Rackspace Technology® records $40M in total cost of ownership savings by pivoting from SPLA to Azure Arc

Rackspace Technology® struggled with disparate infrastructure and complex, manual licensing for Extended Support Updates for Windows Server and SQL Server. It wanted one tool to prevent churn and increase hybrid cloud adoption.

The company is using Azure Arc to improve both SQL licensing and delivery of Extended Support Updates. Teams can manage customer licensing and support while accessing other Azure hybrid cloud capabilities, including SQL Server enabled by Azure Arc.

Rackspace has projected a TCO reduction by $40M over the life of its DCO commitment. It has measured an 80% increase in reporting of SPLA licensing and is aiming for 80% growth in Azure Arc consumption within the next three years.

Cloud computing company Rackspace Technology® wanted to drive maximum efficiency and simplicity as it optimized its SQL licensing, Extended Security Updates, and hybrid cloud operations and management. It’s planning for $40 million in total cost of ownership (TCO) savings and has already achieved increased reporting proficiency through a move to Azure Arc, which has led to more visibility and innovation in its day-to-day licensing operations. Rackspace now enjoys new cloud capabilities as it cements its success with more Azure growth in the pipeline, and drives a more seamless experience for customers.

Azure Arc takes away a lot of the disparate tooling that we used in the past, and being able to deliver the best of public cloud to private cloud customers is another massive opportunity.

Zachary Symm, Product Manager for Managed Public Cloud, Rackspace Technology®

Optimizing SQL licensing, security updates, and hybrid cloud payoff with Azure Arc

Over the last 30 years, cloud computing company Rackspace Technology® has prioritized making technological changes seamless. Offering industry-leading managed service capabilities to customers ranging from small and midsize businesses to enterprise companies, Rackspace strives to make things simple and straightforward for its business teams so they can provide better support to customers along their own technology journeys. “We help our customers innovate, mature, and grow through their cloud journey so they can get to a place where their business can be both sustainable and profitable,” says Zachary Symm, Product Manager for Managed Public Cloud at Rackspace.

Rackspace deals with significant complexity managing infrastructure across more than 20 data centers while seeking to enable value-driven business outcomes, including solutions management and licensing. Among those is Extended Security Updates enabled by Azure Arc, which customers needed to bridge the gap as they updated applications that relied on previous versions of Windows Server. Rackspace wanted a singular mechanism to prevent churn, increase hybrid cloud adoption, and create a path and momentum for customers to adopt future Microsoft Azure services.

Aiming to reduce complexity in favor of a more efficient and effective operating and licensing model for the future, Rackspace first evaluated Azure Arc as a way of providing hybrid customers with Extended Security Updates which had historically been a massive pain point involving multiple touchpoints and licensing requirements. It also saw value in using Azure Arc to optimize SQL with pay-as-you-go options without having to change internal sales processes and procedures, thereby speeding up the onboarding and delivery process. It could also more accurately and automatically track SQL consumption while delivering vital security patches and opening more avenues for Azure growth in areas such as security and fleet management. 

“Everything jumped off from there as we worked with Microsoft to understand the full capabilities and breadth of what Azure Arc could do to help us quickly deliver greater value to customers,” says Symm. “Using Azure Arc for licensing provided a single pane of glass, drove cost savings, and gave us the ability to have tighter management, control, and auditing of SQL licensing. It also introduced automation capabilities that we didn’t have before, internally or externally.”

By using SQL Server enabled by Azure Arc, customers have a better understanding of their utilization of their SQL licensing and technology. They can determine where their databases may be running hot or where there’s going to be gaps and then quickly make changes through that management pane.

Zachary Symm, Product Manager for Managed Public Cloud, Rackspace Technology®

Solving headaches and doing what hasn’t been done before

When Rackspace teams talk to customers about what it means to operate in a truly hybrid cloud, they make a clear distinction: “It doesn't mean that we’re necessarily in both public and private clouds, but it’s about how those two clouds interact with each other and enable the latest tooling,” says Symm. “We position Azure Arc as the unifying agent and catalyst that allows us to do many of the things that we couldn’t do previously, such as boosting observability and innovating with AI to drive best-in-practice security.”

Internally, Rackspace has spent a lot of time developing a massive system for reporting on all of its Services Provider License Agreement (SPLA) customers and licensing. It also put a lot of work into how it optimizes, reports, and maintains licensing efficiency. “Azure Arc, to a large extent, negated any of that licensing preparation being required,” says Symm. “Now, we have clear visibility on every single machine that SQL Server or Windows Server is running on, and we can easily report on it. It puts us in a much better spot operationally with more financial control over our licensing overall at Rackspace.”

In October 2023, Rackspace completed a rapid first migration to Azure Arc for Extended Security Updates customers. Its second migration effort brought over more than double the number of customers in less time, jumping from 600 to more than 2,000. “Once we realized the abilities of Azure Arc and the limited capabilities of our existing systems manager, this was really a no-brainer,” says Symm. “Azure Arc takes away a lot of the disparate tooling that we used in the past, and being able to deliver the best of public cloud to private cloud customers is another massive opportunity.”

Operationally, in addition to enhancing hybrid cloud management and monitoring, Rackspace can now spin down SQL servers and virtual machines when they’re not running, instead of paying for monthly licenses that may not be used. “And now, instead of taking longer in the spin up process, we can more seamlessly and speedily deliver services to customers,” adds Symm.

