Rackspace laying off 6% of US employees

Dive Brief:

  • Rackspace is laying off about 270 U.S. workers, CEO Taylor Rhodes announced Tuesday. In a company blog, Rhodes said that the layoffs are "focused mainly in areas where our workforce has grown more rapidly than our revenue," though he didn’t specify exactly which areas that includes.

  • The layoffs equate to about 6% of the independent web hoster and managed services provider’s 4,500 workforce. Rhodes indicated most of the layoffs affected senior level management.

  • Rhodes also said more layoffs may be on the way outside the U.S. "We are proposing somewhat smaller reductions in our offices in other countries," he wrote.

Dive Insight:

Though Rackspace has struggled in some segments, its managed security offering, OpenStack and VMware private clouds, and managed services for Amazon Web Services and Microsoft Azure are growing "in the high double digits" annually and that the company will continue to invest in those areas.

Rackspace has struggled in recent years. According to Gartner’s Magic Quadrant for Cloud IaaS report released last summer, Rackspace has solid basic features, however it has struggled to keep up with other cloud market leaders. 

Rackspace was acquired by Apollo Global Management for $4.3 billion last summer, so the layoffs may be related to the fact that the company is now under greater scrutiny by its new owner. Businesses are also showing greater interest in multi-cloud environments, an area where Rackspace excels, so Rackspace management may be looking to streamline so it can focus more resources on that area.

Filed Under: Cloud Computing Leadership & Careers