IaaS buying into SIaaS

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SIaaS providers believe in the power of partnerships. Partnerships help deliver value above and beyond what a single company can achieve alone. Furthermore, these partnerships are powerful because the involved companies bring their homegrown revenue streams and customer bases with them.

SIaaS providers we have talked to agree that top cloud infrastructure providers are very important partners for them as cloud infrastructure providers supply the infrastructure backbone of the cloud and they share customers. Beyond strategic partnerships, we see the seeds of M&A activity.

Rackspace has recently acquired cloud monitoring vendor Cloudkick to augment its growing cloud portfolio. The move is meant to enhance Rackspace's cloud management capabilities and improve the experience for its cloud users. The Cloudkick brand is retained and the firm's small team will start a San Francisco-based office and development center (Rackspace is based in San Antonio, Texas).

Rackspace's primary objective is to enhance its cloud management and monitoring capabilities in order to improve the experience for its cloud users and increase overall support quality. This is a crucial area – Rackspace has staked its cloud reputation and differentiated aggressively in the area of user experience and support. Cloudkick accelerates those efforts with a key piece of technology and its early momentum and growing reputation suggest that it is up to the task.

Intellectual property ownership should allow Rackspace to minimize licensing fees and in the process, optimize margins. Pushing customers to Cloudkick should similarly dissuade users from other third-party management tools and redirect revenue to Rackspace's coffers. The more customers use Cloudkick versus other third-party management tools, the more they will identify with Rackspace as an end-to-end cloud provider and innovator.

Cloudkick will help put Rackspace in front of organizations that are still largely in-house by allowing them to go for a test drive on Rackspace's entire portfolio of hosted services. Similarly, it should get customers more comfortable with remote management and expose them to the kinds of tools and capabilities that hosters provide but organizations can't build internally.

Rackspace will initially sell Cloudkick as a separate product but its cloud 'flight deck' command capabilities are sure to be consolidated into the existing Rackspace management interface. It makes a great deal of sense for customers to have all cloud server management and monitoring functions available through a single pane of glass rather than two interfaces. A starting point will be a connection to the support teams, with alerts and events tracked in Cloudkick initiating support responses. 

Cloudkick is Rackspace's fourth acquisition target. Three of those targets, including Cloudkick, have been focused on enhancing its cloud portfolio. Rackspace is definitely smart at identifying emerging technology and striking early, when companies at this stage are affordable. The pickup of Cloudkick certainly speaks to the growing importance of software development in the hosting business.