Laggard Rackspace growth sparks concern: is there enough cloud biz to go around?

Here’s the narrative that cloud vendors would like us to believe: there are infinite workloads flowing to clouds of infinite capacity. There’s enough business for all, keep moving.

But there is nagging worry, sparked anew by Rackspace’s laggard Q1 cloud growth, that the appetite for cloud services may not be unlimited after all. For its first quarter ending March 31, Rackspace(s rax)logged $91 million in public cloud revenue, up 4 percent sequentially and 40 percent year over year. It is the quarter-over-quarter number that has people spooked; given that Rackspace has been touting its new OpenStack public cloud, folks expected much better numbers.

To be fair there are nuances about the Rackspace quarter to be examined. First, it blamed some of the inertia on price cuts on some services during the quarter. And the newer OpenStack-based public cloud business was up 75 percent sequentially, CEO Lanham Napier told analysts on the company earnings call Thursday night. The problem is demand for the older Slicehost-based cloud technology evaporated and bookings for the new cloud haven’t taken up the slack. New customers are being directed to the OpenStack option.

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There are Rackspace-specific issues but there are more macro concerns, which I’ll get to in a minute.

Bryan McGrath, Rackspace’s director of finance, acknowledged that there may be vendor consolidation, just as there has been in other areas when technology matures.

“There are lots of versions of Linux out there but only a few are widely adopted,” he noted. But his point is that even with consolidation, Rackspace is well positioned to prevail. After all, he noted, he company was able to build a $300 million business on its older cloud technology, which was admittedly less scalable and capable than giant Amazon(s amzn) Web Services.

“People bought that because of our support and service. Now we have a new, much better cloud based on OpenStack with new features and functions,” he said. “We’ll marry that with our dedicated business to offer customers what they need.”

Now for the macro cloud problem

Of perhaps greater concern is that so many vendors are jumping into the cloud services game that there may not be enough customers to support them all. IBM will doubtless sell its OpenStack options as they come online to its typical Fortune 500 accounts, the biggest of the big companies. That leaves other smaller — yet still big companies — with OpenStack options from Hewlett-Packard(s hpq), Red Hat(s rhat), Rackspace and perhaps Dell, Cloudscaling, Nebula and other players going forward. Or they’ll go with CloudStack or Eucalyptus or OpenNebula clouds.

Telcos, carriers and hosting companies are gearing up their own cloud services based on their own or partnering with aforementioned OpenStack or Joyent. Microsoft (S msft) just last month came online with its Azure IaaS option, which will probably get traction among the zillions of Windows shops. While Google(s goog) Compute Engine, which will probably become generally available next week at Google I/O, is not really seen as a business class public cloud, you’d be foolish to rule it out completely. And then there is the big, bad incumbent, AWS, which continues to churn out new services, price cuts and service options by the week.

No matter what we make of Rackspace’s quarter, if you thought the cloud wars were hot before, you better gear up for the next round. The big question is whether there really is enough cloud work to support all these players going forward.

My best bet? Nope. CTO Werner Vogels, Rackspace President Lew Moorman and other cloud luminaries will no doubt map out this competitive landscape at GigaOM’s Structure event next month.