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The Stack Archive

Rackspace cuts 6% of workforce to invest in new products

Wed 8 Feb 2017

Rackspace HQ

Managed cloud provider Rackspace has made the call to cut 6% of its workforce in an effort to drive investment into new products.

CEO Taylor Rhodes explained that the decision to cut costs was crucial in order to invest in the company’s future.

According to a blog post, the cuts are focused on parts of the business where the workforce has grown more rapidly than revenue. Rhodes adds that other units, such as Managed Security, OpenStack, VMware private clouds, managed services for AWS and Microsoft Azure ‘are growing rapidly, at annualised rates in the high double digits.’

The executive continues that if Rackspace did not go ahead with the firings, it would not have the opportunity to sufficiently invest in the new products it wishes to advance.

‘Our industry changes rapidly, and we don’t always have the luxury of making gradual changes to our workforce,’ he writes. ‘Sometimes more decisive action is required to seize the opportunity to invest in areas where our customers want our help. That’s where we find ourselves today.’

Rhodes notes that Rackspace did investigate options to avoid the cuts through other savings. He explains that in the months leading up to the layoffs, Rackspace ‘worked persistently and creatively’ to cut back as much spending as possible in areas other than headcount.

While the majority of layoffs will affect U.S.-based ‘Rackers’, smaller reductions will also be made in the company’s offices around the world. The downsizing will represent the largest cut to headcount in the cloud provider’s 19-year history.

Some disgruntled employees have taken to the internet to vent their disappointment. One post on Reddit reads: ‘Customer service will sink to even new lows… If you’re thinking about working there – look elsewhere… You are better off working for an employer that has solid ethics and values.’

Late last year, Rackspace was sold to New York private equity firm Apollo Global Management which has a reputation for being a controversial ‘vulture fund‘ with harsh savings strategies, including slashing wages and cutting jobs.

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