from the dev market.
I think it is interesting Google did another announcement on cost-cutting, a ten per-centre. You might say that's a statement that maybe the view on price wars is tempering a bit. Or you might say Google is getting into a Moore's Law cadence, ten per cent a couple of times a year.
The Register: Do you see yourself doing cloud products, like Microsoft?
Rhodes: Microsoft is a product company. We offer a lot of Microsoft products ourselves. We will have a bigger presence in Microsoft private cloud by hosting the Microsoft stack for our customers. We think they will compete by trying to get people onto Azure hosted out of their data centre, and they'll use their products as the primary draw for that.
What Microsoft wants us to do is offer products as a managed channel. Microsoft is desperate to keep their customers. They're desperate to get you onto Azure, [but they also say] if an organisation like Rackspace can give you a hosted solution that's okay.