Since rolling out Azure Arc, Rackspace has also opted to use SQL Server enabled by Azure Arc to extend Azure services and their benefits, including Azure Monitor and Microsoft Cost Management, to instances hosted outside Azure. “By using SQL Server enabled by Azure Arc, customers have a better understanding of the utilization of their SQL licensing and technology,” says Symm. “They can determine where their databases may be running hot or where there’s going to be gaps and quickly make changes through that management pane.”

To further accelerate adoption of Azure Arc, Symm drafted a business case showing the benefits of a potential pivot to Azure hybrid cloud solutions from a multi-layered operational, engineering, and business perspective. The proposal highlighted the ability to sign a Microsoft Datacenter Optimization (DCO) agreement and quickly realize cost savings and operational efficiencies. “Our executive leadership saw that Azure Arc was a great tool and that there was a lot of growth opportunity as well, and we’ve already started to realize the DCO,” says Symm. “We just hit our first milestone and to say our finance, accounting, and leadership teams are happy would be an understatement. We’re looking forward to the future of working with Microsoft as we expand our footprint into the full potential of Azure Arc.”

The big number that everyone, especially our executive leadership team, loves to hear is the planned total cost of ownership (TCO) savings of $40 million over the life of the DCO commitment.

Zachary Symm, Product Manager for Managed Public Cloud, Rackspace Technology®

Taking advantage of innovation, monumental change, and new opportunities

Across Rackspace, the company’s technological advancements have underscored a consistent attitude of innovation and desire to provide customers with the latest, best-in-class innovations. To this end, Rackspace has achieved the Azure Expert Managed Services Designation, the pinnacle of Azure partner capabilities. “Our customers don’t ever want to be seen as standing still,” says Symm. “Even our on-premises customers are thinking of cloud in some form or fashion, and while some of them don’t have fully developed strategies, the idea of using Azure is very prevalent. As we introduced Azure Arc, they have been asking about what’s next and how they can take advantage of those innovations.”

This customer feedback only increased the imperative to not just execute the original business case, but add hybrid and cloud native features for the future. “Meeting with the Microsoft team was really helpful because we were expounding upon how what we’re doing with Azure Arc is just a very small snippet of what the capabilities are,” says Symm. “We discussed how we could push this further and continue to roll this out across Rackspace.”

To help fully realize its vision, Rackspace knew it could rely on Microsoft support teams, including the Microsoft DCO team, and have since reduced time to market and eliminated overarching complexities. “We now have clear delineation of what needs to take place, what it should look like, and how our two teams—both public cloud and private cloud—can get their work done in parallel, again increasing efficiency and the time in which we can onboard customers,” says Symm.

Achieving big numbers and bigger results

In addition to the day-to-day performance efficiencies and long-term capability gains around hybrid cloud, Rackspace has also seen the financial benefits of its new environment. The company has reduced the overhead of its previous licensing model while making what was historically a manual reporting process now fully automated. Rackspace has also been able to transition to hourly billing through a new licensing model, resulting in significant cost savings and contributing to growth with its Cloud Solution Provider (CSP) Azure practice. “The big number that everyone, especially our executive leadership team, loves to hear is the planned total cost of ownership (TCO) savings of $40 million over the life of the DCO commitment,” says Symm. “From a licensing perspective, this is massive. The ability to grow our Azure business but also recognize savings is unparalleled.”

Moving forward, Rackspace is considering what else it can do around hybrid and cloud native offerings, maintaining a strong focus on technology innovation as it unlocks new solutions along the customer roadmap. Rackspace recently rolled out an enhanced toolset offering consistent inventory, management, and governance, resulting in an improved customer security posture and performance. The company also has a new platform to offer capabilities that were not previously accessible, including Microsoft Defender for Cloud security services, SQL utilization, monitoring, and extended support, enhanced security solutions, and cross-sell options for new and existing customers. “We're always looking at how can we use technology innovation to advance not only Rackspace, but our customers too. Azure Arc and its abilities to enrich and continue to help us grow our business have really been a game changer,” says Symm.

Rackspace has already achieved a significant increase in its SPLA reporting timeline and Net Promoter Score (NPS), representing high customer satisfaction. “Whereas SPLA reporting used to be about a weeklong process from gathering all the data, analyzing it, going through, doing all the optimization, and then getting the final report out, it's now down to about a day and a half,” says Symm. “We’ve seen an 80% increase in proficiency in making sure we're reporting our SPLA licensing since adopting Azure Arc. For customers, they would previously have to go through three or more different partners to satisfy all their licensing requirements. Today with Azure Arc, it's just one seamless interaction with us.”

Rackspace is ready to continue growing, delivering, and innovating with Microsoft to benefit both its business teams and customers. “Our goal is to reach 80% growth in customers consuming Azure Arc over the next three years, or even sooner,” says Symm. And Rackspace is well on its way to achieving that goal. “We’ve got a lot of different levers that we’re activating, whether it be Copilot or data and AI within Azure,” adds Renee Taylor, Vice-President of Global Alliances at Rackspace. “We’re really looking forward to utilizing this new innovation for our business to grow our partnership this coming year.”

We’ve got a lot of different levers that we’re activating, whether it be Copilot or data and AI within Azure. We’re really looking forward to utilizing this new innovation for our business to grow our partnership this coming year.

Renee Taylor, Vice-President of Global Alliances, Rackspace Technology®