back to article Rackspace literally decimates workforce: One in ten staffers let go this week

Around 10 per cent of Rackspace staff, predominantly in the US it seems, got an unwelcome email this week informing them they were being let go. Not that the work they do isn't needed. In an paperwork submitted to the SEC on Wednesday, Rackspace disclosed that 85 per cent of the positions being cut will be backfilled by …

  1. Anonymous Coward
    Anonymous Coward

    If you're dumping 1/10th of your workforce, it seems that either you were pretty overstaffed, or you are staffed properly, but are circling the drain and are desperately trying to buy time. Either scenario should call for heads to roll at the corner offices.

    Alternatively, you're trying to make some quick "savings" by offshoring. That's a move that doesn't seem to pan out in the long term (but juices the profits short-tern)

    Glad I'm not still at $lastjob. We hosted at Rackspace. I'd be starting the search for a new vendor in anticipation of things turning sour.

    1. rcxb1

      Not only does dumping 10% of your workforce signal financial straits... having a technology company doing it RIGHT NOW, when tech companies everywhere are turning record profits, reeks of a massive business failure.

      1. Anonymous Coward
        Anonymous Coward

        nah, it's not because they are short of money

        They are currently in the managed hosting business. They employ a lot of sysadmins and ancilliary staff who are in a shared pool responding in a transactional way to customer tickets. They want to move to being a services business where staff are allocated to particular customer engagements with a defined scope of work (and primarily cloud-based) rather than an all-you-can-eat support model. Basically they want to sell the sysadmins direct to customers and turn them into a billable asset rather than a cost-center.

        1. Steve K Silver badge

          Re: nah, it's not because they are short of money

          Yep - they have changed their services pricing model now, making it much more expensive (both for Rackspace-hosted and Managed AWS/Azure), PLUS there is a minimum monthly spend regardless of the service levels chosen. It is no longer a general services pot (i.e. draw down time as you need it, wherever you need it) either, so you end up having to buy more than you need over >1 service area.

          I think the VCs are looking to milk things a bit further.

          Any new hosting requirements for our clients is likely to be elsewhere....

      2. Anonymous Coward
        Anonymous Coward

        To be fair Rackspace is shit.

        Some of the worst engineers I've worked with over the years ended up there. They seem to either hire anyone that can count to ten or the engineers they attract are crap.

        If anything they're probably just skimming off the scum.

        1. Anonymous Coward
          Anonymous Coward

          Definitely depends on the team. Most of the techs I worked with as a Racker were quite decent. Just the bad apples stank. Most of our US and UK teams are/were pretty good, some of the Indian replacements, I haven't been as amused with.

      3. elsergiovolador Silver badge

        For some companies profits are a huge problem if they can't keep up with hiding them. Then when there is a pressure of workers wanting pay raises, you have to somehow pull that money out of the schemes. Sometimes it is cheaper to let some people go and use that budget to increase pay of other workers. That way they don't have to touch any schemes. I am not saying it is the case here, just a thought.

    2. Anonymous Coward
      Anonymous Coward

      10% layoffs is nothing new

      I recall decades ago, a very Big Blue tech company before the major shift to offshore production used to shed 10% of workforce every couple of years as part of its cycle. Banks currently ditch some percentage of IT staff (primarily contractors) every approx 5 years because of the economic cycle.

      This lot doing it because of offshoring is possibly not a sign of impending company demise.

      Unless we all tap out heels together and say "There's no place like Chapter 11" over and over again

  2. Gene Cash Silver badge

    Leveraged buyouts should be illegal

    "Last year Apollo took Rackspace public again, in part to pay off the debt it accumulated buying the cloud management company in the first place."

    This is the same shit that killed Sears, which was a premier American merchandiser with over a hundred years of success behind it.

    There used to be a Sears in every US city, and Craftsman tools, Kenmore appliances, etc were all top quality and highly respected. When you walked in, you got professional courtesy and treatment, instead of Walmart's snotty disgusted acknowledgement that you exist.

