Rackspace recently raised the prices for its email hosting services significantly, causing considerable unrest among customers and resellers in particular. Partners who have been using the email services for decades speak of a drastic change that is putting pressure on their business model.
The price change means that the standard email subscription now costs $10 per mailbox per month. On top of that, customers can opt for additional modules. The Email Plus extension costs an extra $2 per mailbox and offers additional storage, mobile synchronization, and Office-compatible applications, among other things. Archiving with unlimited storage costs an additional $6 per mailbox per month. This means that costs are significantly higher than at the end of 2025, when the standard subscription cost $3 per mailbox and the extensions added a maximum of $4 per mailbox.
Profitability under pressure
Resellers in particular are critical of the impact of these price increases, writes Ars Technica. Web hosting company Laughing Squid, a long-time partner of Rackspace, claims that the new rates amount to an increase of more than 700%, while partners were only informed a month and a half in advance. According to founder Scott Beale, the news came as a surprise, and the previous 2019 increase of 55% was already considered substantial. The new situation makes email the largest expense within his organization, which makes it considerably more difficult to offer the service profitably.
Other partners are also reporting substantial increases, ranging from well over 100% to almost 500%. In addition, previous volume discounts have disappeared, which particularly affects larger resellers who have been able to count on favorable terms for years. According to those involved, long-term agreements and economies of scale no longer seem to play a role in the introduction of the new prices.
Rackspace itself confirms the price increase and states that it is necessary to continue providing the desired level of service. The company emphasizes that its email service is aimed at small businesses and that customers will receive support in exploring alternatives. According to Rackspace, providing a reliable and secure business email solution remains a core part of its strategy.
Email: a challenging business
The situation underscores how challenging email hosting has become. Managing email infrastructure requires increasing expertise and investment, while margins are limited. For many cloud providers, it is more attractive to offer managed services on top of platforms such as Microsoft 365 or Google Workspace, while leaving the underlying infrastructure to larger players. Rackspace has been following this line for some time, including by focusing more strongly on managed services.
The timing of the price increase coincides with broader pressure on the IT market. The rapid rise of AI has led to a shortage of RAM and other hardware components, making storage more expensive and less available. At the same time, Rackspace has withdrawn from certain email activities in recent years, such as hosting Microsoft Exchange, partly after a costly ransomware attack in 2022. All of this fuels the impression that the company wants to further reduce its own email hosting or, at least, make it less central to its business.
For resellers such as Laughing Squid, this means they have to raise their prices or refer customers to alternative providers. In practice, this is already leading to a reorientation towards other email providers, in the hope of offering customers a more affordable alternative.