Ha. I work for a company which has the word "Enterprise" in it. And fittingly, the full company name exceeds 50 characters which is helpful when filling out government forms.
The 'undefined' error in the CLI tool, the generic "this operation failed" messages in the dashboard, the unexplained authentication failures. If I encountered those multiple times when trialing a service like this, I would abandon it.
It's one thing for there to be errors in OSS code that I can fix, but with a huge and complex service stack like this you're basically at its mercy, and generic errors and failures leave you completely powerless. When something goes wrong with AWS, I've always gotten extensive information which aided in debugging.
I guess if you're part of a large enterprise you have a support contract with MS which gives you leverage around issues like this, but that doesn't apply at the level I currently work at.
Another anecdote: I manage a a couple of hundred VMs, databases, storage accounts, event hubs, Azure Web Apps and much more. Errors in the UI is pretty much a non-issue to me. I have multiple user accounts and manage multiple subscriptions and sometimes switching accounts gives me an error and I have to logout and back in. A bit annoying but hardly something which would make me switch.
I do suspect that their portal will not work well if the connection between you and their data center is shaky though.
It's often called plus addressing. Quite a common feature in mail servers and mail services. MyName+<any-random-text> at gmail.com ends up in MyName's mailbox.
Doesn't that defeat the purpose? Surely anyone savvy enough to be dealing in black-market e-mail address lists is savvy enough to just remove everything after the + sign?
Probably yes. The software I'm using supports configuring the character per domain, so I can use say . instead of +, so I could use myname.service@example.com which I assume would solve that.
Off topic, but can you tell me more about the issue with being taken over by a private equity firm? I work for a 10k employee company who will be taken off stock exchange and sold to a Chinese equity firm.
Besides cost cutting via layoffs being a favored (although by no means the only) strategy for PE firms, there's also debt servicing.
Typically, PE companies buy the company while only putting down a small portion of the purchasing price. They finance the rest through banks. The whole concept is pretty similar to buying a house with a mortgage, except you're buying a company. The debt payments are then a tax write-off, and all/most available company cashflow is diverted to paying off that loan. The ideal company is one with reliable cashflows and access to a growing market (of which I'd say a large cloud infrastructure provider fits the profile).
To improve cashflow: pay fewer people less, convert assets to cash, and/or make more money from your core business. Usually a mix of the three.
From an organizational standpoint, you can think of it like Rackspace just took out a very large (maybe subprime) mortgage on the company and some new people are going to try to make sure that doesn't turn out to be a horrible bet, first for the investors, then for the company.
It also depends on the kind of PE firm. The vulture firms will buy a stable firm and load it up with debt doing stock buybacks and then cash out and let the company crater.
Other firms, like Texas Pacific Group, are turn around specialists that take struggling firms and fix their business processes to make them run better and raise the stock price by actually building a better company.
There are a lot more of the former than the latter, mainly because it takes some uncommonly smart people to run the latter kind of fund and just a bunch of bean counting jerks to the run the former kind.
Your first example is very old school thinking. When a company 'craters' it's not like everyone gets off scott free. All of the people holding the debt, usually big, savvy banks, with the senior tranches of debt have gotten wise to this sort of behavior. And when I say they've gotten wise to it, I mean they got wise to it 20 years ago. In short, if you want to load it up with debt that the company will never pay back and give yourself a big dividend you first have to find someone to lend you that money. If it's obvious to you that that's a bad idea it's obvious to the banks as well.
Most exits in PE are either going public (in which case you have to convince the equity markets that the company is stable), selling to a strategic buyer (e.g., if Apple were to buy RAX from Apollo), or even selling to another PE firm which happens all of the time.
The point is that neither of these scenarios turn out well if you are levering a company up to an unsustainable capital structure.
They own for-profit education companies like University of Phoenix. Read up on their history, especially the law suits, to get an idea of what the management's values are like: https://en.wikipedia.org/wiki/University_of_Phoenix
That's actually a different firm called Apollo Group (which is mostly comprised of Phoenix and a small number of other things) – Apollo Global is a much larger private equity firm with a confusingly similar name
It appears that Apollo Global is part of a consortium that bought Apollo Education Group earlier this year [1]. Looking at the press releases, those appear to be the two Apollos in question. Though, I suppose you should give them some time to see what they'll do with it.
