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The secret behind PayPal: open source, and lots of it

PayPal has discovered what the offline world will soon need to discover: open source offers superior scale.

The old way was to spend a lot of money on limited software and hardware. The new way, as PayPal's CTO (Scott Thompson) of three years found, is to scale out with lots of low-cost hardware and software. Open source enables this, and to marvelously good effect, as Thompson describes:

PayPal runs thousands of Linux-based, single-rack-unit servers, which host the company's Web-presentation layer, middleware and user interface. Thompson says he quickly saw the economic, operational and development advantages of open source and [Red Hat Enterprise] Linux technology. He now sees no other way to do it.

"When you're buying lots of big iron, as I did in other places I've worked, your upgrade path is $2 million, $3 million at a clip. You just had to buy big chunks of stuff to scale," he says. "Here at PayPal, our upgrade path is 10 $1,000 no-name servers, slapped into the mid-tier of the platform. And we just keep scaling it that way. It's unbelievably cost-effective."

You see how perceptions change? From 'the old way is the only way' to 'the old way is insanity,' and in a very short period of time. The article is fascinating for any CIO looking to scale out her IT. Open source offers a better way. Better performance and better value, at a much lower cost.

Just ask PayPal.