Rackspace Hires Public Cloud President, Confirming More Intense Focus

Rackspace Technology on Thursday indirectly confirmed its latest reorganization plans with the hiring of Dharmendra Sinha to lead its public cloud unit.

Rackspace’s Dharmendra Sinha

In May, the managed cloud service provider put itself up for sale — again. Rackspace has boomeranged in recent years between Wall Street and private ownership. It last went public in 2020 after emerging from private ownership in 2016. Before that, the company traded publicly.

As part of its most recent intended reorganization, Rackspace on May 10 said that selling some parts of the organization might make more sense than offloading the whole company.

“This is in part driven by the attractive growth profile of public cloud,” CEO Kevin Jones said.

Indeed, Rackspace appears to be banking largely on public cloud. Sinha’s hiring reflects that. (Rackspace still has not divulged what it might do with its private cloud operations. It has not made any filings with the Securities and Exchange Commission since June 10.)

To that end, Jones on Thursday said Sinha will “accelerate our public cloud strategy.”

“With his proven track record and vast industry expertise, he is the perfect leader to help us capitalize on this amazing market opportunity,” Jones said. “He will immediately make an impact on the business and our growth strategy.”

Sinha comes to Rackspace from IT outsourcing firm Cognizant Technology. He worked at the $47 billion firm for 24 years. Sinha was part of the leadership team that helped Cognizant increase its annual revenue from $25 million to $16 billion, Rackspace said. In his most recent role, he served as North America president for Cognizant. That market represents about 75% of the company’s overall revenue.

Now, at Rackspace, Sinha will home in on public cloud growth.

“Rackspace Technology is in a unique position to be the leading, pure-play multicloud cloud solutions company,” Sinha said. “With this two-business unit structure across public and private cloud, as well as added focus around apps, data and security, we intend to become the premier strategic partner for our customers and partners across all market segments. I am also excited about further strengthening the company’s cloud solution ecosystem.”

Sinha Faces Some Challenges

Sinha has his work cut out for him. That’s because, while Rackspace operates in a hot market and delivers vital services, it is struggling. In spite of its first-quarter growth, Rackspace does not seem to be performing up to Wall Street’s expectations. Case in point: Analysts were forecasting the company’s earnings at 23 cents per share for the second quarter. Rackspace in May provided guidance of 15-17 cents per share.

Constellation Research’s Holger Mueller

“They are stuck between on-premises and cloud support and can’t move customers,” Holger Mueller, principal analyst and vice president at Constellation Research, told Channel Futures in May.

That was slowing Rackspace’s growth too much, he added. Rackspace’s solution looks to be to “try to pretty the firm up,” Mueller said. “The separate businesses are more valuable than the combo.”

In spite of a pending reorganization, however, Rackspace’s channel head told Channel Futures in May that partners would only experience “business as usual.” And, given that Rackspace is training its efforts on public cloud, a booming market, it seems reasonable for Rackspace partners to expect little change.

Public Cloud Could Well Be Rackspace’s Savior

To be sure, research firms worldwide predict jaw-dropping spending on public cloud over the coming years. For example, Gartner says the dollar figure will hit about $500 billion just this year. Rackspace, with a more trained focus on public cloud, can benefit because of its managed services business model.

Finally, Rackspace’s recent announcement around a reorganization is certainly not its first. Recall, Rackspace started as a hosting company (hence “rack space”). Then, as cloud computing started to dominate, Rackspace tried going up against the hyperscalers. That didn’t work. So, executives shifted instead to teaming up with Amazon Web Services, Microsoft Azure and Google Cloud Platform, and acting as a multicloud managed service provider.

So far, that model has worked, though the question remains — what will Rackspace do with its private cloud division? In May, the company said it will share more details during its analyst day in September. It’s possible information could arrive earlier, though. Rackspace is set to report its second-quarter earnings on Aug. 9.