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Wednesday, 22 August 2012 11:50

Rackspace invests $millions in local cloud

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Global cloud and IT services provider Rackspace will offer local organisations the opportunity to use an Australian hosted version of its services from the end of the year – but warned would-be clients to expect to pay more because of high local bandwidth fees.

While the actual costs of Rackspace services are expected to be largely similar to those charged for using the company’s overseas data centres, overall charges will be higher because bandwidth costs in Australia are “magnitudes larger” than those charged overseas according to Mark Randall, Rackspace’s country manager for ANZ.

Jim Fagan, managing director of Rackspace in Asia Pacific, vising Sydney from Hong Kong for today’s announcement, acknowledged that the local service would be more expensive than Rackspace’s international offering but argued that it would not place the company at a competitive disadvantage because it would be competing with other providers also subject to local bandwidth costs.  He noted that the bandwidth issue was already an inhibitor for some software as a service providers, which had to take smaller margins as a result.

Asked whether the arrival of the national broadband network would make much of a difference, Mr Randall said that while it would likely drive the overall growth of the digital sector “we are not banking on 100 megabits to the home.

“The NBN is there as a backdrop...a long term positive but not something you are going to base your business on.”

While the company is expecting to charge a premium for people to use the local data centre, local clients are being offered significant assurances regarding data sovereignty and privacy.

The company today said that if Rackspace was approached by US Authorities seeking access to data held in the Australian data centre, that would not be granted without the express permission of the client or the Australian authorities.

While the risks of data access by US cloud providers through the US Patriot Act have been somewhat overblown, it is unclear exactly how Rackspace might be able to sidestep the process if it was asked to provide access to its international data centres under the provisions of that Act.

The company however issued a statement from its general counsel, Alan Schoenbaum, saying that; "Rackspace will not transfer customer owned data from our Australia data centre to a law enforcement agency of another country (including the United States) without a customer's consent unless it is compelled to do so by Australian law. Data hosted in Australia by Rackspace is subject to the same laws as cloud services operated by wholly owned Australian companies."


Mr Randall said that the customers expressing most interest in local hosting were Government and financial sector users. However the company has yet to sign up any foundation clients for the new Australian business.

He said that a number of SaaS providers were looking to host services locally out of Australia. “This makes it an easier decision for them to move these services into Australia,” said Mr Randall.

To establish a local offering Rackspace has inked a ten year deal with Digital Realty and will become the anchor tenant in its Erskine Park facility being built in Sydney’s west. The centre will be Rackspace’s ninth international facility, and will represent investment of “tens of $millions over the next 20 years,” according to Mr Fagan.

Rackspace says 50 new jobs will be created as a result. Rackspace has had a local presence in Australia for just three years, although it has serviced Australian clients for ten years through its international operations.

Digital Realty’s data centre will initially comprise four halls with a 1.4 MW, 400 cabinet capacity, with a Tier 3 classification and a PUE (power use efficiency rating) of 1.3 which is close to current environmental best practice. There is room on the site for a further four halls according to Rackspace, which is initially planning to set up a 480 KW data centre on the site, which it says will deliver the capacity it expects to need during the first six months’ operation.

NSW Deputy Premier and Minister for Trade and Investment, Andrew Stoner, today welcomed Rackspace’s investment in NSW, saying that the State had become a natural home for cloud based infrastructure claiming 42 per cent of all cloud businesses were now based in NSW. While that has been the case, other states are now starting to get more of a look in - Fujitsu this week announced it was establishing a Western Australia instance of its cloud.

The NSW Government has offered financial support to Rackspace in the form of its Jobs Action Plan which offers payroll tax rebates on any new jobs created through to 2015.

Mr Stoner said that to his knowledge no NSW government contracts had been signed with Rackspace to use the new local data centre, but said that; “We are open to doing business with Rackspace as we move into e-government services.”

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