    And now it's all dead.

    Leveraged buyouts should be illegal.

    1. Imhotep Silver badge

      Re: Leveraged buyouts should be illegal

      In fairness, Sears was in trouble long before that, and just one in a long line of big box retailers that failed in that period. KMart, J C Penney, all the large department store chains - none of them really found a way to compete once traffic began leaving the malls.

      1. iGNgnorr

        Re: Leveraged buyouts should be illegal

        It is particularly stupid that Sears failed: for decades before Amazon, Sears had a successful catalog business. They really should have been able to adust that to the online world, but failed to do so. Maplin is another which failed to do exactly the same thing.

        1. Imhotep Silver badge

          Re: Leveraged buyouts should be illegal

          More than decades. Over a hundred years of catalog sales, including cars and homes.

        2. AlbertH

          Re: Leveraged buyouts should be illegal

          Nope - Maplin's error was to try to be "Tandy". They loaded up their shops with rubbish that nobody wanted to buy (especially since you could get better gear at lower prices from Richer Sounds and Novatech). They virtually stopped their original core business of selling electronic components to hobbyists, and the few parts that they continued to stock were ridiculously overpriced. They completely lost the plot when they were taken over by some "private equity" company....

      2. Dal90

        Re: Leveraged buyouts should be illegal

        Exactly.

        Sears failed first, LBO was just a way to extract as much milk and blood as possible before the cow died.

        Yes, big companies swimming in profits can have some creative spinoffs -- Discover Card was a sucess, Prodigy was cool for it's time. Both of those threatened no entrenched bureaucracies.

        But I don't think anyone who has worked in a large enterprise would expect for a moment they could have transformed their catalog business into Amazon. Amazon needed to be built from the ground up, not against the inertia of either the catalog (killed off in '93) or the retail division that would have furiously opposed the idea.

      3. J. Cook Silver badge

        Re: Leveraged buyouts should be illegal

        Those are partly Wal-Mart's fault; assisting in it was Amazon punching them right in the operating funds, along with the general malaise of the late 90's and early 2000's in regards to malls in general.

        The whole K-Mart and Sears merger was that K-mart was buying Sears as a sort of reverse takeover, which IMNSHO accelerated the death of both companies. (K-mart was on life support before then, and Sears wasn't much better)

        JC.Penny's is still around, albeit vastly reduced. (IIRC, I think are went back to being a catalog store- go figure.)

        There's a reason why I call Venture capital companies that pull this stuff 'vulture capitalists' - not to disparage the noble vulture in general, which serves a very valid task in the circle of biodiversity- because these companies come in, strip out everything of value, and leave the husk of the company to fail taking out all the people who actually worked there and whoever the company still owed money to (i.e., suppliers)

    2. Anonymous Coward
      Anonymous Coward

      Re: Leveraged buyouts should be illegal

      No cap on the profit ceiling, but bankruptcy provides a floor. Just keep flipping until you hit the jackpot.

      1. W.S.Gosset Silver badge

        Re: Leveraged buyouts should be illegal

        Quite

      2. Sherrie Ludwig
        Devil

        Re: Leveraged buyouts should be illegal

        Note that the C suite guys keep banking their salaries, plus bonuses. It'll be news when the decimation reaches them.

  3. revilo

    beginning of the end

    What signal does this send to the remaining talent? Run away from such douche bags (especially if they ask the leaving staff to train the cheaper new folks).

    Unfortunately, the management which does such decisions gets rewarded due to short term profit increase. They themselves have no problem, as they can

    infest a new company with their short sighted decisions.

    1. Nate Amsden

      Re: beginning of the end

      I'd wager the beginning of the end was probably close to a decade ago. Might of been when they did their initial big investment for OpenStack. Not that OpenStack was a bad idea at the time(had a lot of promise though to me promise has fallen flat the past 5-7 years mainly due to complexity), but it was a serious shift in technical strategy.

      https://www.theregister.com/2010/07/19/nasa_rackspace_openstack/

      Couldn't find the article(think there is one) of when Rackspace was essentially pulling out of OpenStack.

