Cloud computing service Rackspace has announced that it will let go of roughly 10% of its workforce. Of those, two-thirds are from the San Antonio area.
The announcement was made in a filing to the US Securities and Exchange Commission on Wednesday, July 21, 2021.
Despite cutting so many employees, the cloud computing service isn’t downsizing. Rackspace pointed out that 85% of the jobs will now be backfilled by workers in offshore service centers.
This shakeup in the workforce follows a management reshuffle—COO Subroto Mukerji is taking on the role of president, transferring most of his duties to CFO Amar Maletira.
Most of the cut jobs are in the US, even though Rackspace employs people all over the globe.
That’s not to say others weren’t affected. An anonymous source informed The Register that “there were fewer than 100 cuts in the UK.” Others have been let go too in other parts of the world.
Interestingly, this isn’t the first time Rackspace has seen mass layoffs.
Cost Cutting in a Competitive Field
Cloud computing is on the rise both in terms of offerings and adoption.
In 2016, Apollo Global Management acquired Rackspace. After taking it private, the layoffs followed.
Then, in 2020, Rackspace was taken public to pay off the debt accrued during the acquisition process.
CEO Kevin Jones hinted at the layoffs back in May when he told investors they were looking for a higher offshore mix in the company.
By backfilling lost positions to cloud facilities “offshore,” Rackspace is ultimately looking to cut costs by employing people from countries with wages lower than those in the US.
The management reshuffle, with an emphasis on finance-focused positions, further indicates the company’s current fiscal fixation.
According to the company’s latest financial results, Rackspace saw a loss of $245.8 million in 2020, up from $102.3 million in 2019.
With a lot of stiff competition in the cloud space, it makes sense that the company is jostling to try and improve spending. Still, that’s no consolation to those put out of work by the decision.