Rackspace CEO: Partners Critical To Fulfill Services Vision

Rackspace bleeds enthusiasm. And nowhere is that more noticeable than in the person of Rackspace's energetic CEO, Lanham Napier.

At the San Antonio-based hosting-turned-cloud-computing company's Partner Leadership Summit, Napier outlined how Rackspace and its "rackers" -- a term of affection for its employees -- will use its razor sharp focus on service to win in the market and in the channel and how through its "fanatical support" it will beat all comers. Rackspace may not be able to out-geek Amazon, Napier said, but Rackspace "will out-serve Amazon Web Services."

That attitude has helped push Rackspace to more than 100,000 customers in 120 countries, more than 2 million enterprise-class e-mail boxes and more than 62,000 servers. And the channel is key to Rackspace's growth plan. The company said its long-term goal is to have 70 percent of its business come through its channel, which is currently just shy of 4,500 partners strong.

"When we think about our partner program, we want to hold you to the same standard we hold our customers," Napier told a room full of Rackspace partners. And to prove he meant it, he offered up his cell phone number to the crowd with the open invitation to call him any time. "Let's go serve our customers really well together," he told them.

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CRN sat down with Napier to talk about how Rackspace is helping its young channel -- which just formed in earnest last September -- attack the explosive cloud and hosting markets and where the biggest opportunities lie for its partners as Rackspace drives to fulfill its goal of becoming one of the world's best services companies. Here are highlights from that conversation.

Next: Driving Partner Revenue

Rackspace has been very vocal about wanting to be the No. 1 company when it comes to service. How can partners take that service model and use it to make money?

What our company can provide is a broad, capable service-oriented platform. We can move up the stack and create service offerings around that that are really compelling. Then, channel partners can take that broad platform and monetize all sorts of mixes, whether it is desktop virtualization or a specific app for a vertical industry. It’s the notion of: How do we help our partners take our basic service set, apply their capabilities on top of it and tailor that to a lucrative niche? That's what they need to figure out how to do and that's what we need to help them do.

And how do partners make money doing that?

The first thing is from a cost point of view, with our platform and service levels, that ought to be really competitive. So the input side of the equation ought to be pretty darn good and the output side, this is where they've got to figure out in their core business, what the bright spot is and what lucrative niche they should pursue. When you go through the roster we would have SaaS companies that may do billing for doctors' offices or they may manage inventory for car dealerships or they may manage logistics for shipping companies.

To me the last mile is where the partner creates their niche and monetizes it. Our service set is really a general purpose service set. How do you take that general purpose service set, which is 80 percent the same across all of those verticals? And then what the partner does for that final 20 percent is tailor it to what they're best in the world at for that customer group. And the way they make money is the inputs going in ought to be very competitive from a cost point of view, from a value point of view. I want to think that because we're cost competitive but deliver an incredible service outcome the value is really there, so that when they figure out the lucrative niche and vertical for a partner's end customer they know that behind them is fanatical support, which is going to make them look good.

Next: Adapting To The Cloud

How are you helping partners make the transition and getting partners up to speed with altering their business to accommodate the shift in IT introduced by cloud computing?

The first thing is to educate and invest in the education so they understand what's going on with the shift. From our perspective, cloud is really a different form-factor. If you look at our business, it has two layers: A technology layer and a service layer. The technology layer used to be dedicated infrastructure. Now it's pooled infrastructure in a cloud. The service layer is where the customer feels it at the end. That's where we differentiate. The notion of helping our partners understand the capabilities there are absolutely some things around scaling, cost per compute, and architecture issues around that cloud that we need to help partners get up to speed on. It's new territory to some degree, but it has, in terms of service level outcomes, that's where as a company we can really help our partners. Once we get the technology layer easily used by partners and understood so they can tap into it, we get the service layer to where they can expect the same type of customer experience and outcome as if they're running on dedicated infrastructure, then it's about helping our partners take that to their customers to create great outcomes.

How is the unifying of the four siloed partner programs going to help partners going forward?

