Rackspace Agrees to Buy Datapipe, Becomes Largest Managed Cloud Player

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When Rackspace purchases Datapipe, it will have more than 6,500 employees worldwide.

Bonnie Arbittier / Rivard Report

When Rackspace purchases Datapipe, it will have more than 6,500 employees worldwide.

Rackspace announced Monday that it has agreed to acquire Datapipe, one of the world’s leading providers of managed cloud services, managed hosting, and colocation, making Rackspace the largest public managed cloud player in the world.

It is the largest acquisition in the company’s nearly two-decade history.

“The reason we’re buying Datapipe is that we want to extend our leadership and own the multi-managed cloud services category,” said Matt Bradley, chief strategy officer at Rackspace.

“It’s the largest acquisition we’ve done, and it should be the ultimate signal that we are going for it. When the transaction closes, we will be the largest player in managed public cloud space, the largest player in managed private clouds, on top of VMware, Microsoft, and Open Stack, and we’ll be the largest player in traditional managed hosting.”

Both companies are privately held, and no financial details of the transaction were publicly disclosed. Rackspace is owned by Apollo Global Management and its partners. The majority owner of Datapipe is Abry Partners. Following the acquisition, which is expected to close in the fourth quarter of this year, Abry will become an equity investor in Rackspace. Until then, both companies will continue to operate as separate entities.

The Rackspace executive leadership team will stay in place and may expand, Bradley said, and the company is currently developing a detailed integration plan that will be released to employees first. When the transaction closes, Rackspace will have more than 6,500 employees, nearly 4,000 more than it had in 2009.

“We want to keep employee talent, and there will be positions available at Rackspace at senior levels that we hope to fill with Datapipe employees,” Bradley said. “Members of Datapipe will become leaders at Rackspace. Whether they work from New Jersey or here is going to be part of our conversations [that will start in the coming week].”

Rackspace will add a fourth new platform to its offerings in the form of colocation, or shared data centers, which Bradley said helps enterprises on their IT journey with legacy systems.

“This is about us ultimately redefining a new way of delivering IT,” he added. “When we say multi-cloud services, it is about us being the best and biggest, with the best talent base, with the best software, best customer service mantra, and really owning the category.”

Rackspace Chief Strategy Officer Matt Bradley

Courtesy

Rackspace Chief Strategy Officer Matt Bradley

When the transaction closes, Rackspace revenue will have increased four-fold since 2009 when Bradley joined the company – a transition he made from the investment banking world. “I tell people that this has been the most professionally rewarding experience of my life,” he said.

Like Rackspace, Datapipe is a pioneer in managed public cloud services. Founded in 2000, the company is based in Jersey City, New Jersey, with 825 employees and 29 data centers in nine countries.

Both companies have been positioned as leaders in the Gartner Magic Quadrant assessments of providers in the industry, and in industry rankings by Forrester and other leading analyst firms. Both are known for their technical expertise and managed services across multiple clouds, exceptional customer service, profitable growth, and engaged workplace cultures.

Datapipe will bring the kind of new capabilities Rackspace leaders say will enable the company to better serve customers of all kinds, including the government sector – a $190 billion book of business that includes the U.S. departments of defense, energy, and justice, as well as the United Kingdom’s cabinet office, ministry of justice, and department of transport.

That is a client base already established at Datapipe, in addition to large customers such as Johnson & Johnson, McDonald’s, and Rubbermaid.

Datapipe also provides Rackspace with data centers and offices in key markets where Rackspace currently has little or no presence, including the West Coast, as well as overseas in Brazil, China, and Russia.

“Our customers are looking for help as they spread their applications across public and private clouds, managed hosting, and colocation, depending on the blend of performance, agility, control, security, and cost-efficiency they’re looking for,” said Joe Eazor, who was named Rackspace CEO in May.

“With the acquisition of Datapipe, we’re very pleased to expand the multi-cloud managed services we provide our customers, while also opening doors to new opportunities across the globe.”

For Datapipe customers, Rackspace offers experience in Microsoft and VMware private clouds, including new service offerings for Azure Stack and VMware Cloud on Amazon Web Services (AWS). Rackspace also brings to Datapipe a managed Google Cloud Platform and managed services for enterprise applications, including those in the Oracle and SAP ecosystems, and those used in digital marketing and e-commerce.

“We are very proud of the business we have built and the innovations and successful customer outcomes we have been recognized for, and the future of Datapipe will be even brighter in combination with Rackspace,” Datapipe founder and CEO of Robb Allen said in a statement released Monday.

“Customers need guidance using public cloud infrastructure from Alibaba Cloud, Amazon Web Services, Google Cloud Platform, and Microsoft Azure. They need help navigating the use of private clouds, managed hosting and colocation solutions, often in combination, as they move critical applications out of their corporate data centers. The combination of complementary capabilities and resources from both of our companies will create the world’s leading provider of multi-cloud managed services.”

This acquisition comes about three months after Rackspace acquired TriCore Solutions, a purchase that brought Rackspace expertise and support for enterprise applications that companies use to manage core functions such as manufacturing, logistics, procurement, supply chain management, customer service, human resources, and financial operations.

In February, Rackspace cut its total U.S. workforce by 6% – about 200 people from its Windcrest headquarters – in an effort to reduce spending. Jobs were eliminated in parts of the business where the workforce had grown more rapidly than revenue.

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