From the Computer Utility to Cloud Computing - To the Cloud: Big Data in a Turbulent World - page 62

force for traditional packaged applications services” (Ante 2012). That
just happens to represent the majority of IBM's global-services business.
Compounding the problem is that as long as cloud services live up to their
promise of lowered IT costs for companies, and so far they have, cloud
revenue for irms with a long history cannot possibly keep up with what
they enjoyed in the past when they sold software and services to a host of
individual businesses. This is not a problem for companies like Amazon
(with its AWS offering), which does not have a legacy business to protect.
How IBM, HP, Dell, Microsoft, and now Apple handle this classic case
of the “innovator's dilemma” will go a long way to determining whether
they have a future of any consequence in or outside the cloud (Bradshaw
2012). 3
Rackspace represents a set of cloud companies that, unlike IBM,
does not have either the advantages or disadvantages of legacy systems
to worry about and has moved full bore into providing cloud services.
The company, which began in 1998 as a small Internet service provider
in founder Richard Yoo's garage, quickly grew to become an established
host for customized applications, providing private, public, and hybrid
cloud services. Widely recognized as one of the leading cloud companies
and with more than 4,000 employees, Rackspace relies on what is called
the OpenStack, software that is universally available based on open
source principles. 4 In 2012 it approached 200,000 customers using close
to 100,000 servers in about 250,000 square feet of data-center space
around the world. Demonstrating that it can play with the heavyweights,
the company's annual revenues surpassed $1.5 billion. Nevertheless, with
long-established irms pouring money into cloud offerings, Rackspace faces
an uncertain future. Consider that Dell alone invested $1 billion into its
cloud in 2012. How does a irm that takes in not much more in annual
revenues keep pace? Additionally, Rackspace beneited from complicated
pricing for companies unsure of the technology and the market and unable
to gauge pricing well. Now, as the cloud approaches commoditized utility
status, with standardized pricing based on hourly use for all customers,
Rackspace will have a more dificult time distinguishing itself from large
irms like Dell and AWS.
Unlike Rackspace, which has grown to become a leader in general cloud
services, companies like Salesforce, which uses the cloud for managing cus-
tomers, and VMware, which provides cloud services through virtualized