It gives more power. What happened in our company was as we grew quickly we created some silos. That happens. We're human beings. We're not perfect. As these silos developed, we were met with right hand not talking to left hand kind of stuff. By combining and pulling things together we are able to offer a much more robust experience for partners. It's about getting the right information into the right person's hands at the right time. It's understanding that Rackspace may have an end customer that needs a partner's services, but if that partner's hanging out in a different partner program they may not know about it. By centralizing it that's what we ought to be able to fix.

Next: 'If It Works, Do It More'

What are your expectations going forward for partners and partner programs?

Here's our philosophical approach: When stuff's working, do more of it. We're not trying to reinvent the wheel around here. We have bright spots in our company and bright spots in our relationships, we want to do more of that. What we've discovered with the partner program is that as the home of fanatical support, we can be a good partner for people. We want to become an even better one. When we survey our partners and say 'How likely are you to recommend Rackspace as a partner? Zero to 10?' We better be nines and tens. If not, we're not shooting high enough and we're not serving them well enough. For us, a partner program is a force multiplier. Collectively, we can do more together than individually. That's what the partner program does for us. It allows our company, as a general purpose service provider, we are so much more relevant and capable when a partner finishes that last 20 percent. That generates a perfect fit. And that's what we're after. We can get them 80 percent of the way there, but that last 20 percent, that's the genius that they bring to it.

What about the competition? Amazon Web Services, Google, AT&T, Verizon and others? How do you keep your partners locked in with the growing competitive landscape?

The big point of difference between us and an Amazon or AT&T is that we are specialists at this. We are purpose built to serve. Those other companies, I do not think they have the same orientation around partnership and service. What our partner program and channel will reflect is that orientation so that businesses out there that differentiate on service and the expertise they bring to their customer are a natural fit for us. If people want the absolute, rock-bottom commodity experience they're not a natural fit for our channel. The best partner relationships that I have been involved in personally is when I feel a real kinship around that value set and how it feels like I'm talking to myself when I'm talking to these partners. They're just like our company. They want to serve our customers well. They have a great spirit. They're doing cool things with technology. They're the scrappers. They're the entrepreneurial folks. I think that's where we have a great residence. If we're trying to compete on the last bottom-dollar price and people don't value the help or the experience, we're just not a fit and it will be the same way for our channel partners.

Next: Looking Ahead

What else can partners expect to see going forward with Rackspace?

We've discovered something that works and it works for the partner and for Rackspace. We're going to increase our investment in this going forward. We're a relationship company. This creates lots of relationships. And we're trying to be one of the world's best services companies and these are great folks to serve, so it all works.

You take services very close to heart. On the Rackspace Website you can't escape the 'fanatical support' and pop-ups offering a chat with a representative. Where does that come from?

It's been a process of discovery. It was, from a company point of view, self-discovery. We were always that, but we didn't quite know it. For whatever reason, 10 to 11 years ago, we decided to try to build one of the world's greatest services companies and we wanted to do it in tech. We wanted to have really cool tech and a really cool outcome for customers. So we decided we're going to differentiate on service. At the time, it was one part being pragmatic that we lost the fundraising Olympics during the dot-com days, so we really needed to differentiate our service and we weren't going to differentiate on number of facilities or network or anything like that. At the time, the industry's conventional thinking was a denial of service model: Don't talk to the customer, Create technology to where you never have a customer interaction and you'll make more money. We just fundamentally don't see it that way. If they're the yin, we're the yang. We just see it fundamentally different. This has been a consistent drum-beat in our company for a decade and I don't think it will ever change. It's not going to change while I'm there. It's what we're about. It's our value set. We find it inspirational. It gets me out of bed and I want to speed to work. I want to do something cool for a racker, a partner or a customer. It's a blessing for me to get to work with these folks.

What's your turnover rate?

It's very low. It's as low as anyone in the industry, probably lower. If you look at our publicly available data I think last quarter it was 0.9 percent... What we strive to do at Rackspace is if customers aren't happy, we'll help them leave. The last thing I want to do is hold people hostage.