VMware Pays $1.26bn For Virtual Networking Start-Up Nicira

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Nicira’s software-defined networking technology takes VMware into Cisco Systems’ territory

VMware is taking a detour from its standard virtualisation and mobile network discussions lately and adding a buzz term that Cisco Systems has been using for years: software-defined networking (SDN).

To that end, VMware said on 23 July that it is paying $1.05 billion (£640m) in cash plus $210 million of unvested equity for SDN software maker Nicira, also based in Palo Alto, California, which was founded in 2007. The transaction is expected to close early next quarter.

Virtual networking engine

With the addition of Nicira, which has built a virtual networking engine using open source software, VMware now has its own virtual networking division.

Software-defined networking is a major departure from standard procedure in data centres. The firmware of network switches and routers – otherwise known as the control plane – traditionally has been a black box: locked, proprietary, and kept under the control of the companies that manufacture those machines.

Software-defined networking turns this old-school approach on its head to make the control plane remotely accessible and modifiable via third-party software clients, using open protocols such as OpenFlow. SDN is in large part about understanding and managing a network as a virtualised entity.

With this portability, SDN allows for quicker experimenting and optimisation of switching/routing policies and for open access to the inner workings of switches and routers that formerly were closed. Basically, changes can now be made when necessary.

The combination of Nicira and VMware will deliver agile, elastic and efficient resources (compute, storage, network, security and availability) on demand for a full range of customers, such as telcos, cloud service providers, enterprises and government agencies, VMware CTO Steve Herrod said.


VMware already has some products in the works in this (virtual networking) area, namely VXLAN (Virtual Extensible Local Area Network), introduced at VMworld 2011 and now in beta testing. This software allows for greater scaling in the number of LAN segments created over cloud networks.

“We see Nicira really complementing our current offering, making ours a world-class networking virtualisation team,” Bogomil Balkansky, president of product marketing in VMware’s server unit, told eWEEK.

Balkansky said the addition of the Nicira development team is as important as the new IT the little company brings to VMware.

“Nicira and VMware are of similar cultures,” Balkansky said. “We both were born in the Stanford (University) Computer Science department. We both look at virtualised networking as an important new sector in data centres and cloud computing.”

Ben Cherian, Chief Strategy Officer at SDN software maker Midokura, told eWEEK that performance isn’t what SDN is necessarily all about.

“The value in virtualising the network isn’t greater performance. It’s scalability, network isolation, implicit automation and fault tolerance,” Cherian said. “If done properly, network virtualisation also has the added benefit of reducing an organisation’s capital expense and operating expense costs. Any company who is building a cloud should look into network virtualisation.”

Early adoption

Cherian believes that SDN is a key trend to watch.

“The early adopters will try network virtualisation this year and next. In two years, we’ll see increased adoption in the enterprise. In five years, we’ll see wholesale adoption in every company. In seven to 10 years, network virtualisation won’t be new technology … it’ll just be the way we do things,” Cherian said.

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  1. With everybody else falling asleep at the network switch, VMware and Nicira have cornered the virtual server market and thus became indispensable to cloud-based services.
    But up to now these two had at least each other to compete with. This has assured both strong development in virtual controllers and servers as well as fair pricing.
    Now, however, the two are about to become one. With everybody else lagging far behind, they will be able to not only monopolize the virtual server market, but also annihilate the old hardware-based switches from Cisco and company.
    “So what,” you say. “Survival of the fittest.”
    Not so fast.
    With the Cisco hardware obsolescence will come a dependency on virtual controllers and servers. This is not bad in itself since they streamline the setting up and maintenance of networks.
    But it can be bad if the virtual controllers and servers take hold to the exclusion of everything else.
    Aside from the inherent monopoly in this, we will also have a dependency on a networking platform — which though efficient, economical, and ingenious — has nonetheless not been around long enough to warrant a complete reliance on it.
    A go-slow approach, therefore, might be in order and the Justice Department perhaps ought to look at all the ramifications before it gives its blessing to VMware to buy Nicira.
    Besides, the two companies have already worked out the necessary protocol to coexist in networks — without being the same entity.
    Staying that way might be better for all of us for the time being.