Q&A: Rackspace Channel Chief Preps Partners For Cloud, Hosted Services Push

The past six months have been a whirlwind for Rackspace and its channel partners. Since the global relaunch of its partner program last September, Rackspace has guided its 1,500 partners -- 1,100 of whom are in the U.S. -- and helped shape their strategy to attack managed hosting and cloud services.

Christopher Rajiah, Rackspace's new director of North American channels, joined in December after running channels at Extreme Networks. Since taking over, Rajiah has worked closely with Rackspace Vice President of Worldwide Channels Robert Fuller to make the partner experience more streamlined and define a clear structure, and create consistency. As Rackspace builds out its three businesses -- Managed Hosting, Cloud Hosting, and Email & Apps, Rajiah is charged with driving sales through referral and reseller partners and creating attractive offers in each separate segment.

Channelweb.com recently caught up with Rajiah to talk about Rackspace and how it plans to help VARs grow and embrace the evolving technology landscape. Here are excerpts from that conversation.

Rackspace is doing a lot more in the cloud. What percentage of Rackspace partners are selling into cloud computing environments now?

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We don't disclose the percentages, but I will say that today our partner program is about 1,500 partners globally that fall into the three buckets - managed hosting, cloud and Email & Apps. We have partner programs in each of these as well that have different requirements and incentives.

What is Rackspace doing to get partners up to speed on the managed hosting and cloud side and to help them adapt to new business models that they have to embrace?

First, you have to look at traditionally what kind of partners Rackspace has focused on. We are very successful today if you look at e-commerce partners, agency partners, partners who have applications -- different software applications that need hosting -- that would make a big part of the partner-base today. But the new targets are those global systems integrators and new value-added resellers that are out there. When we look at enabling those partners, we do computing as a service through cloud and managed hosting, there's a shift of how customers buy IT services. These partners, the value-added resellers at least, make their living selling a lot of on-premise IT equipment and services. We see the acceleration in the transition, and there's a community of partners that do not have established hosting practices and have the need to move very quickly to build that value proposition. These are the dynamics and the opportunity we see, and we will capitalize on this by targeting those communities, not only to reach deeper into the SMB market but to penetrate further into the enterprise.

How is Rackspace helping partners prepare for this shift?

If you look at the relaunch of the program, we created certain sections in our portal to increase our training modules. We increased the search functionality and created joint collateral and training for the partner community. A lot of it is around the training and helping these partners who traditionally sold on-premise make that transition into more of a hosted offer. I'm not saying they'll make this transition overnight. If you look at the industry, only about 10 percent of all customer IT is hosted today. That's another 90 percent left to be hosted, so that's collocated, managed and cloud. I think partners are starting to realize the shift and the customers are starting to demand it. It's a great opportunity for Rackspace to come in and help our partners with that transition so the 10 percent today can be 20 percent tomorrow. It's a transition that we want to go into closely with our partners, and we want to help them to be able to maintain their reputation because in Rackspace, they'll have a trusted and reliable partner to offer that solution with.

As Rackspace broadens its various solution areas, how is the type of solution provider or VAR you work with changing? What is the profile of the new kind of VAR offering managed, hosted or cloud offerings? Is Rackspace targeting different kinds of VARs now?

First let me talk about the traditional VAR, the Cisco reseller and NetApp reseller. I think you're seeing those businesses and those value-added resellers looking to enhance their offerings. You're seeing that shift and that's a demand that's coming to us. But I also see that within our existing base as well.

One example I can put out there is [Microsoft] SharePoint. There are a lot of SharePoint partners out there who sell that service and customers have the choice. Partners give the customers opportunities to do it themselves and install the application and manage it. But I see those SharePoint resellers moving toward a model where they're working with Rackspace to offer the customers other options, like in a cloud environment. Now you might not get all of the functionality but you get a good subset of it. In a dedicated hosting environment, you can offer your customer even more. You can offer it to integrate with Active Directory and Microsoft Exchange Server. [One large SharePoint partner] is working with us to leverage either our public or private cloud technologies. That gives them the opportunity to give more access to their customers. I see that coming from new partners and existing partners who are changing the way they do business from what they've done in the past.

