Rackspace Acquisitions

Despite the bad economy, Rackspace is acquiring startup JungleDisk and SliceHost. This is a very interesting step on their behalf.

Buying JungleDisk makes sense since Rackspace wants to get into the cloud storage business. JungleDisk is one of the bigger Amazon S3 products out there. By adding Rackspace support to the product they can quickly attempt to get into that market. If they will succeed depends on their offering’s cost. Their press release suggests $0.15/GB, but that doesn’t say if they will bill based on requests and bandwidth (which is where Amazon S3 gets expensive). Also interesting is this little nugget:

Also later this year, Limelight Networks will team with Rackspace to allow developers to easily distribute content to millions of end users around the world and bring scalable content delivery and application acceleration services to the masses.

This is competing with Amazon’s attempts at starting a CDN later this year. It’s worth noting that these are both pretty primitive CDN’s since they require you to register objects before the CDN hosts them. Modern CDN’s like Limelight and Akamai allow you setup a CNAME so that their CDN essentially acts as a middle layer between your origin servers and your users. This requires no preregistering since the CDN can just check the origin for any asset requested. Caching is configured via configuration files and via standard http headers. I’m not sure how useful these CDN’s will be to most. Registering objects and uploading to another platform is a giant pain as opposed to just setting up a transparent CNAME. The difference is one requires development time, the other doesn’t.

Acquiring Slicehost makes sense since they apparently have technology that will be useful to Rackspace. They are making a bet that startups in need of hosting on virtual machines (which is much more complicated to manage than typical shared hosting) will produce a decent market in the future. With the economic downturn, at least in the short term this may not look like the most useful purchase. In the long run this may pay off handsomely. They have decent competition in that space and it’s quickly growing. Rackspace’s size may help it weather a downturn better than others though.

They closed 5.18 +0.22 (4.44%) today, despite the DOW being -514.45, so I guess I’m not alone in my assessment.

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