Editor’s note: Rackspace’s most recently quarterly financia; results indicate the benefits of pushing to market a hybrid cloud-enabling portfolio with many options for third-party support, says Technology Business Research.

HAMPTON, N.H. – On its most recenty earnings call, Rackspace executives announced quarterly revenue of $518 million, up 7.9% from the year-ago-quarter. Executives noted Rackspace’s success was buoyed particularly by a growing number of Fanatical Support customers for its Microsoft Azure and Amazon Web Services (AWS) offerings as well as customers on its OpenStack private cloud. Rackspace executives announced Rackspace serves over 400 customers between these key offerings, marking increasing success in the company’s transition to providing customers higher-touch services around cloud deployments and solutions of their choice.

Though Rackspace’s shift to offering integrations and services around third-party cloud (as well as promoting its OpenStack private cloud to support hybrid cloud customers) has won the company early success stories, Rackspace’s strategic direction will continue to create certain short-term difficulties in go-to-market messaging. Rackspace’s focus on third-party support follows a larger market shift in which smaller public cloud providers are moving to support leaders such as AWS with managed services around their offerings, putting Rackspace in competition with vendors such as Hewlett Packard Enterprise (HPE).

Rackspace executives also noted many of the company’s AWS Fanatical Support customers are coming to the company with only incremental workloads, suggesting it will take time for Rackspace to reach a scale of business that can sustain investments in its cloud services portfolio. However, TBR believes over the longer term, Rackspace’s focus on multicloud, private cloud and hybrid cloud over its proprietary public cloud will enable the company to support the growing number of customers with complex environments that include assets spanning on-premises and multiple clouds.

These customers are looking for Rackspace’s high-touch Fanatical Support in managing their workloads, which have moved to AWS and Azure clouds, and Google Apps for Work.

Rackspace’s first months of offering Fanatical Support for AWS provide proof points that indicate long-term opportunity

While Rackspace’s core dedicated and managed hosting business remains key to the company’s success, Rackspace’s move to supporting leading cloud vendors and away from proprietary cloud offerings has allowed it to further promote its Fanatical Support services capabilities. In October 2015 Rackspace announced it was an authorized AWS reseller, a member of the AWS Partner Network at the Advanced Consulting Partner level, and would offer its trademark Fanatical Support around AWS. Rackspace has since announced a number of proof points that suggest its strategy around AWS has been successful during early days. On Rackspace’s 1Q16 earnings call, company executives noted Rackspace has 187 customers for Rackspace Fanatical Support for AWS, including a six-figure signing from 4Q15.

The company also reported over 60% of customers using its AWS services are of the highest service level (Aviator), indicating Rackspace has begun to upsell its Fanatical Support customers and will continue to do so with the remaining group still at the lower service level (Navigator). Additionally, because 40% of Rackspace’s AWS customers are non-U.S.-based, Rackspace has a chance to reach users that need additional managed services and private cloud options to help deal with compliance concerns, which are a particular worry among cloud users in EMEA.

In addition to these proof points, Rackspace announced in April it had been awarded AWS DevOps Competency as part of the AWS Partner Competency Program. As the cloud managed services market crowds with vendors that have moved away from cloud infrastructure to promote higher-margin cloud services, successful differentiation will be driven by vendors’ ability to gain competencies and train employees around leading solutions from third parties. Rackspace has over 260 AWS technical certifications and over 1,350 accreditations on AWS, showing Rackspace customers the company’s skills around migration and management of AWS environments.

Rackspace will leverage core strengths and key partnerships around OpenStack to offer customers OpenStack everywhere

Rackspace’s push to provide support for cloud offerings of customers’ choice also emphasizes the importance of multi- and hybrid cloud environments over purely public cloud environments, with Rackspace updating its OpenStack private cloud options continually. The ability of customers to launch OpenStack private clouds anywhere speaks to Rackspace’s deeper commitment to helping customers avoid vendor lock-in, as users do not need to use Rackspace data centers to purchase Rackspace’s managed OpenStack option and can launch OpenStack private clouds from their data centers.

Despite Rackspace’s leadership in OpenStack, the company’s partnership with Red Hat to provide Rackspace Private Cloud Powdered by Red Hat offers support for customers’ choice of OpenStack flavor.

Overall, TBR believes Rackspace’s recent decision to offer customers OpenStack everywhere furthers the company’s larger mission to support multicloud environments.

(C) TBR