Rackspace is about to lay off ten per cent of its workforce

Most roles will go overseas where wages are lower

Rackspace has revealed plans to literally decimate its workforce, cutting headcount by 10 per cent.

In a stock filing with the US Securities and Exchange Commission (SEC), the company states that it plans to backfill around 85 per cent of the lost positions through offshore service centres.

The company did not disclose where those positions will go specifically, but analysts expect new roles to be in countries with lower average wages.

According to Texas Public Radio, Rackspace will cut about 700 jobs at its headquarters in San Antonio.

Employees at other locations are also facing layoffs, including the UK; although a source told The Register that this will be fewer than 100 workers (out of about 1,000, so still roughly close to the 10 per cent figure).

Rackspace says it notified all employees facing redundancy on 22nd July. They will leave the firm over the next 12 months.

As part of the plan, the company is expanding its internal training programmes and procedures to train exiting workers and help them develop proficiency in skills like data engineering, cloud engineering and cloud-native software engineering.

This will enable employees to meet other in-demand positions.

The layoffs will cost Rackspace $70 - $80 million (£50 - £58 million) over the next 12-24 months, according to the SEC filing. It will include severance payments to affected workers, healthcare benefits, and other associated costs.

However, the company anticipates generating about $100 million in gross annual savings, much of which will be put into new investments.

Rackspace is headquartered in San Antonio, Texas, and employs about 7,200 workers worldwide. As well as North and Central America, it has offices in Europe, the Middle East and Asia Pacific.

Rackspace layoffs have become almost an annual event, with the company shedding between 100 and 200 workers each year between 2017 and 2019.

In 2017, it laid off about 275 employees - nearly 6 per cent of its workforce - six months after being after acquired by Apollo Global Management. The new layoff is much larger, and may have significant implications for the company.

In 2020, Rackspace reported $2.7 billion in revenue, with a net loss of $245.8 million. In the first quarter of 2021, it reported revenue of $726 million, up 11 per cent from Q1 2020.

The company announced a reshuffle in management last week. COO Subroto Mukerji will move to the role of company president on 1^st August, while CFO Amar Maletira will take over most of Mukerji's responsibilities.