Turf wars are inevitable when multiple companies compete over the same market. But they are only significant if a dominant player ends up the loser.
And that's exactly what seems to have happened to VMware, which supplies virtualization technology for PayPal's private cloud computing infrastructure. VMware software will be removed on 10,000 servers this summer, according to a report in Business Insider. It will be replaced by software from OpenStack.
OpenStack is a group that has produced a massively scalable open source cloud operating system. The group was founded by Rackspace Hosting and NASA, but now includes many other companies such as IBM, HP, Cisco and Intel.
Eventually up to 80,000 servers running VMware software could be switched to OpenStack software — PayPal's own servers as well as servers belonging to PayPal's parent company Ebay.
"PayPal's strategy is to leverage open source products and provide meaningful insight and contribution to help advance the ecosystem," said a PayPal spokesperson. "OpenStack is one of the key projects in this overall strategy." The company also uses Red Hat cloud technology, according to the spokesperson.
It's a very dangerous turn of events for VMware, as its cloud computing platform is a premium product and VMware charges a premium price for it.
But if cheaper open source alternatives from the likes of OpenStack can do an equivalent job, what's the point in paying a premium price? And if Internet elder statesmen like Ebay and PayPal are willing to trust their businesses to OpenStack, why should anyone else think twice before ditching VMware for it?
What's particularly dangerous about all this is that the same scenario has played out before for VMware. Its once premium server virtualization technology is now little more than a commodity that has both proprietary and open source hypervisor alternatives.
As a result, VMware has been pinning its hopes on moving up the value chain to large-scale private and public cloud computing deployments. But now it seems these too are under threat.
OpenStack's software can be far less convenient and straightforward to deploy than VMware's. But in this instance it seems PayPal's life has been made considerably easier by FUEL, a set of open source scripts, software and other resources for deploying OpenStack software developed by OpenStack services and technology vendor Mirantis. The company also offers support subscriptions for OpenStack.
A PayPal spokesperson said through The Register that FUEL "has dramatically accelerated our OpenStack deployment with robust, production-grade architecture while giving us the flexibility to tailor OpenStack to our needs."
Of course PayPal's move may not represent a wholesale abandonment of VMware at all. The move may just be about flexing its muscles, proving some alternative technology, and improving its bargaining position when it comes to buying more technology from VMware in the future. There's nothing like having a working alternative in place when you want to turn the screws on your supplier.
But whether PayPal is planning to jump ship altogether or simply get a better deal from VMware or open source alternatives like OpenStack and commercial service and support vendors like Mirantis, it all spells very bad news for VMware's long term strategy of maintaining its margins with cloud products.
Paul Rubens is a technology journalist and contributor to ServerWatch, EnterpriseNetworkingPlanet and EnterpriseMobileToday. He has also covered technology for international newspapers and magazines including The Economist and The Financial Times since 1991.