VMware has agreed to acquire a 100-employee ‘network virtualisation’ start-up called Nicira for a staggering $1.3 billion.
Nicira’s technology is used by companies including eBay and Rackspace to manage physical network infrastructure as ‘virtual’ or software-defined networks. This allows network capacity to be provisioned automatically, which means network infrastructure can be scaled up and down in a cloud-like fashion.
"A network, virtualised with Nicira provides the same operational flexibility offered in [server] virtualisation," the company’s website claims. "The physical network … is treated as a resource pool of capacity that can be consumed and repurposed on demand."
"Nicira’s large data centre customers can save $15 to $30 million per data centre in server and network infrastructure," it also claims, by reducing the number of network ports required.
Nicira’s technology is based on the doctoral work of CTO and co-founder Martin Casado. Along with PhD supervisors Nick McKeown (a Brit) and Scott Schenker, Casado developed OpenFlow, an open source ‘software-defined networking’ protocol that forms the basis of Nicira’s products.
VMware CEO Paul Maritz said the acquisition positions the company as "the industry leader in software-defined networking".
Silicon Valley mogul Marc Andreessen, whose Andreessen Horovitz venture capital firm is one of Nicira’s backers, told Forbes magazine that the acquisition "easily more than doubles VMware’s market opportunity. This positions them very well for the next 20 years.”
All the major networking equipment manufacturers, including Cisco, Juniper and Brocade, have announced their intention to support OpenFlow.
Speaking to Information Age earlier this year, Brocade CEO Michael Klayko said the OpenFlow and software-defined networking promise to disrupt Cisco’s near-monopoly of the IP switching market, by allowing companies to use multiple network infrastructure suppliers. "What it does is open up more of the market to compete on functionality and price performance," he said.
Nicira’s $1.3 billion price tag is twice the $635 million that EMC paid to acquire VMware back in 2003.