As Rackspace Battled, Then Befriended Amazon, San Antonio Tech Matured
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Rackspace began offering “Fanatical Support for AWS” in October 2015, which helped businesses with difficult tasks in AWS, such as authenticating across large technology teams, helping customers choose which is the best AWS service to buy—Amazon offers dozens of options, based on usage needs and other factors—and other technical and administration expertise, according to Cochran. Rackspace also added the same services for Microsoft’s Azure, Google products, and others.
“It was just looking at reality and assessing it correctly. It was a necessary action,” says Cochran, who led the Fanatical Support for AWS as general manager from April 2015 to August 2016, after strategizing on how to create it.
It’s no longer easy to track the impact the offering had on Rackspace’s lagging revenue growth—the company was taken private by funds associated with Apollo Global Management for $4.3 billion in 2016. Rackspace reached $2 billion in revenue for the first time in 2015, and estimated in a regulatory filing it would add about $100 million in revenue in each of the next two subsequent years.
Cochran says he doesn’t know exactly what interested Apollo in Rackspace, though he speculated that the private equity firm may have seen an opportunity in the stock price—perhaps that it was undervalued. He left Rackspace in August 2016, after the acquisition was announced.
Given his experience leading the Rackspace AWS team through the Apollo acquisition, Cochran likely had many job opportunities—possibly even ones that were more convenient, such as in Austin, where Cochran lives.
Instead, Cochran decided to continue working in San Antonio. Keeping tech talent in San Antonio, and drawing new businesses, is something city leaders have been hoping will happen more. The San Antonio Chamber of Commerce invested in promoting the region’s cybersecurity work by starting Build Sec Foundry, an incubator for startups in the sector. Other groups like VelocityTX are trying to draw startups and executives from other countries to town.
Cochran is now the CEO of Chargify, a small software-as-a-service company that helps businesses with billing—in particular, complicated billing issues, like customers who want to pay for services a la carte or based on usage.
Chargify was founded in Needham, MA, in 2009 to handle recurring billing for businesses that charge customers a monthly fee. A company such as Netflix, for example, could have used Chargify to handle its billing needs and would pay Chargify a flat fee to do it, according to Cochran.
Things changed at Chargify when Scaleworks, the investment firm founded by former Rackspace president Moorman, bought the company in 2016. Moorman and co-founder Ed Byrne created Scaleworks to acquire software-as-a-service businesses that they thought weren’t performing to their capability, and then invest in them to boost revenue. Scaleworks has grown, too, in recent months. It moved its portfolio companies into a new office in downtown San Antonio in September, acquired its eighth company, Keen IO, which helps software developers with custom application programming interfaces, and started a new $10 million fund that makes loans to startups with recurring revenue.
Cochran was an early hire who has stuck around. Scaleworks picked him up freshly out of Rackspace to be Chargify’s CEO in 2016.
Cochran has worked to add greater complexity to Chargify’s capabilities. A few examples: The company can help a business charge a customer one price for a million transactions and a lower price for the second million. Chargify can let customers test out price points on products, offering a product for $70 one month and $100 the next to see which performs better. Chargify’s customers use a software interface to work with the system, which Cochran says was designed to be easy enough for anyone without technical skills to use, despite the added complexity in the product pricing.
“What Chargify is trying to tap into is this trend that the very simple subscription model is changing to a much more complex model,” Cochran says. More companies will move to complex pricing methods, allowing customers to pay based on use or other intricate options, which makes billing that much more difficult, Cochran says.
What’s Cochran’s best example of that trend? Amazon, of course. The company has dozens of pricing options for the EC2 segment of its cloud computing service, and has a massive billing system to track it, Cochran says.
“What Chargify is doing is trying to help businesses who … don’t have a team of 10, 15, 20 people to treat their billing like a product,” Cochran says. “We’re trying to build software that allows any business to go out there and give the same level of personalized offers to their customers.”
If Amazon is doing similar work to what Chargify does, the obvious question is whether Cochran is worried that the company might try to sell a competitive product. After all, that’s happened to a company Cochran has worked at before—just like it’s happened (or is happening) to other industries, from books to groceries to healthcare.
“We’ve not seen them having an interest in doing that at this point,” Cochran says. He admits that Amazon’s involvement in any industry should probably give a business in that sector pause. “I think you have to look at Amazon now in any context and wonder, ‘Well what is their angle now?’”
Regardless of the competition a business faces, or its location, Cochran says the same things draw him to San Antonio and Chargify in 2018 that attracted him to Rackspace in the 2000s. It’s a chance to build a business with a centered mission, around similarly minded people, he says.
“In my opinion, Scaleworks and Chargify share a similar philosophy, so it made sense to keep working in San Antonio even though I live in Austin,” Cochran wrote in an e-mail. “I believe certain personalities will seek out those types of opportunities, wherever they exist.”