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Rackspace Technology: Becoming elastic as the ‘un-GSI’

Rackspace Technology unveils new high-touch services framework, strengthening its play in managed public cloud

In April 2021, to assert itself in the managed public cloud space, Rackspace Technology unveiled its Rackspace Elastic Engineering framework, which promises a more scalable approach to the multicloud engagement life cycle compared to standard managed services contracts. The framework provides on-demand access to pools of cloud engineers, architects and engagement managers, dubbed “pods,” that will support customers from the advisory and consulting stage to system provisioning and management. Aligned to nine dedicated specialists, each pod acts as a landing spot for customers that they will constantly engage with to achieve goals post-migration.

Rackspace Technology supports its Rackspace Elastic Engineering offering with the message: “It’s no longer enough to just be in the cloud.” While many customers will initially leverage Rackspace Technology for its vendor-neutral approach to address cloud migration requests, the pod framework is designed to support customers’ cloud-native projects, which has the potential to improve Rackspace Technology’s value-add with support for emerging technologies such as serverless functions, automation and Infrastructure as Code.

The new Rackspace Technology offering supports AWS, Microsoft Azure and Google Cloud, which addresses the growing trend of customers adopting multiple cloud platforms to support specific workloads. TBR notes many cloud service providers (CSPs) are looking to address multicloud management pain points, either with professional services or self-service solutions. TBR expects that the Rackspace Technology platform-neutral approach, combined with a customer-centric approach to cloud transformation, will help the company assert itself in the managed cloud space to increasingly capture more market share away from its technology to services-centric competitors.

With both managed services and dedicated hosting capabilities, Rackspace Technology strives to become the ‘best place to run VMware’

While Rackspace Technology has been a longtime partner of VMware, offering hosting and managed services support for core virtualization offerings, VMware’s rapid shift to the cloud has presented new opportunities for IaaS players and global systems integrators (GSIs). To make it easier for customers to move VMware outside the data center, hyperscalers are allying with VMware to deliver the VMware Cloud Foundation (VCF) platform — which comprises vSphere, NSX and vSAN — on dedicated or multitenant cloud infrastructure. TBR notes VMware has traditionally been less reliant on SI partners, but we expect the company to outsource VMware Cloud management tasks more heavily through 2021 as the portfolio continues to grow, due in part to its recent multiyear, multimillion-dollar partnership agreement with Accenture.

As a result of these dynamics, Rackspace Technology’s private cloud strategy was one of the main highlights conveyed with its launch of Rackspace Services for VMware Cloud. In addition to supporting various hosting methods, including on premises via consumption-based pricing, in Rackspace Technology data centers or through a colocation provider, the addition of Rackspace Services for VMware Cloud supports VMware clients from the services angle. As complexity and lack of in-house resources are among the leading customer concerns surrounding VMware migrations, Rackspace Technology is applying its Rackspace Elastic Engineering framework to support a number of use cases, from lift and shift to application refactoring.

Prior to going public again in August 2020, Rackspace Technology (Nasdaq: RXT) underwent a major strategic pivot, placing less emphasis on the capital-intensive data-hosting model it has been historically known for and shifting its investments to build a resource base within cloud professional services. With the announcements of Rackspace Elastic Engineering and Rackspace Services for VMware Cloud in April and May 2021, the company is competing in the managed cloud space with a new high-touch services framework designed to support enterprise clients at all layers of the cloud stack, from infrastructure management to application modernization. Rackspace Technology’s long-standing technology alliances with Amazon Web Services (AWS) (Nasdaq: AMZN), Microsoft (Nasdaq: MSFT), Google Cloud (Nasdaq: GOOGL) and VMware (NYSE: VMW); ability to host clients’ enterprise workloads in a dedicated cloud; and well-established Fanatical Experience brand are among the ways the company will not only seek differentiation and position itself as an alternative to peers but also establish itself as an “un-GSI.”

Booz Allen Hamilton keeps winning, even when the government shuts down

TBR’s initial response to Booz Allen Hamilton’s (BAH’s) 1Q19 earnings published on Tuesday, and we expect another strong quarter from BAH to close out its FY19. BAH boasts a soundly differentiated market position and multilayered alignment of its technology and advisory portfolio with the primary objectives of its federal customers. Consulting-led offerings are increasingly interwoven with an innovative technical capacity designed to enable federal clients to meet operational challenges and security threats ever-increasing in sophistication and volume. BAH even emerged from the recent 35-day temporary government shutdown with minimal fiscal damage, further illustrating the resiliency of its solutions model and fueling its confidence about 2020. We further expect the company will issue strong guidance for its upcoming fiscal 2020, with revenue growth in the high single digits and margin performance sustained at current levels.

Read more of Senior Analyst John Caucis’ assessment of federal IT services vendors through the quarter and the upcoming quarterly benchmark.

Additional assessments publishing this week from our analyst teams

Tuesday

  • In our 1Q19 Hewlett Packard Enterprise Cloud Initial Response, we discuss how the company’s margin improvements resulted from a more software-defined portfolio and improved operating efficiency as the HPE Next initiative enters its final year. — Cassandra Mooshian, Senior Analyst

Wednesday

  • Cost-cutting initiatives including headcount reduction and deeper integration of digital sales and customer service channels enabled Sprint to reduce $1.2 billion in gross operating costs in FY18, but this was largely offset by reinvestments in network and other operational initiatives. Sprint’s financial position will remain challenged long term due to its high debt load and struggle to generate positive net income and free cash flow, highlighting why the T-Mobile merger is in the best interest of the company. — Steve Vachon, Analyst

Thursday

  • Now with its third CEO in two years, Rackspace rebrands Fanatical Support to Fanatical Experience as it commits to providing ‘unbiased expertise’ and a more total support system.      — Cassandra Mooshian, Senior Analyst

Friday

  • We expect VMware to report another quarter of strong, above-average growth in comparison to its software peers. Ongoing portfolio investments, partnerships and tuck-in acquisitions position the company for continued customer attraction and retention. — Cassandra Mooshian, Senior Analyst
  • Portfolio and talent developments equip HCL Technologies (HCLT) to sustain revenue growth through 2021. HCLT needs to quickly scale its investments and market presence to solidify growth. Kelly Lesiczka, Analyst
  • Despite enhanced efficiencies in traditional IT operations, T-Systems could not offset pressures on profitability from reorganization and adoption of IFRS 16. Expanding its portfolio in growth segments will enable T-Systems to benefit from a more flexible business model to adapt to and address client demands. Kelly Lesiczka, Analyst

And if you missed the May 22 webinar, Bringing the best: Talent and technology in management consulting, check out the replay here.