Rackspace Technology Stock

Rackspace Technology, Inc. operates as a multicloud technology services company.

The company designs, builds, and operates its customers’ cloud environments across all major technology platforms, irrespective of technology stack or deployment model. The company partners with its customers at every stage of their cloud journey, enabling them to modernize applications, build new products and adopt innovative technologies.

The company helps companies of all sizes manage their transition to the cloud, make sense of their IT infrastructure, migrate their data to the cloud, optimize their cloud presence on an ongoing basis and manage the workloads best left to managed hosting or other mature platforms.

Rackspace Fabric

Rackspace Fabric is the proprietary software that underpins the company’s industry-leading automation. It includes over 200 unique tools and components to deliver the company’s services. Rackspace Fabric serves as a single pane of glass through which customers can manage their entire cloud presence and delivers automation, artificial intelligence, predictive analytics and proprietary tools that make the company’s services even more reliable and easier to use.

The company leverages automation to reduce the amount of manual labor associated with serving its customers, as well as to improve efficiency. Whenever there is repetitive, manual labor associated with customer-related tasks, the company automates the task. The company also uses advanced machine learning tools to identify additional work that can be automated. This has provided Rackspace Technology with a critical mass of automation, based upon institutional knowledge and know-how, that the company continues to grow incrementally every year.

Rackspace Fabric includes automation that ranges from service delivery to self-healing infrastructure, giving it the ability to anticipate and proactively respond to opportunities and threats.

The company’s sales efforts are led primarily by a team of over 900 quota-bearing representatives and customer success managers. The company’s ecosystem of partners serves as an extension of its direct sales force, providing a source of additional new business opportunities. The company’s customer engagement model begins with its professional services, where it partners with a customer to assess its objectives and design the best cloud strategy to meet its needs, and continues with its flexible recurring service offerings.

The company deliver its services to a global customer base through an integrated service delivery model. The company has a presence in more than 60 cities around the world. This footprint allows it to better serve customers based in various countries, especially multinational companies requiring cross-border solutions.

The company served over 100,000 customers across 120 countries as of December 31, 2022. The company benefits from differentiated partnerships with all major public and private cloud vendors, including AWS, Microsoft Azure, Google Cloud and VMware.

Integrated Services Portfolio

The company serves its customers through an integrated services portfolio organized in two segments—Multicloud Services and Apps & Cross Platform Services.

Multicloud Services

This segment includes the company’s public and private cloud managed services offerings, as well as professional services related to designing and building multicloud solutions and cloud-native applications. The company offers an integrated suite of managed services offerings across its private cloud, the leading public clouds and colocation. The company’s managed cloud services help customers determine, manage and optimize the right infrastructure, platforms and services on which to deploy their applications to achieve the best performance, agility, and security. The company also helps customers establish governance, operational and architectural frameworks to mitigate risks and reduce inefficiencies, so they can manage costs, achieve industry-specific compliance objectives and improve security.

Within the company’s Multicloud Services segment, it offers the following services:

Private Cloud: These service offerings provide compute, storage and applications accessed by a specific customer, either with a cloud management layer (in managed private cloud) or without one (in managed hosting). The company offers managed private clouds powered by leading technologies like VMware, Microsoft and OpenStack in its data centers, as well as in those owned by customers or by third parties, such as colocation providers. The company also offers managed VMware on AWS, delivering an increasingly popular hybrid combination. The company’s private cloud offerings can be used with or without virtualization software.

Managed Public Cloud: These offerings address the challenges of managing applications and data on the AWS, Microsoft Azure and Google Cloud public clouds. The company bundles the underlying public cloud infrastructure with its expertise and experience, managed services and proprietary tools. While the infrastructure providers are responsible for their data centers, servers, storage, networking and operating system software, the company helps customers navigate, migrate, architect and deploy their applications on those leading public cloud platforms. After a migration, the company manages, secures and optimizes the customer’s environments on an ongoing basis using its tools, automation and expertise, while supporting the customer with robust service level agreements. These offerings do not require the company to commit significant capital expenditures given that third parties provide the infrastructure.

Managed Hosting and Colocation: For customers that require infrastructure on mature cloud platforms, the company also offers them the option to place their own servers and networking hardware in its data centers (colocation) or to utilize dedicated servers provided by it in its data centers (managed hosting). However, demand for these services has lessened in recent years as more and more customers move their data and applications to the cloud. In some cases, the company is proactively approaching customers and encouraging them to move from these mature services to the cloud in order to preserve the customer relationship.

Apps & Cross Platform: The company’s Apps & Cross Platform segment includes managed applications, managed security and data services, as well as professional services related to designing and implementing application, security and data services.

