Racking Up Recruiting Success at Rackspace

A chance encounter sent Nick Hamilton down a path that changed his life.

The 29-year-old San Antonio resident was working a series of dead-end jobs installing car stereos and doing oil changes while pursuing a degree in 3-D animation when he became disenchanted by his job prospects.

“People were like, ‘Oh, you’re an artist! That’s too bad. If you were a programmer, we’d have a position for you,’” Hamilton said.

Then an acquaintance told him about Open Cloud Academy, a training program getting ready to launch nearby that promised to make students ready for well-paid information technology positions in a just a few weeks. It sounded too good to be true.

But last August, just eight weeks after starting the program, Hamilton landed a job as an enterprise Linux administrator with Rackspace Inc., the San Antonio-based IT company behind Open Cloud Academy.

“Everything lined up so that it hit me at a time where I was really discouraged about my current path and it sounded like a golden opportunity,” Hamilton said.


Nick Hamilton
Rackspace engineer Nick Hamilton.

It ended up being a golden opportunity for Rackspace, too. Like many technology companies, Rackspace struggles to find qualified technical employees to fill in-demand jobs. The company regularly paid recruiting agencies as much as $15,000 per hire to recruit entry-level engineers and technical workers — if they could find them at all.

As it turns out, the answer to the company’s recruitment problem — turning internal skills training expertise into an outward-facing education vehicle — was right in front of it all along.

Sunny Forecast, Cloudy Prospects
The number of jobs in cloud technology will grow to about 7 million by 2015, according to data from research firm IDC, making it the fastest-growing segment for IT workers. More than half of global companies have made cloud computing a high IT priority, and nearly two-thirds use, are implementing or plan to deploy cloud computing.

Those newly minted jobs will be in positions that are not just peripheral to business, but central to it, said Cushing Anderson, program vice president for IDC. Many aspects of business, from databases to software, are reliant on cloud technology — defined as the delivery of software or services over the Internet — so it’s critical for IT staff to be highly trained and competent.

For Rackspace, that need is particularly acute. The onset of cloud computing represented a transformation of business, not just the people needed to staff it.

Co-founded in 1998 by entrepreneur and real estate investor Graham Weston, the company employs more than 5,000 people who provide IT infrastructure and services to companies looking to outsource their technology needs. In the early days, the primary cost of the business resided in servers and technical infrastructure. YouTube was a notable early client.

But with the rise of the cloud, Rackspace had to make the jump from being a hardware company to one that relied increasingly on soft skills and customer service, with a mission to provide clients with what company leaders call “fanatical support.”

“Making complicated things simple, making hard things easy — that is really the heart of the value of what we deliver to our customers,” said Weston, also Rackspace’s chairman and interim CEO. “It started as a business that needed no people and really became a business where people were at the center of the value we produce.”

That value resulted in $1.5 billion in revenue for Rackspace in 2013, with cloud computing representing as much as two-thirds of recent growth. Underpinning that shift from hardware to services was a corresponding surge in demand for engineers with cloud competency.

Cloud computing requires “a totally different set of skills than what IT professionals were preparing themselves for 10 years ago,” said Duane La Bom, Rackspace’s director of learning and development.

Larry Guillory, Rackspace Vice President of Talent Management
‘We couldn’t get people in the door’: Rackspace’s Larry Guillory.

Shifting skill sets is one problem. Lack of available talent is another. “The supply if you look at all the indicators is getting shorter and shorter because fewer people are going into the STEM areas,” said Larry Guillory, vice president of talent management at Rackspace.

The pain accompanying that shift is sharper for Rackspace because of the realities of the local market. The bulk of the company’s jobs are in Texas, far from industry centers in Silicon Valley and the East Coast.

“For us, a bigger challenge [is] not just that this shift has taken place and it’s hard to find people with the skills,” La Bom said, “but when we do find them, convincing that talent to relocate to San Antonio.”

Between job postings, screening and assessment, travel, relocation cost and agency finder fees, the price of hiring an entry-level person trained in Linux — the open-source operating system used for many cloud computing jobs — can reach up to $15,000 per hire. And with plans to hire as many as 1,200 people, including 900 in San Antonio, finding even entry-level people has become increasingly difficult.

One option was to offshore jobs. Another was to set up remote offices in locations with concentrations of IT talent. Neither presented a good solution. “Every city in America has an undersupply of people with these skills,” Weston said.

Added Guillory: “The problem was we couldn’t get people in the front door. But once we got them in, we could accelerate them pretty quickly.”

That’s when Rackspace turned inward, taking the company’s existing Linux training model and turning it inside out. The result was Open Cloud Academy, an eight-week certification program aimed at filling the cloud computing skills gap by offering courses in Linux and other core areas to the public.

“Since it’s hard to find people with the right skills, we’re providing the skills,” said La Bom, who heads up the academy in addition to the company’s internal training program, Rackspace University. “Since it’s hard to convince people with the skills to move to San Antonio, we’re teaching people locally.”

OCA in Overdrive
The initial goal was lofty: to hire about half of the people who went through OCA. But given the cost of recruitment, it was a risk worth taking. “Even if we don’t hire everyone, at least we have access to more people coming out of that training program who will be qualified for entry-level roles at Rackspace,” Guillory said.

OCA officially launched in March 2013. The early returns were encouraging. Of the 71 students who graduated from the first two classes, 41 have been hired and an additional 17 are in the interview process. The company has since expanded the program; more than 541 students have registered and started training.

The program consists of two phases designed to immerse students — some of whom have little to no IT experience — in the details of networking. Hamilton, who was part of the pilot, likened the experience to “getting strapped onto a rocket.”

