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Rackspace CEO Bets the (Server) Farm on 'Open Cloud'

In a public cloud such as Amazon's (AMZN) S3 and EC2 offerings, customers access shared services like storage and server power from third-party companies, whereas private clouds can be run at customers' own sites or on dedicated resources at a third-party location.

Tech research firm IDC estimates that revenue from public IT cloud services alone exceeded $21.5 billion in 2010 and will reach $72.9 billion in 2015, growing four times faster than the IT market as a whole.

Another cloud specialist, Proofpoint (PFPT - Get Report), says customers are clearly becoming more comfortable with the cloud model. Whereas Rackspace focuses on cloud hosting, Proofpoint touts specialized security services, according to CEO Gary Steele.

"There are things that we can do as a cloud-based service that are impossible to run on-premise such as big data processing," he said in an interview. "Think about non-tech organizations -- the financial services and health-care organizations -- do they want to build these systems and hire all the staff to run them? Probably not."

Shares of Proofpoint, which also released strong second-quarter results this week, dipped 0.6% to $14.20 on Thursday. Rackspace shares, which have risen more than 24% this year, crept up 0.2% to $53.57.

--Written by James Rogers in New York.

>To submit a news tip, send an email to: tips@thestreet.com.

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