Managed Applications: The company’s managed application services include running large-scale SaaS applications for customers on its and public cloud infrastructure, such as Oracle, SAP and Office 365. This includes key functions, such as managing a customer’s applications and performing key functions, such as account management and scaling up or down of required cloud resources. Additionally, the company manages productivity and collaboration applications, such as email and hosted Microsoft SharePoint.

Managed Security: The company provides fully-integrated security solutions that combine cutting-edge technology with its in-house Security Operations Center to provide customers with threat detection, analysis and remediation capabilities. Additionally, the company has integrated security platforms into its management tools to give its customers one view of their organization’s vulnerability and threats.

The company offers additional managed security services to customers in the areas of security threat assessment and prevention, proactive threat detection and response, rapid remediation, governance, risk and compliance assistance across multiple cloud platforms and Privacy and Data Protection services, including detailed access restrictions and reporting. The company’s 24x7x365 Customer Security Operations Center is staffed by experienced Global Information Assurance Certification (GIAC) security analysts.

Data Services: The company helps customers use their data to further innovate by providing services and expertise for data extraction, transformation, ingestion, storage and analysis. The company utilizes both traditional analytics platforms and new, machine learning technologies to build repeatable, scalable and automated platforms that extract meaningful insights. The company’s developers, administrators and cloud and data analytics architects are skilled across a full range of database services, including managed relational databases (Oracle, SAP, SQL Server and MySQL), big data (Hadoop), managed NoSQL (MongoDB) and managed SAP HANA. The company’s data services are offered both through its managed services subscriptions and through its professional services offerings.

The company offers professional services across its entire portfolio, including multicloud solutions, applications, security and data. As part of its professional services process, the company meets customers at every stage of their cloud journey and design solutions focused on modernizing their infrastructure and applications to enhance the value of their cloud technologies. This process often serves as the starting point for new business opportunities; following its initial professional services engagement, a customer will typically use any combination of its managed services under long-term contracts, and will often use its professional services multiple times as their technology needs continue to evolve. For some new customer relationships, the early stages of the relationship can be weighted toward infrastructure revenue; in these cases, the company’s customer success sales team is tasked with up-selling and cross-selling additional services, including professional services, to enhance the overall customer relationship.

In addition to the company’s integrated services portfolio, it offers customers its OpenStack Public Cloud solution, its third reporting segment, which represents its legacy business prior to its pivot to multicloud. While the company expects to continue to offer its OpenStack Public Cloud solution, the company ceased to actively market it to customers in 2017.

Effective on January 1, 2023, Rackspace Technology reorganized around a two-business unit operating model, Public Cloud and Private Cloud. Public Cloud and Private Cloud have very different business dynamics and require different skill sets and levels of investment to manage. This two-business unit operating model ensures increased focus, delivery and service quality for the company’s customers. Beginning in 2023, Rackspace Technology will change its segment reporting to reflect this reorganization under three reporting segments: Public Cloud, Private Cloud and OpenStack Public Cloud.

Technology Platform

The company’s technology platform is at the center of the Fanatical Experience that it delivers to customers. The company’s technologies focus on removing the complexities of multicloud deployments, unifying compelling aspects of the experience for its customers and enabling it to deliver scalable solutions.

Innovative automation drives efficiency for the company and its customers, enabling it to rapidly and consistently deliver its solutions across multiple products and clouds at scale. Rackspace Business Automation is a custom platform developed to handle over 12 million events and over 1 billion actions per month across physical devices, virtual devices, systems and tools. Data center automation provides services and applications to automate provisioning, configuring and the decommissioning of data center infrastructure. UIPath Robotic Process Automation is deployed across the company’s business to automate repetitive tasks. The company can automate 75% of customer support workloads based upon the automation of thousands of unique processes across its support organization.

AIOps is a new field of software that combines monitoring, machine learning and automation to enhance IT operations. The company’s AIOps platform correlates monitoring events across its customers’ physical and virtual devices into a single incident or problem, significantly reducing the time to resolution for complex incidents. The company developed a first-of-its-kind multi-tenant AIOps solution that processes millions of compliance-related events each month.

Predictive operations enable the company’s data scientists to build sophisticated models to provide actionable insights to its business leaders, increasing its agility and ability to identify opportunities that enhance its customer relationships.

Self-service APIs enable the company’s customers to access data and resources programmatically, extending its automation and service delivery into their native tools and processes. The company supports integration with its ticketing systems to enable two-way integrated support workflows and billing system integration to enable access to consolidated billing data in multicloud environments. Additionally, the company’s pre-built integration with ServiceNow enables enterprise customers to simplify connectivity between its tools and ServiceNow.

