CEO of Rackspace Taylor Rhodes talks with an attendee. Photo by Scott Ball.
Rackspace CEO Taylor Rhodes is leaving the managed cloud company later this month. Credit: Scott Ball / San Antonio Report

Rackspace CEO Taylor Rhodes announced Wednesday morning that he is leaving the managed cloud company effective May 16 to become CEO of a smaller, private company in another city. The company named current President Jeff Cotten the interim CEO.

“I’m proud to have led Rackspace through a hinge in its history, as we seized the leadership of the young and fast-growing market for managed cloud services, and as we went private under the ownership of Apollo Global Management and its partners,” Rhodes said in announcing his departure on the Rackspace blog.

Rhodes noted that the company he’s joining is comparable in size to what Rackspace was 10 years ago, when Rhodes first joined in 2007. This new position will allow Rhodes, 45, to spend more time with his family, especially his high school-aged children.

The decision to leave Rackspace was Rhodes’ alone. Apollo Global Management, which acquired Rackspace Hosting Inc. for $4.3 billion in November, Rackspace’s board members, and the company’s “Rackers” had wanted Taylor to stay in his capacity as CEO of the company, according to company officials.

Rackspace board of directors, led by Apollo, has launched a search for a long-term CEO, and they consider Cotten, who has been with Rackspace for more than eight years, a strong candidate for the position.

Rhodes called his choice to leave “the toughest decision I’ve ever had to make: I’m leaving the company that I love, where I’ve worked for the past decade and made lifelong friends, and where it’s been my honor to serve as CEO.”

Rackspace may have started out as web hosting company, but it transitioned into becoming an early cloud infrastructure company in a market space where it soon faced competition from Amazon Web Services (AWS).

Since its acquisition by Apollo, Rackspace has gained the opportunity to plan for the company’s growth in a post-Amazon market. Rackspace recently signed an agreement to become the first managed services support partner for the Google Cloud Platform and opened a data center in Germany.

Rackspace cut its total U.S. workforce by 6% in February, which resulted in 200 people losing their jobs at the company’s headquarters in Windcrest. The cut was part of a companywide effort to reduce company spending by 7%, or $100 million, in 2017.

Before the cuts, the managed-cloud provider employed 3,300 people in San Antonio, 500 in Austin, and about 2,300 in other U.S. cities and in London, Sydney, Hong Kong and Munich.

“We recently reported strong fourth-quarter results to our bond and debt holders,” Rhodes said. “And 2017 is shaping up to be even stronger, as we’re exceeding almost all of the financial targets that we established with Apollo and our board.

Cotten, 39, will lead the company as it continues to build its own public cloud information technology business, assisting customers as they transition their systems into the cloud.

Cotten posted his thoughts on “Rackspace after Taylor” on the company blog Wednesday.

He emphasized Rackspace’s performance and how it is well positioned to “keep driving to expand Rackspace’s leadership of the fast-growing market for managed cloud services.”

“Under our recently announced partnership with Google, we will soon add managed public cloud services for the Google Cloud Platform,” Cotten wrote in his blog post. “This will make us the only company on the planet that can deliver expertise and support on all the leading public and private clouds, including the VMware, Microsoft and OpenStack private clouds.”

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Iris Gonzalez

Iris Gonzalez writes about technology, life science and veteran affairs.