VMware buys Nicira – $1.05 Billion: SDN the future of networking?

VMware took the IT industry by surprise yesterday with an announcement to acquire Nicira, a network visualization start-up for $1.05 billion.

Network Virtualization, or Software Defined Networking (SDN) is growing steadily, but it is still considered as a niche market. According to an interview by New York Tiems, analyst Brent Bracelin from Crest Security estimates the entire SDN industry is to generate about $100 million in revenue for 2012, but can grow to $2 billion in five years.

With VMware paying 10 times the amount of the entire industry’s revenue this year for Nicira, a lot questions will be asked: is this an over-valued acquisition or a game changer for VMware.

Nicira and Software Defined Networking

What Nicira and SDN promises to bring to the networking table is the concept of a virtualized network akin to virtualized compute. The difference is that the servers are now switches and routers and firewalls int a virtualized network. In the virtualized compute environment, the entire environment with many different physical servers is managed as a pool of resource for application provisioning instead of provisioning to each individual server.

The idea is similar in a virtualized network environment. The capacity of the switches and routers are made into a pool of bandwidth resource, and the control-plane of the hardware that is traditionally hardware bound to each switch/router is then offloaded to a VM or a specialized appliance. The virtualized control-plane or hypervisor is responsible for the actual route learning, policing, QoS, and many other responsibilities of the traditional control-plane. The difference is now that the collection of switches no longer need to learn routes individually or enforce local policy, and that they will be able to consult the virtualized control-plane for forwarding table, firewall policy, QoS, etc.

The Competition

Although a centralized data-plane/management that controls cluster behavior is nothing new, being open-source and vendor agnostic makes Nicira’s solution stand out in the crowd. OpenStack/Open Flow is used by Nicira to allow cross-vendor hardware to function like a back-plane fabric. Cisco’s latest Nexus line of fabric switch does similar where you have small Nexus fabric extenders controlled by a core device, however it is not as granular as Nicira’s solution. Juniper’s Q-Fabric however is a much more closer competition to Nicira’s solution, but it is ran over proprietary Juniper technology. What Nicira can offer is the ability to turn any number of existing networking hardware into a Q-Fabric like architecture and instead of using the traditional protocols like OSPF or BGP or MPLS for encapsulation and using Autonomous-System topology, Nicira’s NVP/SDN Platform is able to create virtual paths that traverse through a big back-plane of bandwidth resource between two NVP/SDN Controller or Gateway (utilizing open vSwitch).

The technology is definitely compelling and being open-source and vendor agnostic makes this a even better proposition. How well VMware will utilize this could definitely shake up and change the traditional dominant vendor-specific network market.