In a filing with the US Securities and Exchange Commission, Rackspace announced Friday that they are laying off 10% of their workforce.

“On July 21, 2021, the Company [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 centers. As part of the plan, the Company also is expanding its internal training program to further develop expertise in cloud services. The rebalance in workforce is a component of a broader strategic review of the Company’s operations that is intended to more effectively align the Company’s resources with its business priorities in high growth areas.”

Interestingly, RackSpace’s is still profitable and performing well.  It appears that laying off 10% of the workforce and backfilling with offshore resources is the typical playbook of reducing cost by standardizing processes and using cheaper staff to run systems.  RackSpace ships jobs to Tech Mahindra, a well known Indian outsourcing firm.

The trick, of course, is maintaining innovation, agility, and customer service.  Can RackSpace continue to serve its customers at the same level?  This is not the first time RackSpace has done this kind of layoff – indeed, this has been a “near annual event“:

“In 2017, the firm laid off about 6% of its employees — about 275 — six months after being acquired by Apollo Global Management. It sent shockwaves through San Antonio as the community struggled to keep those technology workers in the area. This is a much larger layoff, with potentially larger implications.”

The 2017 layoff was driven by private equity, which generally seeks to trim costs to improve profitability after acquisition.  But that was 4 years ago.  Now a steady exchange of premium engineering talent for cheapest possible labor (Tech Mahindra’s specialty) appears to be the strategic direction.  How well it plays out for RackSpace remains to be seen.

raindog308

Raindog308 is a longtime LowEndTalk community administrator, technical writer, and self-described techno polymath. With deep roots in the *nix world, he has a passion for systems both modern and vintage, ranging from Unix, Perl, Python, and Golang to shell scripting and mainframe-era operating systems like MVS. He’s equally comfortable with relational database systems, having spent years working with Oracle, PostgreSQL, and MySQL.

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