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How PayPal Got Its Swagger Back

PayPal CTO explains how the move to OpenStack and a more agile development process put the mojo back in PayPal's product line.

It was an epiphany in a coffee shop that told James Barrese PayPal was no longer a long-in-the-tooth electronic payments service. Barrese, who's been CTO of PayPal for a little more than a year, entered a Starbucks on PayPal's San Jose, Calif., campus, a simple act that made him realize how PayPal's restructured IT and new OpenStack infrastructure were going to pay off.

Here's what happened: On a conference call as he came through the door, Barrese was holding his Android smartphone, papers, and a laptop as he placed his order. As his coffee came to the counter, he felt his phone vibrate.

The phone had already signaled his presence to a low-power Bluetooth beacon in the shop. Since Barrese had previously signed up to pay through the PayPal app on his phone, when the charge was transmitted through the beacon his phone responded, authorizing payment and vibrating to signal that the transaction was complete and he was free to go. As Barrese continued his teleconference, his photo appeared on a screen at the cash register so the barista could confirm visually that the owner of the account was present. Meanwhile, an SMS message was sent to Barrese, recording the transaction.

That sequence reflects two of several products that PayPal that has recently brought to market. They're not yet used in many retail locations; the beacon device was just released to developers in October. But Barrese realized how easily they might soon be more widely implemented. He had never been continuously engaged in a call while making a purchase before -- the Bluetooth signal worked alongside the live call -- and it was the kind of hands-free, frictionless experience that he believes many consumers would appreciate.

"The consumer is in control," Barrese noted in a recent interview. "This really makes the consumer experience more seamless."

[ Want to learn more about how PayPal is using OpenStack? See PayPal OpenStack Won't Replace VMware In Data Center. ]

PayPal is transforming its IT infrastructure from a traditional waterfall development process into an agile one, with greater concern for DevOps being part of how new software is created and put into production. In the PayPal IT space itself, Barrese explained, the walls have come down and development teams sit mixed in with business product engineering and quality assurance teams.

The resulting atmosphere is a reminder of the company's younger days, when PayPal innovations came fast and furious. This year the innovations are again happening rapidly, with a new PayPal mobile app gaining traction on the iPhone and Android phones; the low-power Bluetooth Beacon established in select retailers; and the Chip and Pin card reader launched in the UK so digital transactions can replace hard currency. "We've launched more new products this year than in the last five years," Barrese stated.

In his third-quarter earnings call, eBay president John Donahoe said the PayPal unit was busy "re-inventing the shopping experience." Other PayPal staffers, including senior director of platform engineering and operations Saran Mandair and VP of platform engineering and operations Nat Rajesh Natarajan, described the change more simply, saying that PayPal is going back to its roots as a fast-moving, inventive company. Both credited Barrese for changing IT's atmosphere into a looser, more innovative climate.

The effort has attracted attention outside its halls and allowed PayPal to recruit some top talent, including Arnold Goldberg, the former VP of engineering at Box, who now serves as VP of customer engineering, and Bill Scott, former director of e-commerce user interface engineering at Netflix, now director of UI engineering at PayPal. As PayPal become less of a Java and more of a Node.js shop, it also attracted Doug Crockford, an originator of the JavaScript language at Yahoo, now senior JavaScript architect at PayPal. (Node.js is a version of browser JavaScript that runs on servers.)

"Around the valley, it's sort of like PayPal's got its swagger back," Barrese remarked.

Although Barrese himself is youthful looking, he's no recent college grad. The father of three has done a tour of duty with the Army Signal Corps, spent five years at Andersen Consulting, served for three years as VP of engineering at Charitableway, and started as an e-commerce architect for eBay in 2001. At parent company eBay, Barrese rose rapidly through the ranks. He has served as director of architecture; senior director for systems engineering; VP of architecture, platform, and systems; and VP of technology, before being tapped to become VP of global product development for PayPal in 2011.

He became CTO of PayPal in 2012 and last month was named senior VP and CTO. In his own transformation, he's seen the need for maturing companies to also transform themselves and regain the agility they enjoyed in their youth. Describing his own advancement as closely tied to that goal, Barrese proceeds as if fearless of change because, as Barrese himself conceded, PayPal IT had become hide-bound enough "to drive away the innovators."

In fact, change still doesn't come easily at PayPal, including the change to cloud computing. In a panel at the OpenStack Summit in Hong Kong on November 5, Yuriy Brodskiy, PayPal's senior manager of cloud engineering and infrastructure, told an audience that the biggest problem in getting to the cloud is not the technology but the organization. Members of server, network, and storage teams need to start thinking about all three, he said, "crossing boundaries that were previously well defined. There's a lot of unknowns, a lot confusion," he added. "It's somewhat uncomfortable for a lot of people."

But PayPal has converted 20 percent of its datacenter into a private OpenStack cloud, with product teams able to self-provision and move quickly toward a prototype.

It's clear that Barrese has the personality to weather these difficulties. A skilled technologist, he is always above the fray, with a laugh that verges on a high-pitched giggle as he recounts some event that set off a chain of unforeseen consequences. It seems as if a little chaos around him is a source of amusement rather than dismay. Barrese knows that he must be the author of change at PayPal and appears to have decided that the best approach is to change the conditions. The OpenStack cloud, Node.js language, and other new tools are all part of the evolution.

Many inside PayPal welcome these changes as the best antidote to the rapidly changing electronic payments industry. Scarcely a week goes by without some new payments vendor arriving on the scene. Google has even developed its own payment system, Google Wallet.

Square, the payment startup co-founded and headed by Twitter's Jack Dorsey, is in discussions with banks about an initial public offering that would give it the means to compete with PayPal. Its sales are approaching $1 billion, according to the Wall Street Journal. PaySimple, Pay It Green, GoDirect, BitCoin, and host of other services want to slow down PayPal's gains. (eBay added 5 million new accounts in the third quarter; 78 percent of them will pay eBay transactions through PayPal.)

But PayPal now sees both the challenge and the opportunity. Instead of having a team that's oriented toward mobile development, all development is now centered around "mobile first" -- hence the use of Node.js. A Node.js application can be written once and rejiggered on the fly for each device user interface it's trying to reach.

PayPal used to be about simply making electronic payments from PCs to established e-commerce systems. Under Barrese, it's migrating out to the edge of the network, accompanying consumers to where they make spot purchases. Thirty-six percent of new customers in PayPal's third quarter came from the ranks of mobile users. Barrese wants to see that number increase.

PayPal is trying to restructure on three fronts simultaneously: It's trying to reorganize IT, make its datacenter infrastructure more flexible, and rapidly update its digital product line. Under Barrese, the company's progress on the first two will ensure that the third happens as well.

Want to relegate cloud software to edge apps or smaller businesses? No way. Also in the new, all-digital Cloud Software: Where Next? special issue of InformationWeek: The tech industry is rife with over-the-top, groundless predictions and estimates. (Free registration required.)

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