Industry watchers are making a big deal about the PayPal announcement that the company has embraced OpenStack for its compute. I’ve argued the hypervisor is becoming a commodity; however, in this case, I’m more of the opinion that OpenStack better suits PayPal’s workloads. I think the most interesting detail in the announcement is that network virtualization is a serious concept that’s proved to be possible at PayPal-like scale.

PayPal’s VMware journey

PayPal’s usage of VMware has been under scrutiny for over a year. OpenStack vendor Mirantis made a premature announcement that PayPal had abandoned vSphere for OpenStack. As a result, VMware’s stock price was impacted. It was later clarified that PayPal was still a major user of vSphere. PayPal engineer Scott Carlson detailed PayPal’s OpenStack implementation during VMware’s user conference in 2013. At the time, PayPal was working to integrate OpenStack and vSphere.

Carlson shed light on the size of the then OpenStack deployment within PayPal, along with the challenges of replacing the vSphere functionality. PayPal pioneered running OpenStack on top of vSphere at scale, but this experiment seems to be over. While not specifically excluding vSphere, it’s assumed the PayPal’s current OpenStack implementation is running on top a hypervisor other than VMware.

I reached out to a PayPal spokesperson to get some clarity on the company’s use of vSphere. PayPal’s full response is below.

“PayPal leverages the core strengths of multiple virtualization technologies in our hybrid cloud environment. We primarily use OpenStack for compute virtualization, and as announced, have converted nearly 100 percent of our traffic serving web/API applications and mid-tier services at PayPal to run on our internal private cloud. However VMware is still a critical element in our network virtualization.”

Prior to the purchase of Nicira by VMware, PayPal was a reference customer for Nicira’s network virtualization solution. Nicira’s previous offering is now called NSX; PayPal continues to leverage NSX technology in its OpenStack solution. Potential network virtualization customers may find it interesting that PayPal trusts NSX to scale to the needs of its OpenStack cloud.

Besides performance, vendor lock-in has been another commonly cited disadvantage of NSX. There are two versions of NSX: VMware NSX, which is designed to integrated solely with VMware vSphere, and VMware NSX-MH, which is designed to work with multiple hypervisors and leverages Open vSwitch. Open vSwitch is the open source virtual switch shipped as part of every major Linux distribution. VMware has been able to support PayPal open design requirement via leveraging the integration of NSX and Open vSwitch.


The PayPal OpenStack story tells enterprise customers two things. The first is that, if you have the right mix of workloads and operations talent, OpenStack along with Xen or KVM can replace vSphere. As a cautionary tale, if you don’t have the right mix of workloads and talent, OpenStack can be a time and resource suck.

The second observation (at least for PayPal) is that OpenStack doesn’t have strong networking in the vanilla distribution. PayPal has showed that it’s willing to commit developer resources to make OpenStack work within its environment. PayPal saw enough value-add in NSX to make it a critical part of its cloud deployment.

Does the PayPal OpenStack and network virtualization success impact your organization’s decision to explore either technology? Let us know in the discussion.