The chief executive of Rackspace says the company has closed the gap with Amazon, gaining significant market share in its cloud computing compared to a year ago.
In an interview with Reuters, Chief Executive Lanham Napier said a year ago Amazon was “incredibly far ahead,” of Rackspace in the cloud computing market. But this year he said Rackspace has closed the gap with Amazon’s web services business.
Napier did not provide details about the gap nor how much Rackspace has gained on Amazon.
He did say the Rackspace cloud business contributed 10 percent to the company’s revenue in the third quarter. Business for cloud computing services has been growing in excess of 100 percent per year. In the second quarter, the Rackspace cloud business grew 17 percent.
The cloud business does have its pitfalls, in particular in respect to the tight margins that come with offering the service. Napier said those tight margins have been offset by its hosting business. Rackspace provides hosting to large enterprises. Cloud computing services are primarily provided to customers for hosting websites and renting servers that can be scaled up and back down at any time.
But can this scenario continue? Competition is only starting in the cloud computing market. Rackspace competes with other cloud computing providers such as Joyent. Microsoft will soon enter the game.
The key will be in how to add margins to the cloud business. Depending on traditional hosting business may get tricky if more of that business goes to the cloud, too.
Amazon seems to be fighting that battle on a daily basis. They continue to add features but have to respond to market pressures with competitive pricing. The company recently announced it was dropping prices for its EC2 service.
Disclosure: Rackspace is a RWW sponsor.
