Cloud hoster’s arrival will rearrange IT landscape.
Many in the IT industry have been waiting for this moment. Rackspace, one of the world’s biggest website hosting companies, has announced it is opening a massive data centre in Western Sydney which will go online towards the end of the year.
Ok, another web hoster, I hear you say. What’s so special about that?
Rackspace is no ordinary player. It is one of two favoured hosting providers for popular cloud programs, the other being internet juggernaut Amazon Web Services. Its arrival will reverberate throughout the IT industry.
There are three implications.
The first is that Rackspace rival Amazon will no doubt follow suit within weeks. Amazon’s impending arrival in Australia has been a poorly kept rumour for months. By early next year Australia should have the two largest web hosting companies on its soil.
The second implication follows from the first. Australian businesses, we have often been told, have been reluctant to use cloud software which stores their information outside of Australia. The main concern has been that the US government’s security agencies (the CIA, NSA, FBI and so on) could gain access to sensitive commercial information in documents and emails under the Patriot Act, which granted sweeping powers to combat terrorism.
This argument for data sovereignty, as it is known, is often put forward by software companies which run hosted services from Australian data centres, far away from the grasping hands of US law enforcement.
While cloud software companies serving Australian businesses may have wanted to host their software locally, the truth is that it’s more expensive and the range of services are more limited with Australian providers.
Now that Rackspace and soon Amazon are setting up shop here, cloud software companies no longer have to compromise on data sovereignty.
Local players sometimes take a different tack on the same theme, saying that US companies operating in Australia are still subject to US law and could be forced to hand over data stored in Australia to US authorities.
Rackspace is already trying to cut off that argument at the head. “Data hosted in Australia by Rackspace is subject to the same laws as cloud services operated by wholly owned Australian companies,” said Alan Schoenbaum, general counsel to Rackspace, in a press release.
Interestingly, data sovereignty may be an issue isolated to mid-market and enterprise companies rather than small and medium businesses. Cloud accounting software vendor Xero hosts its application and customer data in Rackspace’s data centre in Texas and has no plans to use the Australian data centre in the short term, Xero tells me.
“Data sovereignty isn’t an issue, it doesn’t worry us at all. We are still signing up 100 to 200 customers a day in Australia. If there were any concerns at the small business owner level we wouldn’t be seeing the volumes,” says Chris Ridd, Xero’s managing director for Australia.
Although it is more cost effective to run its software from a single data centre in the US, Xero may use Rackspace’s Australian data centre to host its cloud-based tax software which won’t be fully released until late next year.
The third implication is the effect on local competition for hosting.
Australian providers such as the Macquarie Telecom spin-off Ninefold have done an admirable job recreating the Rackspace approach with easy billing and “sneakernet” uploads of large files to its cloud storage and cloud servers.
Rackspace is a 4,000-employee public company with 14 years’ experience and annual revenues of $1.3 billion. It counts 60 percent of the Fortune 100 among its 190,000 customers who are served from more than 10 data centres spread around the world. It provides high-quality hosting services for very low rates; only Amazon’s are lower.
Rackspace’s motto is “fanatical support” which translates to 24-hour free support via phone, email or instant chat for all its customers, no matter how small. No Australian provider can match that.