Buying a company with borrowed funds and using the company's cash flows or assets to repay the loan is known as a Leveraged Buy Out (LBO) [0]. It was very trendy in the 1980s but has recently made a comeback.
A good book to read on one of the most notorious examples of an LBO is Barbarians at the Gate [1][2] which dealt with the takeover of RJR Nabisco, a large American food and tobacco company.
For lighter fare, re-watch the 1990 movie Pretty Woman [3][4] but this time ignore the fluffy romance and focus on Richard Gere's character, Edward Lewis, as he goes about negotiating the LBO of a shipbuilding company. Edward Lewis was modeled on a real-life LBO guy, Reginald Lewis, who bought Beatrice International Foods from Beatrice Companies in 1987 in an LBO worth $985 million [5].
I looked into the PE model after meeting a VC firm GP who wanted to find a way to crash that model into the VC model. Dave explained the formula real well but I've also see that a PE firm will sometimes try and raise additional debt financing to grow the business after it purchases the business with debt. Basically the wager is that they can fuel growth (sales) quickly and sell out for a high enough multiple that they make a ton of money in a relatively short period of a few years.
This works in the PE world because these are businesses that have credit and can get debt financing. The typical VC backed company can't get debt financing because they are too risky (early stage) for a traditional lender. That basically but an end to that VC's plan.
What if the people that got the mortgage for the house just want to make it pretty an resell it? I guess that's the fear here, when the buyer is an investment company (house flipper) and not a technology company that wants to increase their market share or add technology / talent to their portfolio.
I hear that this financing model allows the PE firm to limit downside (to what they put down) while allowing for unlimited upside (since the equity is theirs). What's in it for the banks that finance most of it? Just the interest on unsecured loans? Aren't these interest rates typically worse than those on retail (house, credit-card, education) loans?
Debt exists in certain tranches, i.e. there will be low interest secured debt, and higher interest unsecured debt. Banks tend to only lend secured debt against assets and/or cashflow. Unsecured debt is often offered by hedge funds (i.e. 6-8-10% instead of 2-4-5%) and is paid down first.
Why do banks love PE deals? Easy: they make a ton of money off of these deals, with moderate risk. If the business goes under, they are first in line to be compensated. If they make 4% on a $500m loan, that's $20m a year.
Yeah, that's called a buy-and-build strategy, or a bolt-hole strategy. A large number of industries or market segments that are fragmented end up consolidating this way. For example, Lumison is a data center business here in the UK, and they got bought out by Bridgepoint Development Capital. Subsequently BDC and Lumison went on to buy a few other data centers, making one larger data center with the attendant economies of scale
Typically, borrow the money to buy the company, then transfer the debt onto that company's own balance sheet, meaning they have taken control of a company effectively for $0.
1. You need to find a lender willing to lend you most of the acquisition capital.
2. You also need someone to put up the initial equity capital.
3. You need to find a viable company to be acquired that won't crash immediately upon acquisition, and it can't be too expensive. Your first goal is to recover your equity investment. Everything after that is basically profit.
4. Frankly, 99.9% of people have ethical issues (you risk the jobs of 100s of people by overleveraging) with PE deals or don't have the skills and/or intelligence (managing the financial side + running/growing a business is hard) to be able to execute a deal like that.
If all you care about is making money, then private equity is probably one of the "easiest" ways to build wealth (for yourself, that is). At the end of the day, it's nothing more than buying a companies with a huge loan. There are some billionaire entrepreneurs who have used LBOs as their "empire building" tactic, i.e. Rupert Murdoch, John Malone, etc.
Also, check out Amaya Gaming. Classic LBO play done by an entrepreneur.
