Rackspace Ups the Ante in Assault on Amazon

Josh Catone

Web hosting provider Rackspace announced today that it has acquired two startups in a move to bolster its cloud hosting service in a bid to take on Amazon’s Web Services stack. Rackspace, which is based in San Antonio, Texas, paid approximately $11.5 million in cash and stock (with the potential for up to $16.5 million in additional payouts of cash and stock) to acquire two companies: VPS provider Slicehost and Jungle Disk, an online storage app that uses Amazon’s S3.

Rackspace’s cloud hosting division, Mosso, is also announcing the rebranding of its flagship products. The Hosting Cloud, which is a scalable web hosting environment, will now be called Cloud Sites, CloudFS, which is a file storage offering that competes with Amazon’s S3, will be renamed Cloud Files. Rackspace plans to offer CDN services via its Cloud Files services as part of a partnership with Limelight Networks later this year.

Further, Rackspace announced Cloud Servers, an on-demand server service that will use Slicehost’s provisioning technology, which uses Xen virtualization software.

Both acquired companies will continue to operate independently, and Jungle Disk will continue to offer Amazon S3 as a storage option to customers. The Jungle Disk acquisition seems a bit odd, since it is a consumer play that doesn’t seem to fit with Rackspace’s core business, except as a show piece for their Mosso services. Slicehost, on the other hand, makes a lot of sense.

Slicehost has grown into one of the major players in on-demand, virtualized servers, and claims more than 15,000 “slices” online today. They’ve become very popular with web app developers, especially those using the Ruby on Rails framework (three out of the four founders of my site Rails Forum have their own slice, for example). That’s just the sort of early adopter, web application developer crowd that Rackspace wants to attract away from Amazon.

Both Slicehost and Jungle Disk have FAQs up about the acquisitions.

Disclosure: Both Rackspace and Amazon provide hosting services to SitePoint.