Rackspace outage woes continue
Company provides few answers to upset customers as stocks plummet
As an outage of email services provided by Rackspace Technology Inc. stretched through a fourth day Monday, customers had questions but the San Antonio company wasn’t offering many answers. That left some to fend for themselves as they looked for alternatives to communicate with clients and conduct business. Others complained of hours spent on hold waiting for customer service and the difficulty of migrating accounts to alternative platforms without support.
That’s what Bandera business owner Stephanie Atkinson did after she and her husband noticed Friday their email systems weren’t working. She spent the weekend switching their business accounts to Godaddy.
“Monday, I’m working, but not thanks to Rackspace — thanks to myself,” said Atkinson, who runs a technology market research firm. Her husband operates a helicopter business.
Rackspace said Friday morning it was having issues with its hosted Microsoft
Exchange platform, which provides email services. By Friday night, it had attributed the problem to an unidentified security incident. On Sunday, it said there were no immediate plans to restore it.
Instead, the company is advising customers to move to a competitor’s service for email services — cloud-based Microsoft 365 — which it said it’s providing for free. It said Sunday that at least 1,000 employees were working to address customer questions and take calls for support in migrating accounts.
Rackspace did not respond to questions Monday about the nature of the security incident, the number of customers affected and when the service
could be restored. The company also declined to make an executive available for an interview, instead directing a reporter to its website, where it is posting updates.
“We have successfully restored email services to thousands of customers on Microsoft 365 and continue to make progress on restoring email service to every affected customer,” the company said Monday morning.
Rackspace shares plunged more than 15 percent Monday to close at $4.10.
‘Just ridiculous’
On social media, irate customers were blasting the company. Some complained of hours spent on hold with customer service and difficulty switching to Microsoft 365 without support.
Atkinson, the Bandera businesswoman, said she and her husband are longtime Rackspace customers and hadn’t had previous problems. She said she has not canceled the service because she hopes to access her old emails. If she finds out recovery won’t be possible, she said, she’s “done with Rackspace.”
“It’s been a horrible thing,” Atkinson said. “They serve a lot of small businesses around the globe and not everyone’s as techsavvy as me.”
Glen Phillips, a Californian who manages musical artists, said he, too, spent hours this weekend trying to figure out how to access his emails.
“This whole thing is just ridiculous,” he said.
At one point, after being on hold for four hours, Phillips said the call simply disconnected.
“It’s the unknown factor,” he said of concerns about his business.
“It’s the fact that people were trying to get ahold of me and couldn’t do that, and then you have to make them aware of the disruption.”
Phillips eventually made progress and talked to a Rackspace representative Monday morning who assured him his emails will not be lost.
“I just want to get those emails back,” he said.
Not uncommon
Bryan Hornung, CEO of Marlton, N.j.based Xact IT Solutions, said some small- and medium-sized business owners are struggling because they don’t have IT staff and don’t understand how to migrate their accounts to Microsoft 365.
“The frustration is very high,” he said in a Linkedin video.
Such security incidents are not uncommon, Hornung said.
“We see these third-party cloud providers being attacked all the time,” he said.
In a Medium blog post, security researcher Kevin Beaumont said the problems could be caused by a threat actor exploiting known vulnerabilities in Microsoft, including those known as Proxynotshell.
“I expect continued attacks on organisations via Microsoft Exchange through 2023,” he wrote.
Latest problem
Rackspace has a long history in the San Antonio area, where it remains the biggest tech company.
It was founded in 1998 by Trinity University students and originally hosted websites for customers. It was known as Rackspace Hosting Inc. when it first went public in 2008, which was around when it turned the former Windsor Park Mall into its headquarters.
Rackspace later changed its business model amid competition from deep-pocketed companies such as Amazon, Microsoft and Google, which had caused its market value to plummet.
In 2016, New York-based Apollo Global Management took the company private in a $4.3 billion deal. It has since acquired multiple businesses, including Onica, a cloud services and management company, and Datapipe, a managed services provider for public and private cloud customers.
Apollo took the company public again in 2020, but its performance as a public company has since been lackluster. Its revenue has risen, but its last profitable quarter was in early 2019.
In recent years, Rackspace has cut hundreds of jobs, including in 2021, when it laid off about 700 employees, or 10 percent of its global workforce.
The company said the bulk of the slashed jobs would be filled at its offshore customer service centers.
Earlier this year, Rackspace said it was planning a reorganization aimed at boosting profitability by splitting the company into separate business units providing public and private clouds.