Hyperconverged infrastructure (HCI) has grown into a legitimate infrastructure architecture over the last few years. However, at this point it is still a relatively small part of IT infrastructure spending for enterprises. HCI – clusters of virtualized standard x86 servers running storage management software to create a single virtual appliance combining compute and storage – is expected to see major growth. According to 451 Research's Voice of the Enterprise: Servers and Converged Infrastructure, Budgets and Outlook 2016 report, only 21% of enterprises currently have HCI in use, but an additional 36% have plans to implement HCI over the next 24 months. The main vendors hawking HCI are Dell/EMC, Cisco, Hewlett Packard Enterprise, Nutanix, Simplivity (acquired by HPE) and VMware. However, sophisticated cloud service providers have realized that building their own integrated compute and storage solutions better meets operational requirements. One such operator is Rackspace. It recognized the benefits of integrated stacks during the early days of blade servers, and it now runs a sophisticated software and hardware stack for its public and private clouds.

The 451 Take

From a commercial adoption perspective, HCI is still relatively small compared with traditional IT infrastructure, although its growth and market presence are already affecting infrastructure decisions. It is disrupting the storage landscape by providing a simplified means for delivering compute and storage resources to customers and service providers without requiring deep storage administrator expertise. The vendors that embrace cloud and businesses that find ways to integrate HCI into their infrastructures are realizing operational efficiencies. At Rackspace, growth has been slowing, and it is looking to hybrid cloud, hosted private cloud and managed services as a cure. At the scale it operates, off-the-shelf HCI packages did not meet its technical and economic requirements. Over the years, it has refined its own homegrown virtual appliance of compute and storage, using OpenStack as the management software layer, and collaborated with Google on Open Compute Project server designs specifically for hyperscale environments.

Context

Newly privately held Rackspace has had an on-and-off relationship with HCI for a while, and the advancements in shared networking and the lower cost of feature-rich silicon chips have helped. However, Rackspace is not partnering with any one vendor to deliver integrated compute and storage, and says it migrated from HPE, Dell and Lenovo integrated products to its own proprietary solution. While it acknowledges the simplicity of these vendors' HCI offerings, Rackspace did not want to be bound to a vendor's server management and provisioning experience – it wanted a 'Rackspace experience' – but feels these vendors' offers are well suited for small-scale service providers.

There are multiple reasons Rackspace decided to roll its own HCI. First, it feels the control plane ASICs from the integrated HCI offers did not offer enough scale or have enough bandwidth for low enough cost. It also found the related storage costs to be too high, and required server provisioning to flow through the vendor's management software. Thus, any changes to that software could affect development efforts and require maintenance of multiple software versions.

By way of comparison, Linux is not nearly as turnkey as options from software shops like Microsoft and Oracle, but users are drawn to this open source software, and will take less polish for the control and flexibility Linux offers. In a similar way, HPE and Dell/EMC are the polished HCI products to an Open Compute or OpenStack alternative. Rackspace claims its homegrown offering has more flexibility to offer a 'Rackspace experience.' It uses OpenStack for orchestration and management, and has architected in such a way as to accommodate variable hardware from HPE, Dell or Open Compute that meets driver, density, power and supply chain requirements over time.

Opex

Like any service provider operating at scale, Rackspace wants to keep opex low enough that it does not impact the customer experience. To measure success within its support team, Rackspace measures customer score, revenue per employee and tickets processed. Rackspace says that, based on its current scale, the packaged HCI products are not economically viable to move the needle on opex. While the deployment of HCI can lead directly to headcount reductions, it empowers IT generalists and reduces the need for specialized administrators to handle daily management, provisioning and troubleshooting tasks.

The managed service provider, however, does admit that HCI would make more sense for tier two providers operating on a smaller scale with fewer technical resources because HCI offers less complexity. Some packaged HCI offerings make storage capabilities (like snapshots and replication) available to virtualization administrators through their native management tools, minimizing the need for storage administrators. API-based provisioning and storage quality of service will be key features, enabling customers to automate provisioning and optimize resource utilization. This provisioning and optimization will be invaluable in shared environments such as private and hybrid clouds, where workloads often fight for resources. As more VMs and containers are loaded onto clusters, automation will become more important for quickly eliminating resource contention and spotting potential trouble points before a problem arises.

Competition

Rackspace is a successful dedicated-system hosting supplier (and continues as such in what is a declining-growth business), and a supplier of multi-tenant and private cloud services – businesses that are being outperformed by hyperscale providers. It is also a differentiated provider – with outcome-focused support and management services on its own platforms, Google, AWS and Azure – and is a relative upstart in a crowded, mature field of IT service providers.

Rackspace competes with managed infrastructure service providers, which include the largest telecommunications companies, such as AT&T, CenturyLink and Verizon, as well as MTDC and infrastructure providers like TierPoint, QTS, ViaWest, NaviSite and many others. The company also competes with Google Cloud Platform, AWS and Azure partners that are among the largest service providers in the world, including systems integrators and outsourcers such as Capgemini, Wipro, CSC, Accenture and Deloitte, as well as smaller firms in that tier, such as Datapipe and 2nd Watch.

SWOT Analysis

Strengths

Rackspace has a long history of providing outcome-focused cloud and customer services, which will be valuable and applicable as enterprise IT evolves to the cloud.

Weaknesses

The cloud markets are large and growing rapidly, but they are dominated by a few very large market leaders. Rackspace is strong among the also-ran cloud competitors, but is much smaller and growing less rapidly than the market leaders in its new businesses.

Opportunities

IT is transforming more rapidly and more profoundly than ever, creating a wealth of opportunities to develop and grow new businesses.

Threats

Like all legacy IT suppliers, Rackspace is threatened by the rapid growth and market consolidation of a very small number of hyperscale service providers and the dominance of SaaS.
Al Sadowski
Research Vice President, Infrastructure

As Research Vice President, Al is responsible for setting the research agenda for the Infrastructure practices, spanning servers, storage, networking and software-defined infrastructure. He regularly advises the vendor and service provider C-suite, investment bankers and enterprise CIOs on the business problems technology attempts to solve and the companies that build, use and invest in these technologies. Al also contemplates the evolving business models leveraging OpenStack.

John Abbott
Co-founder & Research Vice President

John Abbott covers systems, storage and software infrastructure topics for 451 Research, and over a career that spans more than 25 years has pioneered specialist technology coverage in such areas as Unix, supercomputing, system architecture, software development and storage.

Keith Dawson
Principal Analyst

Keith Dawson is a principal analyst in 451 Research's Customer Experience & Commerce practice, primarily covering marketing technology. Keith has been covering the intersection of communications and enterprise software for 25 years, mainly looking at how to influence and optimize the customer experience.

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