Rackspace Eyes Big Sales Growth With New Born-In-Cloud Partners

Cloud service provider Rackspace is aggressively expanding into the born-in-the-cloud partner market with new partnerships aimed at driving at least 50 percent of its sales growth over the next year.

Rackspace expects to add this year five to seven master agents focused on cloud and as many as 700 to 800 agents that are driving cloud computing recurring revenue sales, according to Vice President of Channel Partner Sales Will Knight. He is expected to detail the new born-in-the-cloud channel sales strategy in a blog post next week.

In the blog post, Knight said Rackspace is expanding its Rackspace Partner Network to include a new Master Agent/Agent program. ’Partners that join the Master Agent/Agent Program will have the opportunity to leverage a number of incentives, including market competitive compensation, pre- and post-sale resources, training and sales enablement and more,’ Knight said in a preview of the blog post obtained by CRN. ’We’re here to help you bring your clients into the Managed Cloud era and offer them the high-touch support they crave.’

[Related: New Cloud Tiers Position Rackspace For More Managed Services Offerings ]

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Among the other non-traditional channel bets being made by Rackspace are a significant investment in private equity and venture companies looking to increase the value of their cloud portfolio by teaming with Rackspace and digital agencies that are developing brand and marketing strategies for companies.

The sharp focus on the non-traditional channel has already doubled the percentage of the company’s sales moving through the channel from the low teens in the beginning of the year to 25 percent of total sales, Knight said. Now, the company, which has been the subject of merger-and-acquisition speculation and has hired Morgan Stanley to look at a potential strategic partnership, is moving even faster to grow that born-in-the-cloud business.

’This is a really big bet we are making,’ Knight said in an interview with CRN during which he discussed the stepped-up, non-traditional channel offensive. ’We are dependent upon our partners to be successful. Our partners have to grow and have to grow profitably with us.’

Rackspace is driving 10 to 20 percent recurring revenue margins for born in the cloud partners, Knight said.

’We have designed a program that is very aggressive but in a way that still allows us to make money and deliver the fanatical support that we are well known for,’ he said. ’Fanatical support costs us money. It is not free. We think we have struck a good balance between partner margins and our margins.’

New born-in-the-cloud partners that teamed up with Rackspace said they see the opportunity to drive dramatic sales growth.

Dan Marsh, managing partner for Avail Partners, a Seattle, Wash. cloud services consulting company, sees a ’massive’ opportunity to grow sales with Rackspace because of the cloud service provider’s strength in meeting the needs of demanding mid-market customers. That’s a market that larger cloud service providers have a tougher time serving and it’s a market that is growing fast, said Marsh.

NEXT: Partners Say Rackspace Shines With Demanding Mid-market Customers

’Rackspace really shines in the mid-market space,’ Marsh said. ’That pie is growing really, really fast and Rackspace is well positioned there because of its fanatical customer support. You hear about their fanatical customer support, but we are evaluating it every single day and they do extremely well in dealing with support issues with the resources they bring to bear on it.’

Unlike some of the behemoth cloud service providers where getting support is an issue, Rackspace has an ’army of experts that are very willing to work directly with customers and actually come to your office,’ Marsh said.

Rackspace, in fact, has applied that same hands-on approach to the Avail partnership, Marsh said.

’They come to our office and call on us with insights on how to make my business better,’ he said. ’It isn’t just throwing a lead over the fence. It is coming to us with ideas on how we can grow our business because they know that will help them grow their business. They have really looked at areas that we can get great at by working together.’

Jo Peterson, vice president of converged cloud and data services for Clarify360, part of Teleproviders, said she is also seeing strong traction with Rackspace in the complex mid-market customer engagements. Clarify360 provides cloud and data center consulting services.

Peterson, for example, pointed to a large gaming company that was able to deploy a complex cloud environment with Rackspace that included EMC storage, F5 networking gear, CA monitoring software and Magento ecommerce software.

’The complexity of the deals that Rackspace is able to handle is really exciting to us,’ she said. ’That’s a differentiator in the market. The market trend is that deals that are getting done are where the customer is provided a complete solution. Rackspace is positioned to win those deals because they have done the pre-work and the heavy lifting. They come to the market with everything you need to provide a good solid solution.’

Peterson said the expanded Rackspace partnership is a ’big strategic opportunity’ for Clarify360.

’Every traditional telecom agent owes it to themselves to evaluate their revenue sources today as they look out over the next five years,’ she said. ’There is a shift toward consumption of cloud services by end users. If you are not selling your customers cloud services someone else will.’