VMware leaps into software-defined networking with Nicira acquisition

Billion-dollar price tag reflects VMware's serious intentions with its cloud strategy

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But traditional hardware networking companies like Cisco may not be sitting around just watching what others like VMware and Nicira are doing in SDN. Back in April, Cisco announced it was funding advanced networking startup Insieme with $100 million. Along with that initial funding, Cisco said it would have the option to eventually purchase the company for as much as an additional $750 million.

The New York Times said Insieme is expected to boost Cisco's portfolio in the rapidly advancing SDN market, which should be a cheap and efficient way to deploy large cloud computing systems. It quoted a Cisco memo:

Insieme's product development efforts are complementary to that of Cisco's current and planned internal investments. Insieme and other internal programs will be components of Cisco's broader programmability framework. These types of investments have strongly benefitted Cisco in the past, and we will continue to look for similar ways to complement our internal development capabilities.

VMware's acquisition price tag on Nicira and Cisco's potential price tag on Insieme are just two examples that underscore the phenomenal surge powering interest in SDN. Virtualization and cloud have fundamentally altered compute and storage architectures, and networking must now adapt.

"Software-based networking delivers the agility, flexibility and operational benefits needed to map network capabilities to virtual architectures," said Kelly Herrell, CEO of Vyatta. "It's a massive market, and today's news is a great validation point of how the datacenter network is evolving."

Herrell added that the combination of VMware acquiring Nicira, and Cisco announcing on the same day another 2 percent cut to its global workforce (which amounts to about 1,300 employees) only highlights the dramatic changes in the networking industry. Looking forward, Herrell said he sees the following shifts ahead:

  • Virtualization is driving massive change. Over 50 percent of the x86-server installed base is now virtualized and this is causing major ripple effects.
  • System architectures are opening up. Monolithic designs are giving way to modular ones.
  • Openness matters. Modular architectures are defined by multiple interoperable elements.
  • Software is eating the world. COTS hardware continues to demonstrate its ability to absorb different workloads.

Another major figure in the SDN market, Guido Appenzeller, CEO and co-founder of Big Switch Networks, told InfoWorld he found VMware's acquisition news of Nicira to be "a great announcement for everyone in SDN because it validates the market potential and accelerates the momentum."

Appenzeller went on to say, "These are very early days, and we're seeing the beginning of a vendor war of physical versus hypervisor switches. VMware just fired the first shot."

"It's not as clear to us that this is good for customers -- not really in line with what they have in their network today, or the way they want to buy," said Appenzeller. "As the leading independent SDN company that works with both physical and hypervisor switches, we have only one thing to focus on -- doing the right thing for our customers."

Eric Chiu, president & founder of HyTrust told InfoWorld that SDN is a natural extension for VMware, and in spite of the price tag, he believes Nicira was a fantastic purchase for the virtualization giant.

However, Chiu looks at the acquisition with a security context in mind, adding, "As networking gets virtualized and becomes part of the virtual infrastructure management layer, this expands the already 'god-like' privileges of the virtualization admins and puts all of the eggs in one basket. This highlights the need for greater access controls and auditing to ensure against breaches, malicious attacks, and downtime from misconfiguration of resources."

VMware's acquisition of Nicira is expected to close during the second half of this year. The deal includes what amounts to a premium payment of approximately $1.05 billion in cash and approximately $210 million of assumed unvested equity awards, potentially payment incentives to existing or future employees.

Will this move allow VMware to corner the market? Maybe not, but the acquisition is going to give VMware one more piece of its overarching vision of the cloud and will make it that much harder for VMware competitors to catch up over the next few years.

This article, "VMware leaps into software-defined networking with Nicira acquisition," was originally published at InfoWorld.com. Follow the latest developments in virtualization and networking at InfoWorld.com.

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