Take a look at the latest earnings report by the cloud hosting giant Rackspace. Rackspace added just under 10,000 new customers in the fourth quarter, almost all of which were for its cloud computing services. What does this mean for companies out there that are thinking of moving to the cloud? I think it means that Rackspace is still making money. Which possibly means that cloud hosting is still very profitable. It does however help companies out and help them to save money. Cloud hosting cost savings is huge when you look at the amount of money that a company can save when they have no one on their site.
Cloud computing services account for around 10% of Rackspace’s total revenue as of Q4 of 2009. The other 90% comes from managed hosting where customers rent and control specified servers within the company’s network of more than 50,000. The benifits to the cloud would be the cost savings. But the drawbacks to cloud hosting would be you can’t see or touch any of the infrastructure your software touches when using cloud computing services. The “cloud” of storage and processing is all up to Rackspace to know what’s going on. Although there are many people out there that hate that they don’t know what’s going on, cloud computing revenue with Rackspace rose 11.7% sequentially in Q4 and 93.2% over last year. See the cloud hosting earnings report below.
| Metric | Q4 2009 | Q3 2009 | Q2 2009 | Q1 2009 |
|---|---|---|---|---|
| New revenue | $7,117,000 | $10,404,000 | $6,918,000 | $1,940,000 |
| Additional servers | 2,016 | 2,386 | 2,231 | 2,520 |
| New revenue per server | $3,530.26 | $4,360.44 | $3,100.85 | $769.84 |
| Cloud computing as a % of revenue | 10.1% | 9.4% | 8.6% | 7.5% |
Data current as of Feb. 17.
Notice the pattern? Rackspace, which in October of 2008 acquired JungleDisk (cloud hosting giant) and Slicehost (vps/future cloud hosting) has been positioning itself in the cloud hosting business. It appears to be successfully navigating the cloud hosting of a transition. High returns per server are once again the norm:
| Metric | Q4 2008 | Q3 2008 | Q2 2008 | Q1 2008 |
|---|---|---|---|---|
| New revenue |
$4,783,000 | $7,525,000 | $11,216,000 | $12,930,000 |
| Additional servers | 2,287 | 2,807 | 2,669 | 3,063 |
| New revenue per server | $2,091.39 | $2,680.79 | $4,202.32 | $4,221.35 |
Data current as of Feb. 17.
At the same time, the inherent efficiency of its cloud hosting business has allowed the company to earn higher returns on capital. ROC soared from 8.6% in Q3 to 10% in Q4, Rackspace said in its earnings release. Not bad for a company stuck in a bare-knuckles fight with tough competitors such as Amazon.com‘s EC2.
Although we all fuss about cloud servers and how they will save us money and save our planet. There are still people that are making money from hosting cloud hosting. Rackspace, my hand goes out to you for making this possible!
