Why is Nicira worth $1.2 billion?

In an exclusive interview with InfoWorld, the CTO of Nicira explains why VMware is paying big bucks for his company and how the acquisition will affect Nicira's key role in OpenStack

At a cloud conference in June, I was introduced to Martin (pronounced "martini" without the second "i") Casado, the 35-year-old CTO of network virtualization startup Nicira. In the space of about 10 minutes, Casado convinced me that we're at the dawn of the age of Software Defined Everything.

Casado knows how to pitch. Just one month later, VMware announced it would pay $1.2 billion to acquire Nicira, which Casado co-founded in 2007. Total investment in Nicira to that point had amounted to $50 million, and the company has just one commercial product, Nicira Network Virtualization Platform, with a few big-name customers. The acquisition is expected to close by end of year.

[ Also on InfoWorld: eBay just announced it is using Nicira's Network Virtualization Platform to create secure virtual networks. | Last November InfoWorld chose SDN (software-defined networking) as one of the top 10 emerging enterprise technologies. | For more on OpenStack, read Oliver Rist's article, "Is OpenStack the new Linux?" ]

Last week when I spoke with Casado a second time, I wanted more insight into the technology that had commanded such a monster sum. I already knew there was something worth stealing. Last October, real (not cyber) burglars broke into Nicira's offices and stole a laptop containing intellectual property. Speculation swirled that the perpetrators were operating on behalf of the Chinese government.

That incident only served to heighten the mystique around Casado himself. When he worked as a researcher at Lawrence Livermore National Laboratory, he was asked by a U.S. intelligence agency to explore the development of an ultra-secure global network within the public Internet.

Ultimately, Casado decided it couldn't be done. But the challenges he encountered led him to enroll at Stanford, where he wrote a Ph.D thesis that led to OpenFlow, a specification -- and now a vibrant open source project -- to create a standard interface for network switches.

Which led me to my second big question. Nicira has also been a key developer of the Quantum networking component of OpenStack, an open source "cloud operating system" that in some ways competes with VMware's pricey line of private cloud products. Was part of the motive behind VMware's play for Nicira to shut that activity down?

When I caught up with Casado, he could only take a short break from poring over the details of the VMware acquisition. As he put it, "There's a big transaction that I've got to work on, and it's taking about 20 hours of every day." So I got right to the point.

Eric Knorr: Why is your company is worth $1.2 billion dollars?

Martin Casado: Networking is a very, very large market and we have done some very innovative things. The SDN (software-defined networking) craze came out of Nicira. We created OpenFlow. OpenFlow is the basis of even the term SDN, which came from an MIT Tech Review article in I think 2009. And so when you have a very large market, you have enormous innovation in an area, you have insertion, and you have large customers, this becomes a very strategic asset.

Knorr: What specific areas do you address where you have unique ideas that nobody else came up with?

Casado: If you think in broad strokes about the software-defined data center, it's going to require orchestrating compute and storage and networking -- and the piece we've worked on is networking. In order to virtualize the network, you have all the properties of software, so you need to do new things to the network control plane.

The way we think about it is that we turned it from a networking problem into a distributed systems problem. So instead of using a traditional protocol to manage the physical network, you use a distributed system, and that will provide you more functionality and better guarantees. And the core IP in order to do this virtualization is an area where we're very, very far ahead.

Knorr: Help us understand how Nicira's product, Network Virtualization Platform, fits in with OpenFlow itself and draw the connections between the two as well as to Quantum.

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