Rackspace outage persists with no immediate plans to restore service

As the outage of Rackspace Technology Inc’s email service extended into a fourth day on Monday, customers had questions but the San Antonio company didn’t provide many answers.

That left some on their own as they looked for other ways to communicate with customers and do business. Others complained of spending hours on hold waiting for customer service and the difficulty of migrating accounts to other platforms without support.

That’s what Bandera business owner Stephanie Atkinson did when she and her husband discovered Friday that their email system wasn’t working. He spent the weekend switching their business account to GoDaddy.

“Monday, I’m working, but not thanks to Rackspace — thanks to myself,” said Atkinson, who works in technology market research. Her husband runs a helicopter business.

Rackspace told customers early Friday that it was experiencing problems with its Microsoft Exchange platform, which provides email services. By Friday night, he had confirmed that the problem, which he called a “major failure,” was an unknown security emergency. On Sunday, he said there were no immediate plans to restore the service.

Original story: Rackspace blames ‘security’ for outage of email service for customers

Instead, the company advises customers to move to a competing service for email services – the Microsoft 365 cloud – which it says it offers for free. On Sunday, he said that at least 1,000 employees are working to answer customer questions and make calls for support on migrant accounts.

Rackspace did not respond to questions Monday about the nature of the outage, the number of customers affected or when the service might resume. The company also refused to make an official for an interview about the situation, instead directing the reporter to its website, where it distributes updates.

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The company said Monday morning, “We have successfully restored thousands of customers’ email service to Microsoft 365 and are continuing to restore email service to any affected customers.” At this time, the move to Microsoft 365 is the best solution.”

Rackspace stock fell more than 15 percent Monday to close at $4.10 per share.

Angry customers

On social media, angry customers continued to blast the company. Some complained of hours spent on hold with customer service and difficulty switching to Microsoft 365 without support.

Atkinson, a Bandera businessman, said she and her husband have been longtime Rackspace customers and have never had a problem before. He said Monday that he had not canceled the service because he hoped to have access to his old emails when the service was restored. If their recovery isn’t possible, he said, he’s “done it with Rackspace.”

“It’s horrible,” Atkinson said. “They serve a lot of small businesses around the world and not everyone is as tech savvy as I am.”

Glen Phillips, a Californian whose business deals with music artists, said he also spent hours this weekend trying to figure out how to access his emails.

“This is all nonsense,” he said.

At one point, after being held up for four hours waiting for customer service, Phillips said her call had been disconnected.

“It’s an unknown,” he said of concerns about his business. “It’s true that people are trying to arrest me but they can’t do that, then you have to let them know about the chaos.”

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Phillips finally made progress and spoke with a Rackspace representative Monday morning who assured him that his emails would not be lost.

“I want to get those emails back,” he said.

It’s not new

Some small business owners and consumers struggle because they don’t have IT staff and don’t understand how to migrate their accounts to Microsoft 365, said Bryan Hornung, CEO of Marlton, New Jersey-based Xact IT Solutions said.

More at Rackspace: ‘Confidence in our plan’: Rackspace CEO optimistic about success of corporate restructuring

“The frustration is very high,” he said in a LinkedIn video.

Such security is not new, 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 problem could be caused by a threat actor exploiting known vulnerabilities in Microsoft, including those known as ProxyNotShell.

“I expect continuing attacks on organizations from Microsoft Exchange by 2023,” he wrote.

Rackspace said Sunday that it is working both internally and with “external experts to determine the scope and impact of this issue.” He also said he expected the recovery operation “could take several days.”

Rackspace is struggling

Rackspace has a long history in the San Antonio area, where it remains the largest technology company.

It was founded in 1998 by Trinity University students and is a website designed for customers. Known as Rackspace Hosting Inc., it went public in 2008, which is around the time it turned the former Windsor Park Mall into its headquarters.

Rackspace eventually changed its business model amid competition from deep-pocketed companies such as Amazon, Microsoft and Google, which caused its market value to decline. It began to increase its focus on providing cloud-based services – including through partnerships with its competitors.

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In 2016, New York-based Apollo Global Management took the company private in a $4.3 billion deal. It has acquired several businesses, including Onica, a cloud services and management company, and Datapipe, a managed services provider for private and public cloud customers.

Apollo took the company public in 2020 but its performance was not good. Although revenue has increased, its last 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 most of the jobs that were cut will be filled at offshore customer service centers.

Last year, Rackspace said it was planning a restructuring to improve profitability by splitting the company into separate business units that provide cloud and public services.

In late September, the company named a new CEO to oversee the restructuring. President and Chief Financial Officer Amar Maletira replaced Kevin Jones as CEO, while Jones moved to a position at Apollo, the majority shareholder of Rackspace.

The company also announced that it is leaving its long-term headquarters and shrinking its office space.

The company will move into a 75,000- to 90,000-square-foot facility north of Loop 1604 along U.S. 281 near Stone Oak next year. Its current headquarters is about 1.2 million square feet.

Last month, Maletira said Rackspace was making “good progress” on the restructuring, which was planned for January.

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