It's one of those things that's easy if you're of the right class and have the right contacts. Another example would be Holmes raising billions for Theranos through people who were all friends of her family. You need to know the right people to stake you the initial sum (and who will collect their fee for doing so). A few years at a big bank, then Harvard Business School should do it. Oh and also you need to be completely amoral.
Basically, in theory the best way to make money is to serve your customers well. But in practice, financial engineering creates a lot of opportunities where those diverge. This is hard on employees, who value non-financial things like stability and meaning in their work.
I'd say employees certainly value financial things and that "recurring revenue" from their paycheck is one of them. Liquidity events from a transaction would be another. Unfortunately they typically lose the former and almost certainly never get the latter in a PE deal.
I'm not denying the financial angle. But people value job stability beyond the pure impact on their bank account. Even if you know you can switch to another job immediately, the worry that you could be laid off at any moment is unpleasant for many.
The hallmark of being owned by private equity is slashes t every controllable expense, running supremely lean and generally aligning with short term rewards.
Private equity groups don't make money from holding businesses, typically. They make the serious returns when they sell a business to a larger company. Keeping expenses low increases margins and drives the best returns.
The problem is that PE management aligns with short term incentive, which is especially difficult for a tech company where value is often derived from high investment into new and emerging technologies.
You have it backwards. It's activist investors (a.k.a. corporate raiders) that push for short-term improvements in the stock market. Investing in long term growth has been a common reason companies went private. While flipping under-valued companies was popular in the 80's, those days of easy pickings are long gone. Private equity is highly competitive today, and you have to have some real management skill to make money (known as "alpha" in the biz).
One fairly recent example of this in the software business is TIBCO. They were making stupid short-term decisions to satisfy investors. The theory was that going private would allow them to reorganize the business and focus on core competencies without second-guessing by investors.
That or it was just a way for Vivek Ranadive to get the maximum payout for his equity stake so that he could focus on running his NBA team.
As a side note, I went to the annual TIBCO conference right before the buyout and it was pretty clear there that Vivek didn't give a wet rat's rear about TIBCO or software anymore and just wanted to spend his day being an NBA owner.
The easiest and quickest way for the Private Equity company to make your business more profitable is through layoffs. They eventually want to sell the company to make a profit for their investors. In many cases this requires layoffs.
It's a fun read but not very technical, or rather, not technical at all. It's a story, I didn't learn anything about finance or business strategy from it.
Right, it's good for a weekend read. I wouldn't say it's completely devoid of educational value. It's interesting to see how Johnson manages his board relationships, as well as the details of the bidding process and how difficult it can be to form partnerships.
The late 80s were definitely a different time, though - the amount of money needed for the RJR LBO is much more easily accessible to people in similar positions in 2016. As of June 30th, KKR's AUM is $131B, while Blackstone is at $356B.
If you're interested in learning the technical details of corporate finance, you're probably best off starting with something like the Coursera class Introduction to Corporate Finance (https://www.coursera.org/learn/wharton-finance), and then reading the textbooks referenced by the course for a more in-depth understanding.
i read this book, it's good. i got the overwhelming feeling that once started, the buyout process is outside of any one person or group's control. it takes on a life of its own.
I worked for an ISP (Berbee or BINC) that was merged with CDW. It was exactly as outlined above -- the private equity company had a big stake in both and merged them together for a later IPO.
In my experience, it was painful because a small highly technical organization was smashed onto a huge sales-centric company. The cultures were not the same at all. It wasn't horrible and I wasn't there long enough to benefit from anything (the Berbee founder gave some ownership to people who had been there longer -- my stay was brief during and after college so it was fine by me). But the resulting company wasn't as interesting to work at and today many of the people I knew who worked there moved on to other competitors in the local market. Nothing wrong with change but it was an awesome company before the merger.
So you might expect in the future to be merged with a company that looks good on paper but is painful in practice. But of course from the PE viewpoint, the point is to make money so as long as that happens, it's a win. It's just their interests are probably not aligned with yours.
It doesn't seem so hard to figure out. The problem is the company is now just part of a portfolio that needs to perform to a certain level. The level of uncertainty with respect to Rackspace just increased 1000% both internally and externally. To me, private equity is a vote of no-confidence.