Next: Rackspace Looks Ahead

You mentioned public and private clouds. Which direction do you see Rackspace partners going in? Public, private or hybrid?

That's an evolution that will continue to develop over the next few years. I'm seeing that becoming much more prevalent. For example, if your customer has a requirement and you have to test it and you need to stage it; I've seen some partners put that into the cloud to do that phase of it. And as they deploy it and grow into a more dedicated footprint, I've seen them take it and move it to a managed hosted offer for their customers. We have one disaster recovery partner that is able to replicate SharePoint data into a dedicated hosting environment or into a cloud environment. It's kind of hybrid computing at its best when you can store your information and leverage cloud technology at a fraction of the cost, or optimize the data around a managed services solution.

The Email & Apps division is planning a channel relaunch next month. Is that the same for the other Rackspace divisions as well?

As we evolve the channel programs, you will see us continue to offer within each of these businesses the best channel programs we can to allow partners to fill customer demand. Email & Apps is doing theirs, the Rackspace cloud team will launch theirs, and the managed hosting, which has been the traditional partner business that has the more established channel program.

What are some of the challenges you see partners encounter as they try to embrace some of these new technologies, whether it's on the managed hosted side, helping clients move applications to the cloud or the new SharePoint offering? What is Rackspace doing to help partners through those?

When you look at existing partners, we're helping them identify more opportunities within their business, even if it's an agency. A lot of times, agencies in the past have done a lot of advertising through print and on TV, and as they are looking to increase their online presence we are helping them with that in terms of being able to maximize the visibility of online campaigns that sometimes, because of the technology needs, the agency can't support. We can come in and we can provide them an infrastructure that allows them to do what they're best at doing.

In the area of software applications, we are creating product offerings that allow those software companies to expand their offering to a complete solution that involves hosting as well. So you're not just selling the product; now you can, in fact, provide a more turnkey solution. We are stepping in and being that natural extension to the partner that can offer unmatched services and reliable hosting solutions to go with that application.

In the VAR community, as we continue to move into that space and target that opportunity, we're making an alternate business model for them, different from what they're doing today. We're allowing the partners to maintain the reputation as a trusted adviser to the customer. Some of the challenges in the new VAR community are compensation -- how do they pay their reps in a monthly recurring model vs. a one-time sale of hardware and software? We are working with our partners and the channel programs we put are very lucrative in the sense that they enable the partner to understand that monthly recurring revenue model and allow them to compensate their sales teams for those kinds of transactions vs. one-time transactions.

Where do you see the biggest revenue opportunity for partners in the Rackspace program?

When you look at what Rackspace focuses on and you look at the data center layer, the networking layer, the device layer and the operation system, we can give that full solution: security, compute power, backup, storage, operating systems like Linux and Windows; we can go into virtualization and the database and into mail and collaboration tools. But when it comes to business processes, that's where the partners can take this infrastructure as a service and add their value on top of it. We're allowing our partners to do what they do best: Package this whole solution and allow them to do the design, the integration, the workflow and the governance. They still have a lot of consulting they can put on top of that and bring value to their customers. And we can be the best, industry-leading provider of that infrastructure to enable their success.

Looking across the competitive landscape, who is Rackspace's biggest competitor now?

We are the leader in this space. In the managed hosting space, we retain the No. 1 spot and in the cloud computing space, we are right next to Amazon and we plan to continue to shorten that distance between us. We consider ourselves the future IT provider in this space.

What do you see going forward for Rackspace and its partners?

We see the channel as a highly strategic asset and one that helps us achieve our growth plans and brings us closer to our customers. We will continue to introduce game-changing products and programs. I see an opportunity for us to enable our partners to offer that more complete solution and to truly impact their business and allow them to focus on their core business and make it a lucrative partnership. Our channel program is the strongest program out there today, and we feel that is enabling a lot of partners to come to us and partner with us, and we see this as an opportunity to continue to grow in 2010.