PayPal Says Linux Grid Can Replace Mainframes

"I came from Visa, where I had responsibility for VisaNet. It was a fabulous processing system, very big and very global. I was intrigued by PayPal. How would you use Linux for processing payments and never be wrong, never lose messages, never fall behind the pace of transactions," he recalled in an interview.

He now supervises the PayPal electronic payment processing system, which is smaller than VisaNet in volume and total dollar value of transactions. But it's growing fast. It is currently processing $1,571 worth of transactions per second in 17 different currencies. In 2006, the online payments firm, which started out over a bakery in Palo Alto, processed a total of $37.6 billion in transactions. It's headed toward $50 billion this year.

Now located in San Jose, PayPal grants its consumer members options in payment methods: credit cards, debit cards, or directly from a bank account. It has 165 million account holders worldwide, and has recently added such business as Northwest Airlines, Southwest Airlines, U.S. Airways, and Overstock.com, which now permit PayPal payments on their Web sites.

Thompson supervises a payment system that operates on about 4,000 servers running Red Hat Linux in the same manner that eBay and Google conduct their business on top of a grid of Linux servers. "I have been pleasantly surprised at how much we've been able to do with this approach. It operates like a mainframe," he said.

As PayPal grows it's much easier to grow the grid with Intel (NSDQ: INTC)-based servers than it would be to upgrade a mainframe, he said. In a mainframe environment, the cost to increase capacity a planned 15% or 20% "is enormous. It could be in the tens of millions to do a step increase. In [PayPal's] world, we add hundreds of servers in the course of a couple of nights and the cost is in the thousands, not millions," he said.