Private cloud poster child PayPal experimenting with public cloud

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PayPal has become a poster child for building its own internal cloud, noting that the move has helped it dramatically speed development and reduce costs.

The company now says it is taking the next step and experimenting with using public clouds.

James Barrese, CTO for PayPal

Image credit: PayPal

While Amazon Web Services popularized the concept of letting businesses order up the use of servers, paying only for what is consumed, companies like PayPal that do financial processing typically haven’t been able to take advantage of public clouds due to security concerns. PayPal has spoken publicly and regularly about its private OpenStack implementation and recently said that 20 percent of its infrastructure runs on OpenStack.

But it’s only a matter of time before PayPal starts running some of its operations on public clouds, said James Barrese, CTO of PayPal.

“We have a few small apps that aren’t financial related where we’re doing experiments on the public cloud,” he said. “We’re not using it in a way that’s a seamless hybrid because we’re a financial system and have very stringent security requirements.”

But he expects that to change. The security issues “will be addressed over time,” he said. Companies like PayPal will be able to design apps to support a security model where perhaps the very sensitive transactions happen in-house with other functions handled by the public cloud.

PayPal is primarily interested in bursting to the public cloud when additional capacity is needed, he said, either for disaster recovery or seasonality.

Many types of web businesses must accommodate for uneven usage of their services. Retail web sites, for instance, must prepare for a rush around the holiday shopping season. But investing in infrastructure that sits around unused most of the year doesn’t make much sense.

Barrese envisions a time when PayPal can rely on commercial cloud providers to handle those spikes so that it doesn’t have to invest in the hardware required to handle them internally. He also predicts that PayPal won’t be alone.

“There’s an interesting financial model we ran that shows it’s really the burst model that makes the most sense,” he said. “You can significantly reduce the cost structure.”

“It’ll happen further down the road than everyone hopes but because it’s so financially compelling, it will emerge,” he said.

Barrese isn't alone among executives who think that hybrid clouds are the future. But PayPal's thoughts are notable because the company does financial services and many companies, even those in industries with less rigorous security needs, worry about potential security threats to using the public cloud.

Big cloud providers like Amazon Web Services and Azure shouldn’t get too excited yet about the prospect of winning PayPal as a customer though.

Barrese expects that companies like PayPal will require a certain kind of service provider. “It won’t necessarily be a public cloud. It might be a semi-private cloud,” he said.

By that he means a cloud service provider that might specialize in catering to retail or financial customers. The provider might limit access to the service to certain companies. Its customers would pay on a per usage basis, just like users of more open public clouds do.

“It’s not like we’d turn around and use Azure or AWS,” he said.

Read more of Nancy Gohring's "To the Cloud" blog and follow the latest IT news at ITworld. Follow Nancy on Twitter at @ngohring and on Google+. For the latest IT news, analysis and how-tos, follow ITworld on Twitter and Facebook.

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