Rackspace just went private in a pivot highlighting to everyone how difficult it is to compete with the likes of AWS and Azure. The interesting question is why couldn’t they compete? Most analysts would argue that Rackspace just didn’t have enough scale. I believe the primary reason is that they lacked the technology to compete.

Rackspace built their business model around leveraging open source, specifically OpenStack and related components, and attempted to deliver an experience similar to that of the public cloud giants like AWS. I believe they felt that if they could get the “community” to develop their product, they could leverage essentially free technology and compete more effectively. Unfortunately, the old adage “you get what you pay for” applies here, as OpenStack has yet to live up to the marketing hype around it. 

Meanwhile AWS keeps marching forward offering what are essentially proprietary solutions that are more cost effective, and easy to use. 

The lesson here is that, while open source software can serve as technology “bricks,” companies need to be prepared to add the “mortar” with differentiated technology or use vendors delivering differentiated solutions.

Scale is a factor, but you cannot compete with players like Amazon and Microsoft without investing in technology.

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