      I was never a customer of theirs but did price their stuff out on a couple occasions ~10 years ago the cost never made sense. Not that public cloud is any better(actually worse in many respects but some still eat it up because it's sexy I guess). Absolutely astonishing how much money is wasted in public cloud, just makes me sad.

      1. Anonymous Coward
        Anonymous Coward

        Re: beginning of the end

        Rackspace never had enough commitment to OpenStack to be considered a serious player anyway. Maybe in the early days when no one had heard of it, but the current iteration of the OpenStack cloud still runs the same core services without any new and exciting additions. Rackspace's own public cloud could easily have been competitive with The Big Three now, but neglecting development, updates and new features on the public cloud made that impossible. And sure as hell won't be happening now.

  4. Anonymous Coward
    Anonymous Coward

    I hope people flee RackSpace

    Offshoring never works at all. It is very hard to do correctly,and you have to spend more money to fix it.

    1. DevOpsTimothyC Bronze badge

      Re: I hope people flee RackSpace

      I've seen offshoring work well for a number of companies. Offshoring can be great if you already have presence in those other markets and and can simply grow a presence instead of having to expand into a new geography.

      The thing that doesn't work well is outsourcing to an off shore company.

      1. Anonymous Coward
        Anonymous Coward

        Re: I hope people flee RackSpace

        The larger Indian Outsourcing companies now blend their staff offshore and onshore. They are bringing BA's, PM's etc into the UK and keeping the Dev teams in India. This has the benefit of removing the cultural misunderstandings that can happen between a British PM and an Indian Dev manager as I found out to my cost. The people they are bringing over are well qualified, understand how British companies work and already have practical experience. They tend to work 6 days a week and as many hours as are required to get the job done. As a contract PM these guys are are actually a bit scary. They are less experienced but if they need to do 60 -70 hours a week to do what I can do in 40 then they will. Quite frankly after running projects for 30+ years I don't have the stamina for that work week and I do like a life outside work. When I started in contracting I would regularly work 50-60 hours per week but I was paid for every one. As a more experienced PM I get paid for a 'Professional Day' now. This does involve long hours at pinch points but the majority of the time my hours are reasonable.

        1. Anonymous Coward
          Anonymous Coward

          Re: I hope people flee RackSpace

          I've been through this several times now in different companies and I have never seen a successful offshoring effort yet. You may keep the lights on, but you lose very experienced staff through short sightedness, getting them to train up people who leave as soon as they become remotely useful and it's repeat again. PMs are pushy and expect devs to work 24x7 with no focus on quality, just quantity.

          Future proofing of the product doesn't matter as it's all about short term looking good and the fact they won't be there in a years time anyway.

          I'm glad I don't have many years left in an industry I used to love and I'm certainly not the only experienced person in IT saying the same thing. Quality and experience seems to count for nothing these days.

        2. Anonymous Coward
          Anonymous Coward

          Re: I hope people flee RackSpace

          Ah, the benefits of having staff in the UK who only are on secondment from their home office, and so if the employer decided to terminate them they'd immediately be an illegal immigrant who'd be deported.

          This in no way encourages some employers to abuse this situation. (You want to stay in the country? Do 50-60 hour weeks with no overtime or back to India!)

  5. Pascal Monett Silver badge

    So they are openly admitting to firing US workers and replace them with foreign ones

    Shouldn't there be a law against that ?

    They not firing the US guys (and gals) because they're no good. They're perfectly good at their job, they're just more expensive than foreign workers. Who just might be not so good at their job, but they're cheaper.

    I'm looking forward to the reports on how Rackspace hosting is plagued with problems because their new workforce doesn't know their job or how to read the procedures.

    1. Roland6 Silver badge

      Re: So they are openly admitting to firing US workers and replace them with foreign ones

      >Shouldn't there be a law against that ?

