How Rackspace is Losing Customers

Maybe even myself...

Posted 1 year ago by Tom Maiaroto.

I shout red from the rooftops when it comes to hosting. I've been in love with Rackspace since I started using them years ago (and got the company I worked for at the time to switch their entire server infrastructure, all their clients except a few, over as well - which included dozens of high profile sites and campaigns). Granted, it was an arranged marriage. I used SliceHost beforehand and they were acquired by Rackspace, but that's ok. I later went on to take advantage of their affiliate program. Sadly they didn't have it way back when or I wasn't aware and missed out on a gold mine. Nevertheless, I enjoyed a couple hundred bucks which really helped me with my hosting through Rackspace.

Rackspace just works for me and my clients. I can scale projects to handle just about any load that I've encountered (this includes millions of visitors and tons and tons of images and videos being uploaded for contests and such). Their number one strength in my opinion is the ability to scale, resize servers, work with images, and build whatever kind of environment you need. A killer feature to glue this all together is their Cloud Load Balancers. Super important and if you've read any of my tips on server configuration you'll know that they are quite useful for a redundant infrastructure that lets you easily add and remove servers without any hiccups.

However...I think Rackspace is going to lose customers. This is just an opinion, I know the company has seen amazing growth and I sitll like them (downgraded from love). The problem is that they are expensive and geared more for the enterprise. Granted, this has always been their direction. Their support is great and that does deserve a few extra bucks. However, not for their unmanaged cloud servers. While they got cheaper over time, they are adding more enterprise features and forgetting the small developer and startups.

This is a mistake.

What's happening is they are leaving an opportunity for other hosting companies to come in and grab a huge market share. While large corporate and enterprise customers are certainly more likely to stick around, the industry has far more startups and independent developers. SliceHost really helped Rackspace acquire the independent developer. That was the single most strategic thing that Rackspace has probably ever done in its history (blindly not knowing their full history, I'm still comfortable with that statement).

Like who? Well, like Digital Ocean for starters. They've been getting a lot of press lately and for good reason. Then there's A Small Orange which is a great hosting company with a great mission. Even companies like HostGator with an older hosting strategy are still growing. Rackspace's cloud revolution didn't stop that. Just about the only thing it did do was give us a really good alternative to Amazon Web Services. 

Rackspace has been adding more enterprise solutions and hasn't focused on the industry trends. Remember, large corporations move slow - they are not going to jump to something like MongoDB anytime soon and if they did it would take a very long time to migrate things. This has allowed Rackspace to ignore smaller developer requests (all over their forums) and not worry about being on top with the latest technology.

Ok, so MongoDB is arguable since for every two people who love it there's at least one who doesn't. Fine...But can you explain the lack of SSDs on Rackspace? Both Digital Ocean and A Small Orange use SSDs for their virtual private hosting only. They also happen to do this at a lower price point than Rackspace's spinny disk servers.

The bonuses don't stop there. A Small Orange gives you free backups. Granted they are a little cheap on the bandwidth usage costs compared to Digital Ocean, but they are still an excellent hosting company to consider as they have a far more expansive product offering than Digital Ocean.

Rackspace has "fanatical support" but so do these guys. A Small Orange sent me a t-shirt just for tweeting about them...With a signed card and everything. Those guys get a special place in my heart despite the fact that I'm heading toward Digital Ocean right now. If I had an agency, then I'd like use A Small Orange for all my hosting.

Coming back to the independent devleopers and startups. It's true, and we don't always like it, but cost is the number one driving force. Despite the fact that Rackspace was a little more expensive, I still use them. They are reputable and all my stuff is there. I enjoy their affiliate program as well as it fits well with my consulting. Not that Digital Ocean doesn't appreciate your help with acquiring customers - they do and they give you a great incentive. Affiliate programs aside, the bottom line here is that Digital Ocean is 3 times cheaper! For better and faster hardware. They made an unbelievably attractive offer and I hope their pricing stays this way. They will capture the entire independent developer and startup market hands down no question if they continue on this track.

However, Digital Ocean will need to add a few more features like load balancing if they want to grow with the startups that they are attracting. I don't think getting all the Microsoft enterprise stuff is a necessity, but I do believe that ease of use features like Rackspace's Cloud Load Balancers are essential. Sure, you could setup HAProxy on two servers for redundancy on Digital Ocrean for about the same cost...But it's not a fun task and you still can run into trouble with scaling.

So why is Rackspace at risk of losing me? Well for starters, I have a startup and I can't afford 3 times the cost for hosting that right now. In fact, it would hurt my business to use them because the costs would go right into the business plan and it would look a lot better (and a lot wiser) if I could show how I can reduce overhead instead.

Secondly, my lovely affiliate account was suspended for an unknown reason. Conveniently when I had a nice big 32GB server running (along with some others) at the time. I missed out on months worth of compensation before I got ahold of someone who re-enabled the account. Will I ever see the compensation for the time lost? Maybe they say...I don't even really care at this point to be frank. I've spent far more money with them and given them more business than I'd know what to do with, that it just doesn't matter. I just wish they would help me out some with hosting discounts as a thank you (I don't need any monetary commission at all!) or that they would just lower their costs and add SSDs. It's 2013, the world is moving to SSD and Rackspace is lagging behind.

So should I have loyalty? I'm a very loyal person...But the more I think about it the more I realize I'm being an idiot. It's business and while I love the relationships I have with many of the Rackspace guys, at the end of the day it's hurting me to continue with them. I'd suspect similar situations for other startups as well.

Rackspace is definitely good. They are the kings of hosting in my mind, but if you aren't pulling a profit yet or are a small company or an independent developer, you'll need to make your own decision when it comes to value. I just don't think they do enough for us smaller folks and that's going to be their Achilles heel.

Edit: Let me be abundantly clear - I still use Rackspace and to give you an analogy here... Rackspace is the commercial airliner. Digital Ocean is like Virgina Galactic (minus the cost - in fact, imagine if Virgin Galactic was cheaper than any other commercial airline). Yea, going to space for cheap is freaking awesome, but are you going to be the first one to sign up? (OK, maybe not even that dramatic) I'd wait and see, but keep these things on your radar!

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