MyRackspace and other portals and associated mobile apps service over 600,000 active monthly users and support product specific self-service, insights, account management, security management, ticketing and billing. These portals are unified with the company’s custom framework and design language, Pilot and Helix, providing a consistent experience and integrated navigation between the company’s product lines and features. The company’s custom identity management system authenticates access to its user interfaces and APIs. This includes federation capabilities to integrate with its customers’ identity providers.

Unified billing enables the company to deliver an integrated single invoice for customers across all multicloud deployments. The company’s systems extract and rerate bills from public cloud hyperscalers and merge data from its products and services to generate a single invoice each month, while applying sophisticated billing and discount models.

Service management applications ensure scale, speed, quality and consistency in the company’s service delivery. These applications, including the company’s custom CORE and Encore tools, support configurable rules and routing engines, integrated escalation management, detailed queue management and management visibility and reporting. These tools are augmented with sophisticated workforce management solutions to manage work shifts by utilizing historical data and trends across ticketing, chat and telephony, to maintain and appropriately staff its 24x7x365 operations.

Growth Strategies

In order to continue to drive growth and capture its large market opportunity, the key elements of the company’s growth strategies include growing its private cloud business with new solutions, such as Rackspace Services for VMware Cloud and Rackspace Data Freedom; building innovative solutions to broaden its portfolio, including scaled cloud-native solutions on its public cloud platforms and full-stack cloud offerings for infrastructure, applications and data; accelerating sales motions to defend its commercial business, expanding into mid-market and selectively targeting enterprise customers with its differentiated solutions both horizontally and vertically; identifying new areas with unmet needs and making smart technology bets to capture those opportunities ahead of the trend (For example, new product offerings, such as Rackspace Data Freedom and Managed Kubernetes introduced to claim previously-unfilled white space in the cloud market); igniting the Racker Culture of innovation and Fanatical Experience for its customers and building on its unique culture by living its core values, embracing a growth mindset and operating with speed while celebrating accomplishments; and expanding automation to drive operational effectiveness and continuous process improvement for itself and its customers while remaining ahead of the competition in automation and building on its advantage.

Competition

The company faces competition primarily from traditional global IT systems integrators, such as Accenture, Atos, Capgemini, Cognizant, Deloitte, DXC Technology and IBM; and colocation providers, such as Equinix, CyrusOne and QTS.

Customers

The company serves a wide range of customers across geography, size and industry.

Geography: The company serves a global customer base. As of December 31, 2022, the company served over 100,000 customers in over 120 countries.

Size: The company has a strong presence with customers of all sizes, including enterprise businesses (revenue in excess of $3 billion), mid-market businesses (revenue of $300 million to $3 billion) and commercial customers (revenue less than $300 million).

Industry: The company serves customers across all sectors, including highly regulated industries with complex security, compliance and governance requirements.

Representative customers by industry vertical are as follows:

Financial Services: Aon, Everest Insurance, TD Bank, and BFC Group Holdings.

Healthcare: Apria Healthcare, Medecision, Teva Pharmaceuticals, and Arthrex.

Media & Technology: BT, Braze, Intrado, and Flextech.

Retail, Consumer & Leisure: Nike, VW/Porsche, Walmart, and Awaze.

Sales and Delivery

The company’s services are sold via a global direct sales team of over 360 sales representatives and over 560 service delivery managers as of December 31, 2022, through third-party channel partners and through online orders on its website. The company’s sales model is based on both distributed and centralized sales teams with leads generated from customer referrals, channel partners and corporate marketing efforts.

Professional services are at the core of the company’s consultative sales model and often serve as the gateway to its platform. For new business opportunities, the company’s professional services organization engages closely with a customer to assess and design the best cloud solution for that customer.

The company’s network of channel and technology partners also plays an important role in its sales efforts. The company’s channel partners - including management and technical consultancies, technology integrators, software application providers, value-added resellers and web developers - serve as a source of new business opportunities, primarily for small and medium-sized customers. The company’s technology partners serve as an extension of its sales force, often leading to new business opportunities as their customers recognize the need for a services partner to make the best use of their technology investments. In some cases, the company collaborates directly with these partners on go-to-market efforts.

The company’s Customer Success team includes over 560 Rackers and engages in client relationship, contract management, managing deliverables, client retention and growth of its install base.

Research and Development

The company’s research and development expenses were $24.5 million for the year ended December 31, 2022.

History

Rackspace Technology, Inc. was founded in 1998. The company was incorporated in Delaware in 2000.