Rackspace Buys SaaS Customer Webmail

Add Your Comments

Rackspace Managed Hosting made its first acquisition Monday, buying Webmail.us – a business e-mail service that is also a high-profile Rackspace customer. The deal is “an exciting development for Rackspace and our utility computing efforts,” Lew Moorman said on the Racklabs blog. Software as a Service (SaaS) is major focus for Rackspace, which says many of its 1,100 new customers in the second quarter will use its infrastructure to support their SaaS apps.

Moorman, the senior VP of Strategy, said the Webmail.us deal is part of an intensifying focus on SaaS at Rackspace. An excerpt:

Webmail knows hosted services. Despite all the hype, there are very few SaaS (Software as a Service) companies at true scale. Webmail is hosting an enormous base of users of a mission critical application in a hosted model. They have developed incredible knowledge on how to build out scale services. Running on 400 servers all working together, Webmail has been forced to build tools to ensure redundancy, drive cost effective storage, enhance automation and improve customer experience. Webmail is a scaled out utility service and their learnings will help Rackspace in many current and future efforts.

What’s interesting about the deal is that last year Webmail.us shifted a large chunk of its e-mail storage operation from Rackspace to the S3/EC2 utility computing service at Amazon.


In October of 2006, Webmail unveiled a new data backup system using Amazon Web Services. Bill Boebel, the CTO of Webmail.us, blogged about the rationale for splitting its services between the two providers:

We are a software and services company, not a hardware company. Which is why we outsource our data center to Rackspace. Rackspace owns the hardware, keeps it running, and replaces hardware components that break. They do a great job at this. We write and manage the software that runs on the hardware, and we do a great job at that. … Yes, our use of Amazon S3 displaced our use of Rackspace’s managed backups. However, we desperately needed to replace it anyway. Traditional data backups systems do a horrible job at backing up maildir formatted email data. … I strongly feel that moving our backups to S3 is a success for Amazon, and not at all a failure of Rackspace.

Webmail’s executive team clearly retained faith in Rackspace, and is betting their future on the San Antonio provider. “We don’t see this as an exit strategy,” Webmail CEO Pat Matthews said of the deal. “We’re calling this phase two.”

Webmail projects revenue of $6 million this year. Rackspace just announced revenue of $84.0 million in the second quarter of 2007, representing a 61.6 percent increase over the second quarter of 2006. Rackspace says it has experienced 34 consecutive quarters of revenue growth since the company’s inception. In August Rackspace announced plans to spend $100 million to convert a vacant San Antonio shopping mall into its headquarters.

About the Author

Rich Miller is the founder and editor at large of Data Center Knowledge, and has been reporting on the data center sector since 2000. He has tracked the growing impact of high-density computing on the power and cooling of data centers, and the resulting push for improved energy efficiency in these facilities.