Rackspace: The Avis of Cloud Computing?

In 1962, Avis, the second largest car rental company in the United States, adopted a new marketing slogan to compete against market leader Hertz: "We're #2. We try harder!" It was a bold move by new CEO Robert Townsend, and it paid-off. According to the Avis blog, the company had become profitable after thirteen years of losses and by 1966 had grown its market share from 10% to 35%. This marketing campaign has since become the stuff of legends in advertising circles.

Back at Interop/Cloud Connect 2009, I went one evening to dinner with Lew Moorman (@lewmoorman) and John Engates of Rackspace. Naturally, one of the topics that came up was how Rackspace can better compete with market leader Amazon.

Rackspace is in essence the #2 in the cloud computing business (well, at least when it comes to infrastructure-as-a-service). Guy Rosen, who writes the Jack-of-All-Clouds blog, publishes a monthly State of the Cloud blog post in which he tracks the usage of leading cloud providers among the 500,000 leading web sites. It gives a good sense of how these companies are faring.

It's a pretty tight race between Amazon and Rackspace -- with Rackspace having about 87.5% of the number of sites that Amazon does. But back when I met the two Rackspace execs in Las Vegas last year, their cloud business was at an early stage and they had recently made their first acquisitions in the space (Slicehost and JungleDisk). They hadn't even published their open API for what was then called Mosso (later renamed as Rackspace Cloud).

By November 2009 Amazon leaped ahead in Guy's State of the Cloud metrics with 2,249 sites versus Rackspace's 1,665. In other words, Rackspace had only 74% of the number of sites Amazon did.

Maturing the Cloud 

So how did Rackspace close the gap? And why do I think it will continue to do really well?

There are a few reasons. For the most part, the industry is maturing and that it is by no means  a one-company game. So bloggers, analysts and journalists are more frequently mentioning the #2 player in the arena when they want to quickly give an example of a cloud provider.

More importantly, as larger customers are considering moving more (and more important) projects to the cloud, they are conducting serious comparison shopping with less emphasis on "coolness" and ease-of-use and more on reliability.

When they perform this comparison, the SLA comparison table below is what they'll see. This table was prepared by Josh Beil (@joshbeil) and published on Web Host Industry Review. As you can easily see, Rackspace Cloud Servers offers superior uptime guarantees and credits. Josh gives a more detailed analysis for those interested.

	Rackspace – Cloud Servers	Amazon – EC2
Uptime / Availability Guarantee	100%	99.95%
Time span	Current period	“service year” or the preceding 365 days
Time-to-resolution	1 hour	Not specified
Credits	·         5% of the fees for each 30 minutes of network or data center downtime, up to 100% of the fees ·         5% of the fees for each additional hour of downtime past time-to-resolve, up to 100% of the fees	10% of bill per eligible credit period
Notification onus	Customer	Customer
Window	30 days after incident	30 days after incident
	Rackspace – Cloud Files	Amazon – S3
Availability	99.9%	99.9%
Definition	(i) The Rackspace Cloud network is down, or (ii) the Cloud Files service returns a server error response to a valid user request during two or more consecutive 90 second intervals, or (iii) the Content Delivery Network fails to deliver an average download time for a 1-byte reference document of 0.3 seconds or less, as measured by The Rackspace Cloud's third party measuring service.	“Error Rate” means: (i) the total number of internal server errors returned by Amazon S3 as error status “InternalError” or “ServiceUnavailable” divided by (ii) the total number of requests during that five minute period. We will calculate the Error Rate for each Amazon S3 account as a percentage for each five minute period in the monthly billing cycle.
Credits	99.89% - 99.5% 10% 99.49% - 99.0% 25% 98.99% - 98.0% 40% 97.99% - 97.5% 55% 97.49% - 97.0% 70% 96.99% - 96.5% 85% Less than 96.5% 100%	99 % - 99.9% 10% Less than  99% 25%

Add to this the fact that Rackspace has much more robust customer support ("fanatical support" to quote their famous slogan), and a much better sales/legal infrastructure to deal with larger customers, and you cannot avoid the conclusion that they have a great future in store not just for getting a large market share in terms of numbers of customers, but also attracting enterprise customers (i.e., their market share in dollars will be even higher).

Given that Amazon is a consumer company and Rackspace is a B2B company, it's no surprise that they are each taking a different angle and playing on their strength. While Rackspace focuses on SLA and support, Amazon focuses on ease-of-use, low-touch self-service and low prices.

Finally, one more factor will play an important role in the success of each of the cloud providers, and that is the ecosystems that evolves around their products. That means management, automation and monitoring tools (e.g., RightScale, CloudKick, enStratus), Machine Image support (such as the AMIs from Red Hat/Jboss on EC2) and other ancillary products and services that form a "whole product". Amazon has the lead here as of now, but Rackspace seems to be working hard to catch up.

So perhaps, for now, Rackspace can adopt the Avis slogan: We Try Harder.