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In one of its largest employee shake-ups to date, cloud hosting provider Rackspace Technology will lay-off about 10 percent of its workforce over the coming 12 months. As further stated in the official filing with the U.S. Securities and Exchange Commission, about two thirds of the company’s ‘Rackers’ – as Rackspace’s employees are called – are based in the company’s headquarters in San Antonio, Texas.
Rackspace counts about 7,000 employees worldwide, so terminating 10 percent of its workforce implies a job loss for about 700 employees. The company stated that about 85 percent of these positions will be ‘backfilled’ in Rackspace’s offshore service centers, most likely as a cost-cutting move. It does not specify where such positions will be assigned.
“The initiatives announced today will enable Rackspace Technology to take full advantage of current market trends, drive significant earnings leverage as revenue continues to grow, and compete even more effectively with other cloud service providers,” said Kevin Jones, Chief Executive Officer. “In addition, we are more closely aligning our Rackers with next-generation service offerings that offer more compelling growth potential both for them and the company.”
Rackspace laid off between 100 and 200 people between 2017 and 2019, making it a near-annual occurrence. The firm presented it each time as reducing employees in low-profit sectors while shifting to others with higher profit growth.
Increase in Turnover
Rackspace Technology, meanwhile, will extend its internal training programs in Cloud Engineering, Data Engineering, and Cloud Native Software Engineering to create competence in these areas. The company stated that it would allow existing workers to be better prepared to fill high-demand jobs in the company’s fast-growing professional services and Elastic Engineering teams.
The layoffs don’t seem to be motivated by poor financial performance but simply by the creation of even more organizational efficiency and clout. Rackspace’s second quarter’s revenue is now projected to be in the $741- $744 million range, up from the $735- $745 million range originally forecasted. Furthermore, Rackspace anticipates bookings of roughly $258 million in the second quarter of 2021, up 6% from the first quarter.
