Rackspace to acquire TriCore for its application management capabilities
Rackspace on Thursday announced its acquisition of TriCore Solutions, a leader in enterprise application management. The terms of the deal, which should close in June, were not disclosed, though Rackspace called the deal its largest acquisition ever.
TriCore manages a range of applications including enterprise resource planning (ERP) solutions from Oracle, SAP, and other vendors. Customers have asked Rackspace to deliver managed services for ERP, business intelligence, analytics and data warehousing workloads. Up until now, it couldn't offer that.
"TriCore for us is a capability-driven acquisition to get more products and services to our customer base as quickly as we can," said Matt Bradley, VP of strategy and corporate development for Rackspace, to ZDNet.
The acquisition is the latest step Rackspace has taken to expand beyond its core cloud management services. Last month, the company launched its new Global Solutions and Services (GSS) division aimed at delivering professional services.
Rackspace started shifting toward customer support services last year after it had trouble competing as a cloud provider against major companies like Amazon, Google, and Microsoft. It's now one of the top managed service providers for AWS, with hundreds of engineers certified as experts on the AWS platform. The company left the public market late last year following a $4.3 billion deal with the private equity firm Apollo Global Management.
While Rackspace doesn't detail its financial results as a private company, Bradley said managed cloud customer accounts are up over 500 percent since last year. Additionally, the cash the business is generating is at an all-time high.
With that cash, "our new ownership wants to be aggressive and invest in capabilities that are going to make us the leader in application and infrastructure management at a global scale," Bradley said.
TriCore CEO Mark Clayman will be joining Rackspace as a senior operational leader. "This is not a, 'buy the company, buy the customer, slice-and-dice the organization" deal, Bradley said. "We're truly buying a product capability because our customers want this."
Since many companies are looking for the same partner to manage their enterprise applications and their single-tenant and public cloud solutions, Rackspace and TriCore see an opportunity for cross-selling those services to their combined customer base, as well as to new customers.
After surveying 4,000 of its customers, Rackspace found that its largest customers weren't interested in outsourcing its application management, nor were its smallest customers. Mid-market customers, however, are looking for help "either getting a better service experience or a lower total cost -- or both -- for a whole set of enterprise applications that companies... shouldn't be managing internally," Bradley explained.
That customer profile fits nicely with TriCore's target customer, which is a business bringing in between $300 million and $5 billion in revenue.
Meawnwhile, Rackspace's survey showed that 42 percent of its customers plan to migrate to the cloud or upgrade in the next two years. "We see an upgrade or migration as a trigger event to introduce them" to managed professional services, Bradley said.
As it finalizes the acquisition, Rackspace is also readying for a change in leadership: Earlier in the week, the company announced that tech veteran Joe Eazor will come on as Rackspace CEO on June 12.