Rackspace outage upsets customers

Company blames ‘security incident’ as its patrons lose access to email over weekend

An unknown number of Rackspace Technology customers have been unable to send or receive emails since early Friday morning because of an outage the company is blaming on a “security incident.”

The Windcrest-based cloud computing company said Sunday that it had about 1,000 employees working to reduce wait times for customers seeking information or help migrating accounts to other platforms. On social media, one customer complained of waiting more than eight hours before giving up.

“Our teams continue to work diligently to restore email service to our customers, and we are continuing to add resources to reduce wait times and increase response to tickets,” Rackspace said in an update Sunday afternoon.

It acknowledged the outage Friday evening, when it said it had a “significant failure.”

Rackspace shut down its Hosted Microsoft Exchange service because of what it initially described as connectivity and login issues. It later told customers it was providing Microsoft 365 accounts and to migrate accounts to that platform.

Rackspace, the San Antonio area’s biggest technology company, did not say when service could be restored or provide details about the nature of the security incident it’s blaming for the outage.

“The full extent of our support resources are dedicated to this issue,” Rackspace said, adding that employees were working to contact all affected customers.

Many were sharing their frustration on social media, though, saying the situation was affecting their ability to communicate

with clients and conduct business. They also were complaining about spending hours on the phone trying to reach customer support.

“Losing my email due to the @rackspace outage is almost as stressful as the first days of lockdown,” one Twitter user tweeted.

“No idea how/when I’m going to get my email back,” another wrote. “Was on hold for 8+ hrs before giving up.”

“I own an IT company for the past 26+ years and have so many of my clients on your service, INCLUDING mine,” one person wrote in a comment on a Rackspace Facebook post about the outage. “The lack of transparency on this is unacceptable and to me smells like a hack or ransom is happening. This should NEVER EVER take nearly 24 hours to resolve — It is unacceptable and interrupting my IT business.”

“You’ve lost our business,” another commented.

Early Friday morning, Rackspace said it was “investigating an issue that is affecting our Hosted Exchange environments” and customers’ ability to access the Outlook Web App. After shutting down the service, the company said Friday evening that it had “determined that this is a security incident” affecting Hosted Exchange accounts.

By Sunday morning, it said it was working to reduce wait times for customer service that “are much longer than usual.”

Recent struggles

The outage is the latest among several issues facing the struggling company, which has a long history in San Antonio.

Rackspace was founded in 1998 by Trinity University students and originally hosted websites for clients. It first went public in 2008, around when it converted the former Windsor Park Mall into its headquarters.

But by 2016, it had lost about 60 percent of its market value amid competition from heavyweights such as Amazon, Microsoft and Google. That led to New York-based Apollo Global Management taking it private in a $4.3 billion deal.

Rackspace changed its business model and worked with the tech giants to help customers move their data to private and public clouds. It acquired several businesses, including Onica, a cloud services and management company, and Datapipe, a managed services provider for public and private cloud customers.

The company slashed hundreds of jobs in 2017, 2018 and 2019. Then in 2020, Apollo took Rackspace back to the stock market with a second initial public offering. Its performance as a public company has been lackluster. Though it has seen increasing revenue, Rackspace’s last profitable quarter was in early 2019.

Early last year, Rackspace laid off about 700 employees, or 10 percent of its global workforce. The company said it expected about 85 percent of the eliminated positions to be filled at its offshore customer service centers.

Reorganization

Earlier this year, Rackspace said it was planning a reorganization aimed at increasing profitability by splitting the company into separate business units providing public and private clouds.

In late September, Rackspace named a new CEO to oversee the reorganization. President and Chief Financial Officer Amar Maletira replaced Kevin Jones as CEO. Jones moved to a position with Apollo, Rackspace’s largest shareholder.

Last month, Maletira said Rackspace was making “good progress” on the reorganization set to roll out Jan. 1.

In October, Rackspace announced that it was leaving its longtime headquarters and downsizing to a sliver of its current footprint at offices on the North Side.

Next year, the company will take over 75,000 to 90,000 square feet of space at an office building just north of Loop 1604 along U.S. 281 near Stone Oak. Its current headquarters, known as The Castle, includes about 1.2 million square feet.

Rackspace shares fell about 2 percent to $4.85 in Friday trading. They continued falling after hours Friday, to $4.77.