Rackspace to Expand SaaS Capabilities with Acquisition of RelationEdge

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Just one of the many sections of desks at Rackspace. Photo by Scott Ball.

Scott Ball / Rivard Report

The Rackspace headquarters, also known as 'The Castle,' is located in Windcrest.

Managed cloud company Rackspace announced Thursday its third major acquisition in a year, one that allows the company to add implementation and managed services for software-as-a-service (SaaS) applications to its growing IT-as-a-service portfolio.

The purchase of RelationEdge, a 5-year-old company based in San Diego that helps businesses implement customer-relationship platform Salesforce and engage with their customers, is said to be a strategic move that allows Rackspace to expand into a growing field.

A component of many companies’ digital transformation processes, SaaS applications such as Salesforce are expected to drive $73 billion in spending by 2020. The slice of that spending that RelationEdge can address is growing 30 percent a year, and will be worth about $49 billion by 2020, according to IDC industry analysts cited in the Rackspace statement.

Rackspace plans to operate the business in its current locations, under its present leadership and the RelationEdge brand.

Courtesy / Rackspace

Gerard Brossard

“We have acquired RelationEdge in response to the growing demand we’re hearing from customers,” stated Gerard Brossard, executive vice president and general manager of Rackspace Application Services.

“Enterprise and mid-market companies are increasingly deploying SaaS applications to enhance business processes across many departments, from sales and marketing to customer service, operations, HR, and finance.”

This will be the third-largest acquisition in Rackspace history, after Datapipe, announced last fall, and Massachusetts-based TriCore Solutions, which was announced in May 2017. No financial details were disclosed, but a Rackspace executive told the Rivard Report that this most recent buy did not require the company to take on any additional debt.

Founded in San Antonio in 1998, Rackspace was acquired in 2016 by New York-based private-equity firm Apollo Global Management. As a leading provider of IT as a service in the managed-cloud space, Rackspace currently serves more than 140,000 business customers – including most of the Fortune 100 – from its data centers located on five continents.

In February, Rackspace laid off nearly 100 employees, mostly in San Antonio to “meet shifting business needs.” Those layoffs occurred only about a year after the company cut its total U.S. workforce by 6 percent, eliminating the jobs of about 200 people at its Windcrest headquarters.

Though the RelationEdge acquisition will increase “head count” growth over time, the Rackspace executive said it won’t be immediate and most, but not all, of the growth will occur in offices outside of San Antonio.

“It will be important to San Antonio because this is another major step in our building out that end-to-end experience of our business,” the Rackspace executive told the Rivard Report. “When we bought TriCore, based in the Boston area, we also got some of those people here, and they were managed here, and we’re adding resources to help them here. We built organically, internally, e-commerce and digital marketing business right here in San Antonio that supports the people who use [those] platforms. So that will grow here in San Antonio.”

Brossard said the company will definitely leverage Rackspace’s scale to invest in the business across the U.S.

“I started in January, and one of the first things I looked at was identifying application services strategy for Rackspace in the broader strategy,” he said. “…We want to be able to provide our customers end-to-end capabilities in helping them transform no matter where they are in their journey.”

RelationEdge, founded in 2013, has 125 employees working from offices in a dozen cities across the U.S., including Dallas. Like Rackspace, the company is privately held.

“We are very proud of what we’ve built,” stated Matt Stoyka, RelationEdge founder and CEO. “We’re also excited about what we still can achieve in this fast-growing market by joining forces with Rackspace. The two companies are a great fit culturally as both differentiate themselves through exceptional customer service.”

Stoyka described Texas as a growth market for Salesforce and thus RelationEdge. “So as we expand our presence and to be local in the community, obviously San Antonio would make a tremendous amount of sense for us,” he said. “There’s a huge resource pool there for us as well.”

Also this week, Rackspace announced the new offering of Rackspace Kubernetes-as-a-Service, a managed service that transforms the way enterprises utilize new container technologies, accelerating their digital transformation.

 

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