Rackspace Cuts 6 Percent Of US Workforce As It Refocuses

Managed cloud provider Rackspace has revealed it is culling six percent of its US workforce, as well as small reductions in its international operations.

The news of the headcount reduction was made by CEO Taylor Rhodes in a blog post and he said the job losses are “personally painful”, but promised the departing ‘Rackers’ fair severance packages.

It has certainly been a busy period for the firm. In August Rackspace revealed it was going private, after private equity firm Apollo Global Management agreed a $4.3 billion (£3.26bn) deal to take control of the cloud hosting firm.

Job Losses

Rhodes said that he had to act decisively so as to give a clear message about the future for customers and partners, as well as the ‘Rackers’ who have been spared the headcount reduction.

“I’m writing to report that Rackspace today initiated layoffs that will cut our US workforce by about 6 percent,” Rhodes wrote. “We are proposing somewhat smaller reductions in our offices in other countries, through consultative processes governed by local laws.”

The US layoffs and proposed international reductions are personally painful, but they are necessary and manageable,” he added. “We’re confident we can accomplish these reductions without any effect on the expertise and exceptional customer service we provide to our customers.”

Rackspace had 6,115 staffers as of September last year, so six percent would translate to approximately 366 employees losing their jobs.

“We have targeted these cuts primarily toward our corporate administrative expenses and management layers, while striving to create the least impact to our frontline Fanatical Support and product teams,” Rhodes wrote.

He did not mention how many international staff would be affected, but admitted that the redundancies are because the firm finds itself “with more expertise than we need in some areas, and not enough in others.”

“Our industry changes rapidly, and we don’t always have the luxury of making gradual changes to our workforce,” Rhodes said. “Sometimes more decisive action is required to seize the opportunity to invest in areas where our customers want our help. That’s where we find ourselves today.”

It seems that safe areas within the firm are Rackspace Managed Security offering, the OpenStack and VMware private clouds, and its managed services for Amazon Web Services and Microsoft Azure, as all of these are growing rapidly, at annualized rates in the high double digits.

“What we did today was a very hard thing, and we will not let it be in vain,” pledged Rhodes, although that will be of cold comfort to those being handed their P45s.

Expanding Operations

Rhodes took charge of Rackspace back in 2014, after the firm had previously explored its strategic alternatives, before opting to go private in a buyout last Autumn.

More recently the firm announced it was building its first ever data centre in continental Europe, with the Frankfurt facility expected to open its doors in mid 2017.

That meant that Rackspace now operates 12 data centres worldwide, located at sites such as London, Hong Kong, Sydney, Dallas, Chicago and Ashburn (near Washington DC).

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