The IT strategy behind PayPal’s spinoff from eBay

In September of 2014, eBay announced plans to spinoff its PayPal subsidiary as an independent, publicly-traded company. Within a few weeks of the announcement, PayPal’s technology leaders had nine months to separate from eBay and set up the infrastructure and systems to support the new company. (Outside experts predicted an 18-to-24-month separation timeline, or double the amount of time PayPal’s technology groups actually received.)

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The totality of the endeavor was massive, especially when you consider the scope and scale of all the technologies involved, that they’d been intertwined for more than a decade, and that the separation needed to be accomplished while customers all over the world continued to rely on PayPal every day. Brad Strock, who had recently been promoted from PayPal’s vice president of global operations and technology to CIO, led the IT effort.

The new structure would include 900 applications, 30,000 end-user devices, 25,000 email accounts, 1,900 vendor contracts, three new data centers, one of the largest enterprise data warehouses in the world, and the addition of 5,000 new servers, with the recreation, cloning or moving of another 9,000 across 60 global locations.

“Everything was in the eBay domain, so we had to build entirely new IT for PayPal without exception,” Strock says. “But we had half the time we really needed.” To keep the massive IT project on track, Strock developed six key principles.

6 principles for PayPal’s IT spinoff

1. Clone and go

“Our rule was to take what was there and split it, because every time you touch something, you are tempted to improve it,” Strock says. From time to time, he and his team allowed exceptions to this rule, when an upgrade would produce no additional risk. “We took the opportunity of the separation to take Exchange to the cloud with Office 365,” he says. “We knew we were going there eventually and that the move would not add risk to the separation.”

2. No big bangs

Strock wanted to avoid the potentially disruptive experience of flipping a switch on the new network and lighting everyone up on one day. “We wanted everything to be iterative, so that we could touch 1,000 users a day, rather than all 30,000 at once.”

The plan sounded great from a change management perspective, but it created some real engineering challenges for the IT team. “We had to build a separate corporate network for all of the PayPal employees, who were collocated with eBay staff,” Strock says. “That meant we had to let PayPal employees work on the eBay network until the day of the split, and then transfer only those people to the new network.” While that complexity made the work harder, it let the team track how they were progressing on a daily basis.

3. Be very transparent

Strock and his team identified a small number of critical outcomes and “tracked them maniacally.” For example, they knew that 30,000 people needed to be migrated to new services. “Every day, we looked at where we were on that journey. 5,000? 6,000? We were always aware of where we were on the flight path to hit our goal.” 

This allowed them to communicate status and progress with clarity and consistency to all major stakeholders.

4. Raise risk issues early

“Bad news doesn’t get better with age,” Strock says. “We had to get the teams comfortable with raising risk issues early, when we still had the time to take action.” Prior to the separation project, Strock had always worked hard to instill risk transparency into the IT culture, “but it became much more important during this transformation.”

5. Secure ‘air cover’

Before the team embarked on the separation, Strock sat down with every executive, including the CEO, and briefed them on the scope of the work, including the big numbers and the tight timelines. “We wound up scaring them a little bit, and every executive responded with ‘how can we help?'”

Strock’s answer: “There will be bumps in the road and things will break. We just ask for your grace and support while we work through it.” This allowed the separation team to work without worrying that if they made a mistake, there would be major repercussions. “I didn’t realize the power of the ‘air cover’ principle until later,” says Strock. “I didn’t realize how much freedom it would give our teams to move quickly.”

6. Single points of accountability

For every major piece of work, Strock identified one person who would be accountable for the outcome. “When you have multiple people accountable, you don’t have anyone accountable,” he says.

As a corollary to this principle, Strock kept the teams small. “For a small core team, fewer than 100 people, we took almost everything else off their plates,” he says. “This meant few people debating decisions, better focus, and faster progress.”

As a result of the separation, Strock now finds himself with a stronger team. “In a merger, you’re looking for synergy, but here, you’re looking for the opposite,” he says. “It was important that we have a strong team to run IT for PayPal, and this project was a battlefield promotion that built our bench strength.”

Strock also finds that he is now a stronger leader. “I am an analytical person, but this project required us all just to make decisions and move on,” he says. “I had to be candid and call it like it was, and not spend time worrying about politics. It was liberating.”

About Brad Strock

Brad Strock has been CIO of PayPal since October 2014. Prior to that role, he was the company’s vice president of global operations technology for nearly five years. Before joining PayPal, he was Bank of America’s senior vice president and technology executive for more than five years. Strock holds a BSME, with distinction, as well as an MBA from Purdue University’s Krannert School of Management.