Pre-Amazon AWS, Rackspace managed hosting was the place for lean startups. Rackspace has some cool customer success stories, including the fact that Rackspace hosted YouTube up until the close of the acquisition by Google. But Rackspace seems to have lost its corporate identity in the past few years, and now it’s attempting to compete directly with other public cloud providers.

Rackspace was an early sponsor and corporate heavy behind OpenStack. Much of its identity over the past few years has been the primary public cloud option for an OpenStack Cloud. Later in the OpenStack marketing campaign, Rackspace preached the virtues of private clouds based on OpenStack; now Rackspace seems to have pivoted to offering what it calls the managed cloud.

Competing with Amazon, Google, and Microsoft

I never thought that Rackspace entering the early adopter cloud services model made much sense. Rackspace has for years promoted its Fanatical Support value-add for hosted services. Rackspace’s traditional business model is to cater to small and mid-sized businesses that need hand-holding running an enterprise data center. Even today, Rackspace is one of the world’s largest providers of hosted VMware vSphere, which I learned during my conversation with Rackspace CTO John Engates. This model doesn’t mesh with that of early adopter cloud providers such as Microsoft, Google, and Amazon, which expect its users to just pull out a credit card and consume services with little support.

When Amazon and Google had price wars for its cloud services, it was reasonable for Rackspace to take a good hard look at where it really adds value vs. its competition. Rackspace simply doesn’t have the organization structure, culture, or scale to compete with early adopter cloud providers.

The managed cloud

Rackspace’s traditional business model allowed customers to pick any hardware from white boxes to high-end OEM servers from providers such as Dell; its new managed cloud solution offers the same variety of options. Engates said Rackspace has big plans around offering a cloud service from multiple vendors. I envision Rackspace allowing its customers to select services such as virtual machines running on AWS to database services running on Azure and help them stitch them all of it together into a hybrid cloud offering.

It starts with VMware

Rackspace has been heavily promoting its hosted VMware service for the past few weeks on Twitter and other online media sources — it’s a back to the roots campaign. Rackspace says it has always been a managed cloud company; the option to have an organization’s vCloud Director managed by Rackspace has always been available. According to Engates, hybrid cloud is just a natural extension of its current VMware offering. Engates said customers not on the cutting edge of cloud need help deploying services on public and hybrid clouds, as well as integrating into their existing data center strategy.

Engates sees a gap for enterprises wanting the benefits of cloud, but lacking the technical skill to execute on a cloud strategy. This sounds similar to the VMware vCloud Air focus of extending the relationship with VMware-centric customers. Rackspace is taking the same approach as VMware by enticing enterprise customers with the promise of a virtual machine-centric view of the data center. Rackspace promises to hide the complexity of providing 99.999% uptime of an enterprises virtual machine infrastructure. The expectation is that this capability and support will be extended to Rackspace’s OpenStack Cloud and eventually to other cloud providers.

The bottom line

Rackspace has fully engaged a business model that I believe it should have promoted heavily over the past couple of years. The value in its service has traditionally been the high touch managed hosting.

It’s worth paying attention to Rackspace’s service offerings after VMworld 2014, as well as the company’s interactions with services provided by Microsoft, Amazon, and Google.