Rackspace CTO Talks Cloud, OpenStack & the Power of Small Groups

Scott Ferguson
5/2/2017
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John Engates was familiar with Rackspace's headquarters long before the company even started.

As a teenager in San Antonio, Engates went to high school across the street from the former shopping mall that now houses Rackspace's corporate headquarters. Later, as an accounting major at the University of Texas, he dabbled in geeky pursuits on the side, including learning Unix and how TCP/IP worked.

At one point, Engates started his own ISP before a partner in that business urged him to apply to a new company called Rackspace. He became one of the first 35 employees at what was then a startup. Through the company's ups and downs, he stayed on, toiled in a number of different positions, and now works as its chief technical officer as Rackspace moves into the cloud era.

As CTO, Engates believes the best ideas are found in small groups. "I am an introvert sort of naturally. I fake it pretty well as an extrovert. I can put on an act if you will, but it's getting into a character," Engates told Enterprise Cloud News during a recent interview at Rackspace's San Antonio HQ. "The introvert in me always would rather work with a small group than to try to lead massive organizations."

Rackspace HQ in San Antonio is housed in a former mall (Source: Enterprise Cloud News)
Rackspace HQ in San Antonio is housed in a former mall (Source: Enterprise Cloud News)

"The truth is, a lot of times, you can't really come up with new, interesting things at large scale," Engates added. "You can only do those in small pockets within the company. I tend to work through other organizations. I go and spend time with a lot of the engineers that work in other people's organizations around the company."

A place in the cloud
Engates finds himself in a leadership position at a time when Rackspace is undergoing significant changes, and innovations are needed. The cloud has presented a lot of opportunities for a company such as Rackspace, but it took time for the company to find its place in the cloud. Although the company once fought against the likes of Amazon Web Services, it's now found it easier to partner with AWS and provide services to customers through the public cloud platform.

Rackspace is also working with Microsoft Azure, and recently signed up with Google's Cloud Platform.

The cloud market is starting to consolidate with AWS, Azure and Google offering cloud to the masses, while other providers -- IBM and Oracle -- are focused on high-end enterprise.

Company changes
At the same time, the company's corporate changes have been well chronicled. After moving from a public to private firm in 2016, Rackspace laid off about 6% of its workforce in January of this year as it focused more on its cloud services and moved away from other areas. (See Rackspace Cutting 6% of US Workforce.)

Charles King, an analyst with Pund-IT Research, sees Rackspace, at some point, getting squeezed by ongoing cloud trends. "Rackspace has mainly focused on partnering with those companies but most all of them seem intent on consolidating their positions, a strategy that squeezes Rackspace," King wrote in an email to ECN. "That said, there are thousands of other cloud service providers that are regionally focused or aimed at specific industries, as well as businesses interested in more personalized cloud services. Rackspace can likely find success there but it will rely on cobbling together multiple smaller deals."

OpenStack at a crossroads
At the same time, Rackspace has been fighting to keep the momentum behind OpenStack, its own private cloud platform co-developed with NASA in 2010, which has settled into more of a niche in the last few years as AWS has dominated. Intel recently stopped funding a joint development program for the platform, which also led to a much smaller round of layoffs at Rackspace. (See Intel Pulls Funding From OpenStack Development Group.)

VMware, Hewlett-Packard Enterprise and Cisco remain supportive but less involved in OpenStack. However, Yahoo, with its large-scale architecture, has embraced the platform. (See 4 Fantastic OpenStack Lessons From Yahoo .)

"OpenStack is one of those technologies that once seemed inevitable and now appears to be dwindling away. I think one of the problems was its complexity," King noted. "That created opportunities for Rackspace and others to develop service businesses around OpenStack but it also inspired people to look for and create less onerous approaches. There's still business for Rackspace here but I wouldn't bet the company's future on it."

Adjusting to the cloud
During the interview, Engates acknowledged the layoffs were painful but said the company continues to hire in its growth areas, and the top leadership -- CEO Taylor Rhodes and President Jeff Cotton -- have the support of the new private ownership. The new ownership, Apollo Global Management, took Rackspace private in a $4.3 billion deal last year that was sold as a way keep the company growing without quarterly Wall Street pressure. (See Rackspace Finalizes Deal to Go Private.)

Next page: Rackspace changes with the times

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