Rackspace: OpenStack will drive future revenue

Rackspace said in its second-quarter earnings call on Thursday that OpenStack, the open-source platform for creating infrastructure-as-a-service clouds, will become a gateway for the company to sell its services to the enterprise.

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For the second quarter of 2011 Rackspace reported revenues of $247.2m (£151m), up 7.5 percent on the first quarter, and income of $17.6m, up 27 percent on the first quarter.

On an earnings call its chief executive, Lanham Napier, stressed the importance of the OpenStack platform, of which Rackspace is a co-founder, for encouraging companies to create clouds and then sign up for Rackspace cloud services.

Rackspace wants to "help deploy OpenStack deployments for [businesses], do proof of concepts around these deployments and in the process, sell some business today", Napier said on the call. "OpenStack is... opening the door for us to have some really cool conversations with customers and prospects, earn additional business from them today, and I think over time, it will create a whole new revenue stream for us," he added.

OpenStack take-up

OpenStack is an open-source community project to create the code necessary to run cloud storage, servers, networking and computation without having to pay for proprietary software. Rackspace and Nasa launched OpenStack in July 2010, with Nasa contributing code for the compute portion and Rackspace code for the storage part. Since its launch, OpenStack has gained over 90 partners, including HP, Citrix, AMD and Dell.

[OpenStack] is threatening to many of the established client-server companies.

– Lew Moorman, Rackspace

"It's in our interest as a company to have a ubiquitous standard for the cloud," Napier said.

Rackspace hopes that by being one of the prime contributors of OpenStack code, and by migrating its own internal infrastructure to OpenStack by the end of 2011, it will be in a strong position to develop and sell services on top. Rackspace offers OpenStack-specific services through its Cloud Builders business, which was launched in March.

Along with providing business for Rackspace, the company believes OpenStack may displace other companies. "[OpenStack] is threatening to many of the established client-server companies [such as] VMware," Lew Moorman, the company's chief strategy officer, told ZDNet UK on Tuesday.

The third major OpenStack distribution, dubbed Cactus, was released in April. Shortly after, virtualisation specialist Citrix announced Project Olympus, a commercial cloud infrastructure product based on OpenStack code.