As Amazon Web Services market share grows, Rackspace is making sure it gets a piece of the pie.

Kelly Teal, Contributing Editor

November 6, 2019

4 Min Read
Acquisition
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Amazon Web Services now claims 40% of the worldwide public cloud market, according to new data from Synergy Research Group, and Rackspace has ponied up to get its share of the pie.

This week, the managed cloud computing provider said it will purchase Onica, an AWS premier consulting partner and managed service provider. The move bodes well not just for Rackspace but also its channel partners.

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Rackspace’s Lisa McLin

“Partners benefit in every way, with a new expanded portfolio to sell, ability to work with one partner to help their customers innovate, increased technical expertise to tap into and a global presence,” Lisa McLin, Rackspace’s channel chief, told Channel Futures.

Specifically, partners will gain scale through Onica’s professional services, which include

strategic advisory, architecture, and engineering and application development. Competencies cover data and analytics, DevOps, education, health care, industrial software, IoT, Microsoft workloads, and migration and storage, thanks to Onica’s AWS certifications in those areas.

Rackspace did not disclose terms of the deal.

Onica was founded in 2014 as a cloud-native services company. This, the MSP says, enables it to help customers build new revenue streams, increase efficiency and bring cloud innovation to complex technology projects. Kevin Jones, CEO of Rackspace, said in a prepared statement that was a key reason why his company wanted to buy Onica.

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Rackspace’s Kevin Jones

“As a cloud pioneer, Onica has established itself as one of the largest pure-play AWS consultancies, with an unmatched reputation for true capability leadership with AWS and customers,” Jones said. “This acquisition will strengthen our ability to meet all of our customer needs on AWS, and together, we will have the most complete set of professional services and managed service capabilities in the industry.”

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SCTG’s Brendan Caulfield

Brendan Caulfield, co-founder at cloud consultancy ServerCentral Turing Group (SCTG), an AWS MSP partner, expressed some skepticism.

“I am not sure that the Rackspace-Onica deal by itself will have a major impact on the overall cloud services market or ecosystem,” he told Channel Futures. “In fact, I believe this ecosystem is dominated by much smaller firms who are servicing the small- to mid-market customers that may not be of interest to the large technology firms like Rackspace or Accenture due to scale.”

However, Caulfield said, the Rackspace-Onica union “does make things more interesting in the enterprise space because Rackspace just added enough talent and scale to start competing for some of the largest deals in the market (i.e. JEDI).” (JEDI, of course, already has been awarded to Microsoft Azure but similar projects abound and will continue to arise over the coming years.)

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Onica’s Stephen Garden

Rackspace contends that demand for public cloud professional services is growing and that Onica will bring that expertise to enterprises using AWS. Onica agrees.

“By combining our capabilities with Rackspace’s global presence, resources and scale, we will be better positioned to achieve our mission of helping customers innovate using AWS,” Stephen Garden, CEO of Onica, said in a press release. “We pride ourselves on delivering results for customers, and in Rackspace we have found a partner that shares our…

… passion for providing a customer-obsessed experience.”

Rackspace and Onica expect the transaction to close later this quarter of 2019. Garden and Tolga Tarhan, Onica’s chief technology officer, will continue to lead the Onica team, reporting to Sid Nair, general manager of Americas at Rackspace.

Caulfield predicts Rackspace and Onica, whom he calls “both very good companies,” will ensure that the acquisition and subsequent operations integration all go smoothly.

“Obviously, each of their respective customers will need to be diligent in making sure none of the pending changes impact their ongoing agreements or operations but, again, I don’t believe this will be an issue for either of these providers,” he said.

Rackspace and Onica each are privately held, although rumor has it Rackspace soon will pursue an IPO. For now, Rackspace is owned by affiliates of certain funds of Apollo Global Management LLC and unnamed co-investors. Onica is a portfolio company of Sunstone Partners. According to Fortune magazine, Onica had raised approximately $20 million from investors including Sunstone Partners. Since 2017, when Sunstone first invested, Onica grew from 50 employees to more than 350, Sunstone said in a press release announcing the Rackspace deal.

Evercore acted as sole financial advisor to Rackspace on the transaction. Barclays acted as sole financial advisor to Onica.

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About the Author(s)

Kelly Teal

Contributing Editor, Channel Futures

Kelly Teal has more than 20 years’ experience as a journalist, editor and analyst, with longtime expertise in the indirect channel. She worked on the Channel Partners magazine staff for 11 years. Kelly now is principal of Kreativ Energy LLC.

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