Microsoft gathers ammo for cloud war with Amazon

Rackspace

Amazon.com's cloud business is wildly popular with the techy do-it-yourselfers, but less so for companies that need help managing their data centers.

Microsoft, after spending years playing catch-up to Amazon Web Services, is now catering to the type of client that likes to ask for assistance. On Monday, the software giant said that it's partnering with Rackspace Hosting, which will provide its trademark "fanatical support" for Microsoft's Azure cloud service.

"The next wave of cloud adoption is going to come from more traditional enterprise customers who value support and expertise from a company like Rackspace," said John Engates chief technology officer of San Antonio, Texas-based Rackspace.

Microsoft's cloud grows but dwarfed by old stuff

Microsoft, under CEO Satya Nadella, is juicing up its Web-based offerings as customers dump their own data center equipment in favor of the more powerful, cost-efficient and data-heavy attributes that come with the cloud.

In the fiscal third quarter, Microsoft's commercial cloud revenue more than doubled and the business is on pace to generate $6 billion annually.

By joining forces with Rackspace, Microsoft salespeople can provide greater comfort to customers who have expressed concerns about offloading their most critical infrastructure.

This offering is clearly targeted at big businesses, with Rackspace's support pricing for Azure starting at $1,500 a month and going up from there.

"Our mutual customers will have even more options for migrating their diverse IT workloads to the cloud," Scott Guthrie, executive vice president of Microsoft's cloud and enterprise group, said in Monday's announcement.

Despite its rapid growth, Microsoft is still way behind Amazon. According to Synergy Research Group, AWS controls 28 percent of the cloud infrastructure market, topping Microsoft's 10 percent share. IBM is third with 7 percent, followed by Google at 5 percent.

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For Rackspace, promoting and selling service for other clouds is a return to its roots after some rough years competing head-on with AWS.

While the company, with a roster of 300,000 clients, was built on managing outsourced data centers and offering exuberant customer service, Rackspace jumped deep into the cloud servers and storage market last decade. That included building its own infrastructure.

As Microsoft and Google joined the game, a pricing war ensued, leaving Rackspace in an unwinnable battle with the biggest tech companies in the world.

Rackspace's share of the cloud infrastructure market now sits at 3 percent, according to Synergy, and the stock has dropped by more than half since early 2013.

Working with Microsoft is nothing new for Rackspace. They've had a partnership for 13 years, with Rackspace providing support to key products like Windows Server and Exchange.

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This is its first foray into supporting Microsoft's cloud, and it does raise the question: Could Rackspace strike similar agreements with AWS and Google?

"We've been asked before about support for other platforms," said Engates. All he would say as far as potential deals is, "this is the one we're ready to announce now."