Rackspace Email Costs Soar: What Customers Need to Know Now

The landscape of email hosting is shifting dramatically, and Rackspace customers are feeling the pinch. Recent price hikes for Rackspace’s email services, reported to be as high as a 706% increase, are causing significant concern among businesses and reseller partners. This article dives deep into the reasons behind these soaring costs, the impact on customers, and potential alternatives to consider. We’ll explore the current market conditions, Rackspace’s response, and what steps you can take to navigate this challenging situation. Understanding these changes is crucial for maintaining cost-effective and reliable email communication for your business.

The Shocking Price Increases: A Detailed Look

For years, Rackspace was known for its competitive email hosting pricing. However, that’s no longer the case. As of March 2026, Rackspace has implemented a new pricing structure that has left many customers reeling. The standard plan now costs $10 per mailbox per month. Adding features further increases the cost:

• Rackspace Email Plus: An additional $2/mailbox/month (includes file storage, mobile sync, Office-compatible apps, and messaging).
• Archiving Add-on: An extra $6/mailbox/month (provides unlimited storage).

This represents a substantial jump from November 2025 pricing, where the Standard plan was just $3/mailbox/month, Email Plus was $1/mailbox/month, and Archival was $3/mailbox/month, according to data from the Internet Archive’s Wayback Machine. The magnitude of this change is prompting many to re-evaluate their email hosting options.

Reseller Reactions: “Devastating” Impact on Businesses

The impact of these price increases is particularly acute for Rackspace’s reseller partners. Laughing Squid, a web hosting service provider and long-time Rackspace reseller (since 1999), publicly voiced their concerns, describing the price increase as “astronomical” and “devastating.”

Scott Beale, founder of Laughing Squid, reported a 706% price hike and highlighted the limited notice provided – just a month and a half. He explained to GearTech that email had become their largest expense, severely impacting profitability. Similar reports are surfacing online, with partners citing price increases ranging from 110% to nearly 500%. Crucially, these new quotes reportedly do not include previously negotiated volume pricing discounts.

Loss of Negotiated Pricing

Beale emphasized that Laughing Squid had previously benefited from favorable reseller pricing based on their long-standing relationship and the number of mailboxes hosted. “All of that seemed to vanish when they notified us of their new pricing,” he stated. This loss of established discounts adds another layer of financial strain for partners.

Rackspace’s Response: Maintaining Service Levels

When contacted by GearTech regarding the significant price increases, Rackspace offered the following statement:

Rackspace Email is a reliable and secure business-class email solution for small businesses. To continue delivering the service levels our customers expect, effective March 2026, Rackspace Technology is increasing the price of Rackspace Email. We have a support team available to help our customers to discuss their options.

The company reiterated its “mission is to deliver quality, trusted and reliable hosted email solution for businesses.” However, this explanation hasn’t quelled the concerns of many customers who feel the price increase is disproportionate to any perceived improvements in service.

Why Are Rackspace Email Costs Increasing?

Several factors are likely contributing to Rackspace’s decision to raise prices. The email hosting business is becoming increasingly complex and challenging, and several market forces are at play:

• Increased Complexity: Managing email at scale requires significant expertise and resources, including robust security measures to combat spam and phishing attacks.
• Shifting Market Dynamics: Many cloud providers are focusing on managed services built on top of platforms like Microsoft 365 and Google Workspace, leaving the complexities of infrastructure to larger companies.
• AI-Driven RAM Shortage: The growing demand for AI is driving up the cost of RAM and other computing components, impacting storage affordability.
• Past Security Incidents: Rackspace’s decision to discontinue hosting Microsoft Exchange following a costly 2022 ransomware attack may be a factor in their desire to minimize email hosting responsibilities.

Essentially, the combination of rising operational costs, increased security threats, and a changing market landscape is forcing Rackspace to re-evaluate its pricing model.

The Challenges of Email Hosting in 2024 and Beyond

Email hosting is often perceived as a high-effort, low-margin business. While seemingly simple on the surface, maintaining a reliable, secure, and scalable email infrastructure is a significant undertaking. The rise of sophisticated phishing attacks, spam, and data breaches necessitates constant investment in security measures. Furthermore, compliance with data privacy regulations (like GDPR and CCPA) adds another layer of complexity.

This has led many companies to prioritize higher-margin services, such as managed cloud solutions, over basic email hosting. The trend towards integrated productivity suites like Microsoft 365 and Google Workspace further diminishes the appeal of standalone email hosting for some providers.

What Are Your Alternatives? Exploring Email Hosting Options

Given the significant price increases, many Rackspace customers are actively exploring alternative email hosting solutions. Here are some popular options to consider:

• Microsoft 365: A comprehensive suite of productivity tools, including email, office applications, and cloud storage.
• Google Workspace: Similar to Microsoft 365, offering email, office apps, and collaboration tools.
• PolarisMail: As highlighted by Laughing Squid, PolarisMail offers a potentially more affordable alternative.
• Zoho Mail: A cost-effective email hosting solution with a range of features.
• Fastmail: A privacy-focused email service known for its reliability and security.

When evaluating alternatives, consider factors such as:

• Pricing: Compare the total cost of ownership, including mailbox fees, storage costs, and add-on features.
• Features: Ensure the solution meets your specific needs, such as email archiving, mobile sync, and integration with other applications.
• Security: Prioritize providers with robust security measures to protect your data from threats.
• Support: Choose a provider with responsive and reliable customer support.
• Migration: Assess the ease of migrating your existing email data to the new platform.

Laughing Squid’s Response: Adapting to the New Reality

Laughing Squid is proactively addressing the price increases by increasing prices for Rackspace mailboxes and offering services with PolarisMail at lower prices. This demonstrates a commitment to providing customers with affordable options despite the challenging market conditions. Beale reported that he has attempted to contact Rackspace regarding the new pricing but has yet to receive a response.

Conclusion: Navigating the Changing Email Landscape

The recent price hikes for Rackspace email hosting are a wake-up call for businesses. The email hosting market is evolving, and providers are facing increasing pressure to balance cost-effectiveness with security and reliability. Customers need to carefully evaluate their options and consider alternatives to ensure they are getting the best value for their money. Staying informed about market trends and proactively planning for potential changes is crucial for maintaining seamless and affordable email communication in the years to come. Don't hesitate to explore the alternatives and negotiate with providers to find a solution that meets your specific needs and budget.