• 03/29/2013
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As The PayPal Vs. VMware Story Turns

PayPal is adopting OpenStack for its cloud infrastructure, but it's not necessarily dumping VMware for virtualization infrastructure. Here are some conclusions from this saga.

In the past week, a story that was originally reported in InformationWeek, among other places, said PayPal was adopting OpenStack. Then the story took on a life of its own -- as some outlets reported that eBay was booting VMware off 80,000 servers and replacing it with OpenStack. Let's examine what conclusions can be drawn about this saga -- and VMware's future.

When InformationWeek first asked a PayPal spokesman, Saran Mandair, about PayPal's plans, he responded with a minimum of information, omitting any reference to replacing VMware. Boris Renski, a spokesman for the consultant on the project, Mirantis, was theoretically in a position to know the scope of PayPal's plans and he offered the "80,000-servers conversion" line. InformationWeekdeclined to report something PayPal itself was unwilling to say, even though a seemingly knowledgeable source was claiming it.

Two other sources, however, reported the story as Renski represented it. "In A Dangerous Sign For VMware, PayPal Chooses Rival OpenStack," said the headline on Business Insider on March 25. Reuven Cohen in his column in Forbes, picked up the theme on March 26: "PayPal To Drop VMware From 80,000 Servers and Replace It With OpenStack." The source was Renski, not PayPal.

PayPal doesn't have 80,000 servers; it has closer to 9,000. But part of the appeal of the story was the presumption that if PayPal converted, parent eBay would as well. And in that way, a magic wand was waved over 9,000 servers and they became 80,000.

At the peak of the story's twists, one knowledgeable observer tweeted, "I'm replacing 80,000 calories with OpenStack," as an equally sensible statement.

[ Want to learn more about how Mirantis is converting PayPal to OpenStack? See OpenStack Deployment Tool Goes OpenSource. ]

There's an assumption in these headlines that VMware and OpenStack are two different things, and a customer has to choose one or the other. PayPal might be focusing on OpenStack for its future cloud management, but that doesn't rule out continued use of VMware. In fact, VMware joined the OpenStack board of directors last fall in part to ensure that ESX Server workloads would workin an OpenStack cloud.

In listening to what PayPal was actually saying, it was always possible, in my opinion, that PayPal would use OpenStack for its new cloud applications and a growing part of its infrastructure, but continue to operate VMware, either independently or under it. PayPal could announce it was converting to OpenStack and still use VMware for many years to come. This would be true even if someone inside PayPal said he expects all of PayPal to one day run under OpenStack. Those who disbelieve this don't understand the staying power of effective systems, once installed.

The Forbes and Business Insiderheadlines, however, made PayPal a tipping-point story. If PayPal was ripping out VMware to put in OpenStack, then VMware had reached its crest of data center success and was about to fall into a steep decline. Savvy companies, such as PayPal, were about to cut it back. That could happen someday, I don't know. But somehow I don't see PayPal seeking a major upheaval right now in exchange for a few saved VMware licenses.

But such subtleties are not what tipping-point stories are about. It's better if a one-time innovator, VMware, is shown to have been on a phantasmagoric roll which came to an end one morning when Wall Street woke up and discovered virtualization was nothing but smoke and mirrors. If the relationship between VMware and OpenStack is not well understood in the technical community, you can be sure it's not well understood on Wall Street. From the time these stories broke until the opening of trading Thursday, $2 billion in value emptied out of VMware as its stock dropped below $76. It has since recovered about three-quarters of the loss to $78.89.

PayPal's Mandair initially told me in an email for a March 25 InformationWeek story that PayPal was deploying OpenStack "to help transform our global infrastructureinto an agile and open cloud platform." Mandair is senior director of platform engineering and operations; it sounds from this like all of PayPal's infrastructure is undergoing the transformation, but few details were offered.

PayPal's Nat Rajesh Natarajan, VP of platform engineering & operations, then offered up a more specific statement used in VMware senior VP Bogomil Balkansky's March 27 blog. While PayPal was implementing OpenStack, its purpose was to "enable agility, innovation and choice. We're not interested in a 'rip and replace' approach. In fact, this collaboration will help us utilize robust virtualization technologies, such as VMware. They are a valued PayPal partner and we intend to continue leveraging their core strengths ..." Natarajan said, according to the blog.


re: As The PayPal Vs. VMware Story Turns

Thanks for bringing some clarification to this saga. There are definately big changes afoot in the way infrastructure is being run and services delivered, but there are also important technological distinctions that must be made when reporting this kind of story.

Drew Conry-Murray
Editor, Network Computing

re: As The PayPal Vs. VMware Story Turns

I think Business insider jumped on this story thinking that the Openstack product being used by PayPal was the hypervisor. This would of been a big story if PayPal changed it's hypervisor and vCenter product.

re: As The PayPal Vs. VMware Story Turns

Regardless of whether the actual number is 9000 or 80000 i see a major trend which is consistent across various enterprise companies and it is growing fast- Enterprises are questioning the value behind VMWare and are not willing to pay the amount of $$ that they did in the past for that value. OpenStack is currently they're only viable alternative and as OpenStack gets more mature more enterprises will start using it as an alternative. The backing from big companies such as HP, IBM, Redhat that knows the enterprise business helps to speed up that trend.

See my take on this and specifically what i believe OpenStack providers should do in light of this:

re: As The PayPal Vs. VMware Story Turns

In the future, I think a lot of companies will bring in a second and third hypervisor and use them on more and more servers, especially for developers, in remote offices, in departments. But at this point, I see a lot of major companies keeping VMware at the center of their of data center virtualization. They know they're paying a lot but they're hanging around to see what they can get for their money. And who is else is promising the software-defined data center? Charlie Babcock, InformationWeek