Personally, I fall into the group that thinks private equity is probably bad for the economy in general.
It's such a great example of how accounting drives insane decisions. I will die happy if I can get people to stop thinking in terms of profit vs cost and instead think in terms of value and waste, as the Lean Manufacturing people do.
A typical PE buys the company with 20% cash down, and 80% debt (i.e. money borrowed from a bank).
They now have to find extra profit to pay the interest.
Ideally they also get a healthy dividend or management fee every year.
This inevitably comes down to
a. increased sales
b. cost (i.e. salary) cuts
They also want to resell/IPO the company in 3-7 years - obviously for money than they paid for it. This is another constant pressure to increase profit (see a & b above).
HOWEVER
Growing companies are usually not for sale and are very expensive. They cant be bought by PE. PE often looks for a troubled company which can be bought on the cheap, and can be somehow be kept profitable for a few years.
Hence (a) is difficult leading to focus on (b)
This of course is not all bad.
Some academic studies have shown that PE companies do grow over time.
The new management can trim the middle management roles and invest more in real r&d and product.
YMMV
So it's maintained in the open on GitHub, it's technically open source in terms of licensing. Yet you claim it's not really open source. Care to clarify?
It’s technically open-source, that’s the point. There’s more to open-source than license. Sorry but there’s no way for me to clarify without just repeating my original comment.
> It’s technically open-source, that’s the point. There’s more to open-source than license. Sorry but there’s no way for me to clarify without just repeating my original comment.
It's free software, and in that sense the license is the only thing that really matters. However, if you're discussing open collaboration styles then that's a whole different discussion. Either your project is free software or it isn't. Whether it has a diverse and open development community is a separate problem, and doesn't fall under "is this project [free software]".
Such as? You seem to have a mental model of things that make a project objectively open source, that don't include the license. I'd be curious what those things are.
I really don’t, it’s more of a feeling. With an open-source release like .NET it seems more like better documentation. In fact that was the case for early commercial Unixes—you needed the source code to actually use the system, but it wasn’t open-source.
Open-source as-documentation (for lack of better term) is still useful. It makes bug fixing a whole lot easier, for one thing. But it’s not quite the same as open-source ecosystem. For that you need to have a diverse set of actors, sharing the same goal. That’s what I think successful open-source project makes. You need to accept the fact that the project is not just yours. Something like that.
Of course Microsoft could do all those things. Who knows, it they’re determined enough they might turn it around. The problem here is like I said Java is just good enough. No one really cares, except people that could use some better documentation, that have been already invested in the ecosystem. That’s why open-sourcing is still valuable, but also why they’ll never gain any adoption of the kind they’d need.
Sorry if that sounds like rambling, it’s sort of late.
They might be open, but there’s democracy and then there’s democracy. See for example recent MSBuild incident (but don’t try to argue about it it’s just an example).
As I said, it’s a feeling. The feeling is it’s Microsoft’s project, everyone else is along for a ride. And that’s fine, but it’s something different. Let’s just not pretend technical merits drive adoption, that’s rarely true.
> They might be open, but there’s democracy and then there’s democracy. See for example recent MSBuild incident (but don’t try to argue about it it’s just an example).
> As I said, it’s a feeling. The feeling is it’s Microsoft’s project, everyone else is along for a ride. And that’s fine, but it’s something different. Let’s just not pretend technical merits drive adoption, that’s rarely true.
Uhm. So many free software projects work like that. A company creates something, releases it as free software. Yes, people contribute (and that's awesome by the way) but in general all of the engineering talent works at the company because they wrote it in the first place (and they hire contributors). At SUSE this is how YaST, zypper, spacewalk, et al development works (with significant contributions from the openSUSE community, but we have teams of people working on those projects so our contributions are more of a concentrated effort). There's nothing new or different about this model of free software development (Sun did the same thing with OpenSolaris and Joyent does the same thing with SmartOS). Yes, GNU and Linux follow the hobbyist model but that's not how all projects work.
