Xero shares in Rackspace compo

Wellington-based SaaS firm shares small portion of up to US$3.5 million payout

Wellington-based online accounting software provider Xero has received a small refund from hosting partner Rackspace in compensation for a 45-minute outage last week.

Rackspace is being forced to pay out between US$2.5 million and $3.5 million in service credits to customers in the wake of a power outage that hit its Dallas datacentre.

The datacentre provider, which offers a variety of hosting and cloud services for enterprise customers, suffered power generator failures on June 29 that caused customer servers to go down for part of the day.

Rackspace reported to the Securities and Exchange Commission that it expects to issue one-time service credits to impacted customers totaling $2.5 million to $3.5 million. The final number hasn't been determined as Rackspace is "continuing to assess the financial impact of service credits due to these events."

Paul Williams, Xero's general manager of finance, says a small refund arrived yesterday.

Williams says Xero was able to communicate with customers throughout the disruption through its blog and on Twitter. That was unlike Rackspace, whose blog also went down in the outage, he says, but still used Twitter to inform users.

"The feedback was surprisingly supportive," Williams says. "No one was really upset."

The disruption came around the financial year end in Australia, but that wasn't much of an issue, he says.

"We were lucky it wasn't on GST day," he adds.

"From a Xero point of view, Rackspace is one of our long-term partners. We are disappointed about what happened last week, but the ability of a top tier provider like Rackspace is what we need," Williams says.

He says Xero pays a premium over other offerings to get that level of service.

The 144,000 square foot datacentre is in the Dallas suburb of Grapevine and is Rackspace's primary hosting location. Outages previously struck the facility in November 2007.

This time, Rackspace apologised to customers in a company blog, saying the power outage was "the result of a range of power infrastructure issues," and that the company serviced its UPS units and generators after the incident. The power outage affected portions of the facility.

"Although we have had some issues with this datacentre before, please know that we will do what it takes to improve its reliability and performance," Rackspace said. "We owe you an action plan to prevent this type of thing in the future, and we'll get that to you as soon as it is ready."

On Wednesday, Rackspace said it had completed production load tests on generators, eliminating the problems behind the outage and returning the datacentre to "normal operating conditions."

Rackspace has a long history providing co-location services, and is making a run at the emerging cloud computing market with new services for hosting storage, virtual servers, and a Web application platform.

Several customers complained on the comment portion of Rackspace’s blog last week, with one person writing "your lack of redundancy for your own internal operations is highly concerning."

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