Cloud Market Challenges: Rackspace Seeks Advice from Morgan Stanley

Cloud Market Challenges: Rackspace Seeks Advice from Morgan Stanley

The cloud has been one of the most appealing markets for tech giants over the past few years, due to the fact that thousands of businesses have started outsourcing their mission-critical servers. The proof of the point is the fact that global public cloud spending is expected to reach $220 million this year, with SaaS as the most popular model.

Considering the growth of cloud-based services and customers’ increasing trust in this platform, it’s unsurprising that more and more companies seek out their share of the cloud cake. Unfortunately, however, with the names such as Amazon, Google and Microsoft as major competitors, such a focus may not always be as profitable as expected. This seems to be the case of Rackspace, a San Antonio-based company that keeps struggling to achieve competitive edge where the aforementioned corporations have already settled in.

Recently, the news broke out that Rackspace hired Morgan Stanley, an American financial services corporation, to help them evaluate their options for business growth: “Our board decided to hire Morgan Stanley to evaluate the inbound strategic proposals, and to explore any other alternatives which could advance Rackspace’s long-term strategy,” the company said in a statement.

Rackspace turns to Morgan Stanley

As noted by Forbes’ Ben Kepes, Rackspace has always been somewhat of a “bridesmaid in the cloud infrastructure space,” constantly trying to find the ways to deliver their cloud services in a most profitable way. However, even with their open-source platform OpenStack, Rackspace never managed to achieve greater success. Judging from their stock reports, the company may be facing some serious issues as their revenue gradually declines over the years.

A quick look at box

Although the demand for public cloud services keeps growing, it is questionable whether any company other than Google, Amazon and Microsoft can make significant revenue here. Cloud storage prices keep declining and with the recent cut in cloud storage prices, they are getting closer and closer to zero.

Now even the biggest cloud service providers have troubles monetising their services. This mainly relates to Box, one of the leading business-oriented cloud storage and sharing services, which has been in the centre of media attention over the past couple of months. Namely, earlier this year, Box filed for IPO, revealing a $168 million net loss, which came as a surprise to many business analysts.

Clearly, the main reason why it is so difficult to maintain a stable position in the cloud storage market is the fact the infrastructure costs may be huge, even if millions of users buy a particular service. In such an ecosystem, it appears that only the biggest names can survive.

However, as many experts have pointed out, this doesn’t actually signify the death of cloud storage since the demand is very likely to further increase over the years. What the cases of both Rackspace and Box prove is that the seemingly saturated cloud market can be won only through further innovations.