Rackspace, a leading player in the traditional hosting world with some level of difficulty gaining traction in the cloud based world, today announced the acquisition of Cloudkick, one of the cloud management vendors with a pretty dashboard having HTML 5 based 3D server visualization. Rackspace is mum on the details of valuation. Interestingly, this is the first cloud management vendor to be acquired in the public cloud space and, few years from now, we may even see this as the beginning of an acquisition trend.
How does Cloudkick fit into Rackspace?
Before I offer my own take on how this acquisition fits into Rackspace’s plans, I will first quote Rackspace’s own thinking on this acquisition.
Rackspace has big plans to incorporate the Cloudkick suite into our hosting and cloud services. Rackspace customers (or anyone managing servers anywhere) can easily add their servers to the Cloudkick dashboard and start to experience its magic. In the coming months, Cloudkick and Rackspace toolsets will become more integrated, including full incorporation into our managed service level.
I guess this clearly spells out their short term strategy on how they are going to put Cloudkick to use.
My Take
Before I start, I want to warn readers that the following sections may border along the lines of conspiracy theory but it is a realistic possibility that cannot be dismissed outright. There is no fun in reporting along the lines of Rackspace’s PR. I feel that analysts should think from different angles and if you agree with me on the role of an analyst, this is one such angle. Knowing Rackspace’s position in the current IaaS market, this is definitely a possibility unless Rackspace changes track and makes some interesting acquisitions.
If you really want to see how Rackspace will put Cloudkick to use in the short term, look at Jungledisk, their acquisition couple of years back when they went big on cloud computing. Jungledisk, like Cloudkick, supports other cloud provider(s) and, when they acquired Jungledisk, Rackspace claimed that they will continue to support Amazon S3. Till today, they have stayed true to that statement. However, they have cleverly used the tool to lure users into Rackspace Cloud Files by offering paid features like data transfer and data request (both upload and download) free. If their Jungledisk strategy is any indication, they are going to use Cloudkick in the same way. They are going to let Cloudkick support other cloud providers and dedicated servers (well, as long as people continue using it) but they might use it as a tool to lure users into Rackspace cloud by offering a tighter integration and, probably, by offering some features for free or at a lower price compared to the competing providers. More importantly, this will be a great tool for Rackspace to differentiate their offerings from competing services to the actual users of cloud.
In the long term, I see Rackspace becoming more of a cloud management player on the infrastructure level of the stack. In spite of what hardware vendors want you to believe, IaaS layer is going to be dominated by commodity hardware and there is very little value an IaaS provider can offer to differentiate themselves from competition. I think Rackspace realized this long back and open sourced their compute and storage platforms (see CloudAve coverage of OpenStack). They want to put their strength, their fanatical support, to use in the cloud based world. It was evident when they made their announcement about Managed Cloud Services on tuesday. With the Cloudkick acquisition and their plans to deeply integrate Cloudkick with Managed Services, their plans to focus on the management is getting more and more obvious.
There is another factor into Rackspace’s thinking, OpenStack. If my expectations and Rackspace’s expectations turn out to be true, OpenStack is going to get lot of traction leading to what I call as “Open Federated Cloud ecosystem”. If the infrastructure services market goes in this direction, this move by Rackspace is going to put them as a major player in the market. By default, Cloudkick or any other Rackspace service is going to be tightly integrated with OpenStack and the success of OpenStack will, in a way, define the future of Rackspace.
Conclusion
Even though it is easy to dismiss the above take, I clearly see this as one of the many paths for Rackspace into the future. If I couple this acquisition to their announcement about managed cloud services and OpenStack, my take above appears more realistic. What do you think? Do you think Rackspace will go big on the cloud management space or I am completely on a wrong track with my analysis. Feel free to jump in and add your thoughts.
Related articles
- Rackspace Acquires Cloudkick for Cloud Server Management Apps (webpronews.com)
- Rackspace acquires Cloudkick, aims to be cloud service point guard (zdnet.com)
- Cloudkick joins the Rackspace Family (cloudkick.com)
- Welcome Cloudkick to the Rackspace Family; Fanatical Support Gets New Tools (rackspacecloud.com)
- Rackspace in heavenly marriage with server admin kit (go.theregister.com)
- Another Giant Gets Another Sexy Startup: Rackspace Acquires Cloudkick (readwriteweb.com)
- Rackspace Acquires Cloudkick (datacenterknowledge.com)
- Rackspace picks up Cloudkick just two years after the company launches (venturebeat.com)

Good writeup Krishnan, couple thoughts in response,
In regards to them going big on the managed services front, that is a given. The majority of their business today is from managed dedicated servers and things such as hosted exchange. All they are doing is becoming more diversified in the software/services they offer…, they jumped right on MS’s premise based Azure announcement earlier in the year saying once people start buying it, they will start offering it.
On the integration of cloudkick into openstack, there are two ways to look at it. One, cloudkick is really just a centralized multitenant web app, with clients that can run on any machine, so there is really nothing to do to support openstack. Two, cloudkick could become the default console for openstack, but seems like a grip of money to pay for something you are trying to cultivate for free with what they tout to be one of the largest, fastest growing open source projects/communities.
The amount of traction openstack will get is still very questionionable. Its still a far ways off from being a product companies will just download, install, and use “out of box”. The part that I think is currently most interesting around the openstack adoption conversation is the storage piece, not compute. The majority of the orgs dont need Rackspace/NASA style compute infrastructure, and we have a world that is already littered with IaaS compute solution providers that fit the bill for most and have dedicated dev/sales forces.
Other things to look out for, which most people dont mention all that often, is that the best thing Rack has done in past 12-18 months isnt openstack, or growth of their cloud service.., its gathering an INSANE wealth of talent around key open source projects. Buy “owning” and influencing the main contributors and directions of said projects, they have a rediculously nice organic pipeline building over next couple years as the IT and software space continues to rapidly evolve
Krishnan,
I like your write-up and agree with much of it. I actually think that there are parallels to be drawn between the traditional IT world, in which we have OEM’s that ship hardware and independent vendors for systems software, software development platforms, and applications.
It seems that IaaS providers operate at the same level as traditional OEM’s; the larger ones even source much of their hardware from the same factories as the OEM’s, while the smaller one may acquire it from low cost commodity HW vendors. Similar to traditional OEM’s, IaaS vendors will (need to) provide a rich set of “Infrastructure SaaS” capabilities with their basic cloud service, but just as there are independent software vendors in the traditional IT world- there will also be independent SaaS vendors offering entire cloud stacks or cloud-agnostic management tools for those who prefer not to lock themselves in.
Which path Rackspace will choose is difficult to tell and I’d be surprised if they know themselves at this time.
Fred van den Bosch
CEO; Librato