Rackspace to lay off 10% of workforce

Rackspace Technology plans to lay off 10% of its workforce, with 85% of these roles set to be replaced through its offshore service centres.

That's according to a regulatory filing submitted by the cloud computing services provider last week, informing the Securities and Exchange Commission, the US market regulator, of its plans.

The document states that on 21 July, Rackspace “committed to an internal restructuring plan, which will drive a change in the types of and location of certain positions and is expected to result in the termination of approximately 10% of the Company’s workforce”.

“The Company anticipates that approximately 85% of these roles will be backfilled in the Company’s offshore service centres,” it added. The affected employees were notified of the decision on the same day, and are expected to leave Rackspace over the next 12 months. The restructuring means that the company will spend between $70 and $80 million (£50-58 million) over the next 12-24 months on “severance payments, healthcare benefits and other exit costs”.

Rackspace will instead focus on “expanding its internal training programme to further develop expertise in cloud services”, such as cloud, data, and cloud native software engineering.

In another regulatory filing, the San Antonio, Texas-based cloud computing company also stated that it’s planning to invest between $65 and $70 million (£47-50 million) in expanding its offerings in areas including “cloud migration, Elastic Engineering, cloud native application development, data/artificial intelligence/machine learning and security services”.

The investments are expected to deliver the company “an estimated $95-$100 million of gross cost savings”.

Commenting on the decision, Rackspace CEO Kevin Jones said that the initiatives will allow the company “to take full advantage of current market trends, drive significant earnings leverage as revenue continues to grow, and compete even more effectively with other cloud service providers”.

“In addition, we are more closely aligning our Rackers with next-generation service offerings that offer more compelling growth potential both for them and the company,” he added.

Besides its offices in Texas, New Jersey, California, Virginia in the US, Rackspace also has two facilities in Melbourne and Sydney in Australia. IT Pro reached out to find out which out of these offices will be affected by the job cuts but the company has yet to respond.