Why OpenStack adds up for Rackspace

In a nutshell, OpenStack is a bridge for Rackspace to ultimately find new revenue streams.

Rackspace cooked up OpenStack---a cloud operating system---with NASA and has been among its largest evangelists as 125 companies have joined the movement.

One large question for me has always revolved around why. Rackspace is a hosting and cloud infrastructure as a service provider. OpenStack clearly has a role, but the strategic importance isn't always obvious.

After a chat with Rackspace CTO John Engates the role of OpenStack is much more clear. In a nutshell, OpenStack is a bridge for Rackspace to ultimately find new revenue streams. Rackspace has moved from hosting to cloud and will ultimately layer in more services.

Engates was in Orlando at the Gartner Symposium to talk to enterprise technology executives. Rackspace, which is well known among startups as an Amazon Web Services competitor, isn't on the radar of many enterprises.

"We're looking to get the word out to CIOs," acknowledged Engates. This disconnect comes as Rackspace offers a hybrid hosting-cloud model that would appeal to companies.

So where does OpenStack fit in? OpenStack is the conversation starter with many tech execs wary of being locked into VMware. Rackspace is essentially courting enterprises by serving up OpenStack as a way to run private clouds---also known as data centers. When this private cloud arrangement is set up, there's a nice path to Rackspace's hosting and cloud offerings.

The future boils down to Rackspace offering to run those data centers and handle various services. "In the OpenStack model, we can offer services on top of your data center and services outside the walls of our operations," said Engates.

Today, Rackspace is doing some consulting, but in the future it will transition from hosting to more services. When that happens, Rackspace will have a third revenue stream.

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