Classes were five days a week from 8 a.m. to 5 p.m. “When you’ve never heard of Linux before it’s kind of hard to wrap your mind around this entirely new concept,” Hamilton said. “We put in long hours, some weekends.”

Sidebar: Inside Open Cloud Academy

Similar hours and weekends were spent in the build out of the program. Once the decision to launch OCA was made in October 2012, the challenge quickly became logistical. While Rackspace already had the content and curriculum, it still needed a venue, equipment and trainers.

Duane La Bom
Rackspace director Duane La Bom’s learning team built out Open Cloud Academy in five months.

Initially, Guillory and La Bom considered hosting programs in Rackspace University at the company’s headquarters, nicknamed “The Castle.” However, they quickly realized it didn’t have enough space. They opted instead for a site on the sixth floor of the Weston Center, one of Weston’s real estate holdings and the city’s tallest building. It also served as the company’s first office.

From there, Guillory and his team began construction of a pipeline from the classroom to the office. Recruitment started early, with students touring Rackspace’s headquarters, working on resumes, doing mock interviews and meeting with potential hiring managers.

To Rackspace, the academy served as an example of how traditional HR silos — in this case, learning and talent acquisition — can work together. Instructors, well-versed in job requirements, report candidate progress back to recruiters, who can then decide if an individual is worth hiring.

“In essence, we’re doing an eight- to 12-week interview with these folks, not a 45-minute interview,” Guillory said. “Our bet was the longer we work with somebody, the better we get to know them, so if we made decisions about hiring any of the graduates it would be a more solid decision.”

In addition to serving as a recruitment and development tool, OCA also served as an employer branding initiative and onboarding program. Students were “drinking the Kool-Aid early,” Hamilton said, meeting “Rackers” and getting a sense of what it’s like to work for the company.

To IDC’s Anderson, Rackspace’s external training effort is better than those of many companies that end up pouring money into community colleges or local IT education programs. Anderson points to Rackspace’s targeted investment as the best practice he has seen in community education.

“They’re actually getting to touch folks that are demonstrating interest in that technology,” he said. “They’re walking in, they’re demonstrating commitment, they’re showing up and they’re sitting down for a class for a period of time. And Rackspace gets to look at them and gets feedback from their instructor.”

OCA team
The OCA team and one of their graduates: left to right, Guillory, Lelani Mercado of Project QUEST, Hamilton, Maria Salazar of Project QUEST and La Bom.

To Weston, the business case was clear. “We’re much better off hiring from a pool of qualified applicants than having to pick from people that don’t have the skills to begin with and we have to train them.”

Still, Rackspace’s move to train outside students isn’t without debate, especially in light of the company’s decision to charge tuition of $3,500 per student to offset the cost of running the program.

“We didn’t put any quota measures around it and we didn’t set out to make lots of profit,” Guillory said. “What we set out to do was to build a business that was sustaining, that allowed us to do something good for the community, good for students, good for Rackspace.”

An intensive, hands-on program like OCA, which includes as many as eight courses, could cost somewhere in the range of $18,000 to $20,000 on the open market, La Bom estimated. An independent search of prices for single self-paced online Linux courses from other vendors found prices that vary from $195 to as much as $2,500. Toss in the cost of certification, and one course can come close to $3,000.
The decision to charge tuition strikes some as a backward step. “To me, that’s not the most desirable element,” Anderson said. “The incremental cost of adding a body to a training class is teeny. They might think of it as a lost revenue stream, but you’re in fact gaining a known body for your recruitment process, which is in fact more valuable to you than the [$3,500] you would have gotten from the class.”

La Bom contends that charging tuition forces students to think more deeply about their career goals and commitment. “We’re putting them under a lot of stress over the two months they spend with us,” he said. “If there’s no skin in the game, if there’s no reason to stay in it beyond just wanting to make a career change, we feel like we would lose some of those students.”

For students who struggle with the cost, Rackspace says it works with community organizations like Project QUEST to fund scholarships. The company is also exploring setting up a nonprofit to secure grants for student scholarships.

For others, the question of whether to charge tuition boils down to the long-term value students get from the experience. If taking a course from the academy leads to better job prospects, then it’s probably OK, said Joel Simon, vice president for public sector services at the Council for Adult and Experiential Learning, a nonprofit group that works to build corporate-community education partnerships.

“You don’t want it to be a fee for getting a job at the company,” Simon said, “but if it’s a fee that gives you skills that are marketable broadly and that help you get a job somewhere else, I don’t know that’s a negative compared to a school that does the same thing but that is not specifically tied to an employer.”

Rackspace leaders agree, saying the certifications students achieve in networking administration and IT are industry standards that are recognized worldwide and can be applied to any job. Some graduates will choose to work for Rackspace. Others will go elsewhere.

“Either way, it’s good for the talent base of our city,” Weston said.

On the Horizon
Guillory said Rackspace’s development of OCA demonstrates the need for talent managers to think beyond traditional silos when looking to solve business challenges. It also shows that businesses can play a pivotal role in overcoming a glum local employment outlook by helping solve talent challenges in the community.

“Why would any major business feel like they have a shortage?” Weston said. “Why would they let themselves be a victim of being short? It doesn’t make any sense. This is where we as employers have the opportunity to go out in the marketplace and train people for the skills we need, rather than expect them to show up on our doorstep.”

Weston’s initial challenge to Guillory and La Bom was to graduate 1,000 students in two years. Now, he is hopeful that they’ll hit 2,000 graduates in 2015.

For some, the effort has been deeply personal. Hamilton scored perfectly on his Linux exam and “went from zero to hero” in just eight weeks in the OCA program, Guillory said.

“We changed that guy’s life. I have no doubt Nick will be a leader in our tech organization in the next two years. Without OCA, we wouldn’t have found him.”