      It would have been interesting to see how they would have played this if Trump were still in the White House...

      1. LogicGate

        Re: So they are openly admitting to firing US workers and replace them with foreign ones

        I suspect that this would mainly have been a question of how much money ended up on the bank account of the Trumpsterfire.

        (edit:spelling)

  6. W.S.Gosset Silver badge
    WTF?

    OMG

    You literally used literally literally.

    > Rackspace literally decimates workforce: One in ten staffers let go this week

    1. First Light Silver badge

      Re: OMG

      Wouldn't they have to chop off their hands for it to be literally literal?

    2. PM from Hell
      Joke

      Decimation

      If they literally decimated the work force they would line them up and execute 1 in 10. Even with the labour laws in the USA this would be frowned upon (except in Texas)

    3. Dan 55 Silver badge

      Re: OMG

      They are technically correct, which is the best kind of correct.

  7. D.A.

    Glassdoor

    Their Glassdoor reviews (particularly for the U.K. business) are enlightening.

    Looks like the old-school management they brought in utterly decimated the previous culture of the company. Surprise surprise.

    1. Anonymous Coward
      Anonymous Coward

      Re: Glassdoor

      A lot of UK rackers (myself included) have approached the few years with a lot of cynicism. From when they announced we were hiring massive amounts of OS and NetSec technicians in India and Mexico, we figured they were about to pull the rug. I can hardly think of anyone in the UK offices that was thrilled with Kevin as a CEO that isn't a boot-licker.

  8. jason_derp Bronze badge

    Somebody should be getting excited!

    A 140% increase in losses in comparison to a 11% increase in revenue, and a 10% reduction in workforce? Sounds like Mr. Jones deserves a bit of a yearly bonus! That's how that works, right?

  9. Sparkus Bronze badge

    finally...

    a mostly-correct use of the word and concept 'decimate'.......

    1. Potemkine! Silver badge

      Re: finally...

      What have the Romans ever done for us?

  10. Anonymous Coward
    Anonymous Coward

    Rackspace. We're laying off 1/10th of our workspace, so the CEO can afford sexier assistants. Clue was in the name....we need more space for Racks.

  11. Ashto5

    700 Vacancies

    Dismiss 10% while hiring 700 I didn’t think that was allowed ?

    Still 700 vacancies is a lot, bet you fill them with min wage people

  12. alain williams Silver badge

    "the beancounters are ruling the roost"

    So: those who really understand the business needs being replaced by money men who will chase short term cash while failing to invest & exposing the business to technical risks, one of which might bring down what may become a house of cards.

  13. skintagain

    A shadow of it's former self

    I'm a 15+ year customer with a six figure spend and it's laughable how bad their service has deteriorated over the last few years.

    In the process of leaving them now - their UK support techs will openly admit on the phone how bad things have gotten internally.

  14. Danny 2 Silver badge

    Inadvertent far left racist

    I don't like companies that outsource overseas to avoid workers rights and democracy. My precedents fought, suffered and died for that stuff. It galls me that some overseas call centre workers question my accent on my call. I would far rather deal with a Liverpudlian, Sunderland or Cornwall accent than any Bombay globalisation blur.

    Globalisation is a race to the bottom, not a levelling up. It only benefits he rich as is.

  15. s2bu

    Kudos to El Reg

    I have to give my kudos to El Reg for properly using decimate. The improper usage of it is a pet peeve of mine. Yes, I know, the dictionaries have given up and added the improper definition, but that’s just because they’re bloody sellouts!

  16. Anonymous Coward
    Anonymous Coward

    Should be made illegal

    "Rackspace disclosed that 85 per cent of the positions being cut will be backfilled by workers in "offshore service centers.""

    One word for that..

    CUNTS.

    Unfortunately in the US that also hold you over when leaving "Don't hand over all your notes then we won't pay out your redundancy".

