Rackspace to issue as much as $3.5M in customer credits after outage

UPDATE: Rackspace's Dallas data center was hit by another power failure Tuesday morning that was caused by the failure of an electrical connection leading to "a brief loss of network connectivity to some servers," the company says. Updates are being issued by Rackspace through its blog and Twitter.

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

Rackspace, 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."

The 144,000 square foot data center 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 apologized 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 data center 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 data center 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."