Rackspace To Acquire Datapipe In A Blockbuster Deal For Global Cloud Services

Rackspace Hosting said Monday it would buy Datapipe, uniting two of the world's largest managed services providers into a global powerhouse with extensive multi-cloud capabilities.

This acquisition, the largest in San Antonio, Texas-based Rackspace's history, looks to create a managed services juggernaut with a global data center footprint, a broad customer base and deep alliances spanning all of the major cloud operators.

"We want to be the leader in multi-cloud management. We're going for it," Matt Bradley, chief strategy officer at Rackspace, told CRN. "We see the market as being huge. It will make us the largest player in managed public cloud, largest player in private clouds, continued largest player in managed hosting."

[Related: Rackspace Launches Global Solutions And Services Business]

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The Datapipe deal comes only months after Rackspace agreed to buy TriCore Solutions, an application management specialist that at the time was its largest acquisition to date.

Richard Dolan, Datapipe's senior vice president of marketing, told CRN it made sense for two companies that so often come up against each other in the market to join forces.

"We're really looking at this as the best way to step forward and embrace the amount of business we see out there," Dolan said.

Rackspace did not say what it will pay for Datapipe, an MSP based in Jersey City, N.J. The acquisition will be financed with debt and equity.

Bradley said the combined entity would see annual revenue of $2.4 billion, and employ roughly 6,700 people.

Both MSPs have substantial hosting businesses through their own data centers, as well as partnerships with hyper-scale cloud providers. Both are among the largest MSPs in the AWS ecosystem.

Datapipe's infrastructure, custom-built automation tools, extensive certifications and high-skilled employees will be valuable additions to Rackspace's portfolio, Bradley said.

With those assets, Rackspace will be in a position to go after a $190 billion public sector market, leveraging Datapipe's established base of government customers such as the U.S. Department of Defense, Department of Energy, and the U.K. Cabinet Office.

"We can easily build a $500 million business over time serving that category," Bradley said of the public sector.

Datapipe also has satisfied many compliance requirements and earned certifications that would take years for Rackspace to bring under its roof organically, he added.

Enterprise giants like McDonald's and Johnson & Johnson rely on Datapipe tools for orchestration and automation, including a unified customer-facing management system for public and private cloud resources, he said.

Datapipe has developed several other unique capabilities desired by enterprise customers, such as an integrated customer ticketing service, Bradley said.

The acquisition will expand Rackspace's private hosting business into several regions where it currently has no data center presence, including the West Coast of the U.S., and new global markets from Latin America to mainland Europe, China and Russia.

Professional services talent also made Datapipe an attractive acquisition target.

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Datapipe's acquisition of Santa Monica, Calif.-based DualSpark in 2015 brought into the company a group of former AWS employees with expertise modernizing, refactoring and scaling legacy applications to function seamlessly in AWS ecosystems.

Assets like the DualSpark team will bring Rackspace into cloud adoption conversations much earlier, to "day zero" strategizing before a provider is even selected, Bradley said.

Another portfolio booster Rackspace will pick up from Datapipe is colocation services. Rackspace doesn't currently offer colocation, but its sales reps see many customers looking for that IT services model to host some legacy workloads while shifting others to managed cloud services, Bradley said.

"To be able to serve the enterprise well, you have to serve them into the future but meet them where their needs are today," Bradley said.

Rackspace and Datapipe expect the acquisition to close in the fourth quarter of this fiscal year.