    I may have purposely deleted all my notes and info I'd created over the years before I was let go. Fuck 'em, if you're getting rid of me just to employ someone cheaper (this isn't rackspace) then fuck am I going to help the person replacing me. Yes, not their fault but fuck businesses that do that to their staff.

    I've seen one local council tell their staff "We're out sourcing your job to Indian. Before you go, we want you to train up the Indian staff, thanks". Fuck right off!

    1. Anonymous Coward
      Anonymous Coward

      Re: Should be made illegal

      Unfortunately in the US that also hold you over when leaving "Don't hand over all your notes then we won't pay out your redundancy".

      I may have purposely deleted all my notes and info I'd created over the years before I was let go. Fuck 'em, if you're getting rid of me just to employ someone cheaper (this isn't rackspace) then fuck am I going to help the person replacing me. Yes, not their fault but fuck businesses that do that to their staff.

      Come now, always train your replacement to the absolute letter.

      Of the existing documented procedures that management laid down on paper circa 1990 when they did an update drive when doing that application for ISO9001 that hasn't been updated since.

      It's very important that your replacements know how to write an autoexec.bat, config.sys, and know how to find the right order to load devices to memory so you don't run out, and how to assign IRQ addresses manually etc. As long as you can truthfully say that:-

      1) That this information is required to understand the documented company procedures.

      2) if a problem in this area arises they would need the information that you have given them.

      3) That you have had to deal with these issues before.

      Then personally I think it's fair game. If management wanted you to do something else then of course they would task you to do it. As a mere pleb you should not argue and should just do exactly what you are told to do like a good employee without arguing even if the assigned job doesn't make sense to you.

    2. Anonymous Coward
      Anonymous Coward

      Re: Should be made illegal

      Along with many of the rest of my team, I wrote up a set of "special" notes on how to do my job, for the benefit of the much cheaper guy that tried to replace me. Their date stamps were suitably "touched" to make them appear entirely legitimate.

      The "special" notes were left on the company server in the training folders, and have wrought havoc over the last couple of years since I was "replaced", and the organisation still hasn't realised what we all did. They can't understand why things are persistently and repeatedly borken, and why "service levels" have collapsed.......

      1. Anonymous Coward
        Anonymous Coward

        Re: Should be made illegal

        I'd suggest not doing that. Leaving deliberately faulty instructions that you wrote can lead to legal consequences.

        Training people on 20 year old obsolete and unworkable procedures laid down by the management is perfectly safe though; they are legitimately company resources.

  17. Allonymous Coward

    I'm no fan of offshoring, and I used to quite like Rackspace back when I used them. But as a non-US techie (who's admittedly probably slightly jealous of high left-pondian remuneration) I'm not entirely surprised they're decimating their American workforce in favour of somewhere cheaper. I sometimes worry that American tech salaries are in a bubble.

    1. Nunyabiznes

      The salary cost oftentimes reflects the higher cost of living.

      Here a median house is $600K USD while the median salary is 58K. Tech sector jobs are better, but not in line with COL. When you add in all taxes, fees, etc that are non-negotiable along with the cost of housing and transportation (not many areas in the US that have good public transportation infrastructure - a good topic for future conversation) the salaries aren't that spectacular. Better than running a shovel, but not much (or at all) better than the trades.

      But, you might be right that tech jobs are in for a correction. There are executive bonuses that need padding. After all, space tourism is a thing now.

      1. J. Cook Silver badge

        I dunno- some of the trades aren't too bad, as long as you are willing to work in non-optimal conditions or do physical activities for 40 -50 hours a week...

        (personally, I am of the opinion that plumbers are worth every cent they charge- some of the jobs they do are literally crappy...)

        1. Nunyabiznes

          Trades

          Nothing against the trades here. They are just a data point that I happen to know off the top of my head. Listen to Mike Rowe for an education about what is good in the trades.

          I wish I had apprenticed in electrical when I was a lad. I actually like doing low voltage control wiring and I have a working understanding of high voltage AC - enough to know what not to touch at least.

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