Rackspace Eliminates 275 Jobs as Part of Effort to Slash OpEx

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Rackspace has eliminated about 275 jobs, or 6 percent of its 4,600 employees in the U.S., the company confirmed to the San Antonio Business Journal, as it reduces operating expenses in a pivot towards high-growth services. Despite this, CEO Taylor Rhodes says that over a period of several years, headcount will be “significantly larger.”

Going private after being acquired by private equity firm Apollo Management in November allows Rackspace to restructure the company for long-term growth in ways that would not be possible under the pressure of what Rhodes called “the 90-day shot clock of the public markets” in a blog post on Tuesday.

Apollo wants Rackspace to reduce its operating expenses by $100 million before the end of April, according to the Business Journal.

SEE ALSO: Rackspace’s New President Talks Customer Obsession, AWS Cloud, and Plans for 2017

The Business Journal also observed social media reports suggesting that Rackspace’s total global workforce of over 6,100 would be reduced by 500.  The company says it is still hiring in departments with high customer demand, however. Rhodes says the annualized run rates of Rackspace Managed Security, its OpenStack and VMware private clouds, and managed services for AWS and Azure all have  growth in the high double digits.

“The U.S. layoffs and proposed international reductions are personally painful, but they are necessary and manageable” writes Rhodes. “We’re confident we can accomplish these reductions without any effect on the expertise and exceptional customer service we provide to our customers. We have targeted these cuts primarily toward our corporate administrative expenses and management layers, while striving to create the least impact to our frontline Fanatical Support and product teams.”

There have been several other announcements of job cuts affecting the hosting industry already this year, including at Endurance International Group brands, and at Dell.

Recently appointed Rackspace president Jeff Cotten discussed the company’s evolution in response to growing market complexity with the WHIR in January.

Rackspace has been busy over the past couple of weeks, naming a new director of managed security for the EMEA region.

A report released this week by Technavio named Rackspace one of the top five suppliers in the global hosting services market, which it expects to grow by over 13 percent annually to over $145 billion in 2020.

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