Can VMware Redefine Network Virtualization?

VMware's striking move Monday to acquire SDN pioneer Nicira caps a string of events this month that piece together the company's go-forward mission of automating the datacenter and creating next-generation clouds.

Kicking off what could prove to be key milestones for VMware was its July 2nd announcement it is acquiring DynamicOps, a cloud automation provider renowned for its support of multiple virtual environments. Then came last week's shocking news that VMware CEO Paul Maritz, who has led the company through stellar growth during his four-year tenure, is stepping aside to become chief strategist of the company's parent EMC to be replaced by veteran Pat Gelsinger.

Topping off this month's buzz was the Nicira deal, VMware's largest acquisition to date. The amount VMware is paying for Nicira, $1.26 billion, is eye-popping. Though Nicira is a hot software defined networking startup with some highly regarded engineers and executives whose Network Virtualization Platform (NVP) software is used by the likes of AT&T, eBay, Fidelity Investments and Rackspace, it only came to market six months ago.

The premium price tag notwithstanding, the reaction to VMware's move has raised eyebrows as the company shows its determination to not extend further into virtual networking but to lead in it. Cisco's stock on Tuesday dropped nearly 6 percent in reaction to the move. Adding insult to injury was Cisco's announcement that it is laying off 1,300 people on top of the more than 6,000 jobs that were already phased out this year.

Fear by Cisco investors that VMware's move to marginalize its hardware by virtualizing it is "way overblown," said Forrester Research analyst Andre Kindness. "The purchase puts another nail in the Cisco VMware relationship but networking is more than the data center and more than layer 2 and layer 3 switches," Kindness said. VMware has yet to address the Layer 4 to Layer 7 arena."

Kindness said Cisco has been down this road before, first when Juniper Networks entered the carrier routing market and later when it moved into enterprise switching, as well as when Hewlett-Packard acquired 3Com and VMware's launch of vSwitch. But vSwitch itself wasn't enough for VMware to bring forth a strong enough virtual networking story, Kindness noted, hence the Nicira deal.

While vSwitch was a worthy start, VMware was held back by its hardware partners' agendas, Kindness said, noting Cisco, Dell, HP and IBM all released converged solutions which embedded their own virtual networking technologies. And those that don't have the necessary piece-parts are partnering, such as HP's announcement in May that it will use F5 Networks Application Delivery Networking (ADN) to deliver automated policy-based automated networking.

"Basically, the big hardware vendors are developing their software and hardware solutions that would be controlled by their own management solutions," Kindness said. "This would minimize VMware's influence on the management stack and open the door to other hypervisors. Thus VMware needed a solution that would ride over any of the hardware vendors who themselves are fighting over virtual transport protocols between switches, between data centers and between data center and public cloud offerings."

Whether VMware can pave its own path remains to be seen but by acquiring DynamicOps and Nicira in tandem, VMware is taking some bold steps to lead the next phase of cloud and datacenter virtualization by evolving from core server pooling to incorporating the network gear.

Others that have jumped on the SDN bandwagon say VMware's move validates software defined networking as the next big trend in the evolution of the datacenter and cloud computing infrastructure. "This underscores just how phenomenal the surge is that's powering interest in SDN," said Kelly Herrell, CEO of networking software provider Vyatta, in a blog post. "The simple facts are irrefutable: virtualization and cloud have fundamentally altered compute and storage architectures, and networking now must adapt."

Jaron Burbidge, a business development manager for Microsoft New Zealand's Server and Cloud Platform business, pointed out in a blog post that Windows Server 2012 and System Center 2012 SP1 will allow for the creation of SDN-enabled clouds. "In many ways, VMware's acquisition of Nicira is a late acknowledgement of the importance of SDN as a critical enabler for the cloud," Burbidge noted. "However, I think our approach is substantially more mature, delivers end-to-end capability, and provides an open platform for partners to innovate. Most important, our implementation is available broadly for customers to begin deploying today."

At first glance, one might wonder why VMware needed to shell out so much money for Nicira. After all, as noted by Kindness and his Forrester colleague Dave Bartoletti, VMware has already moved down the road of SDN with vSphere, which provides virtual switching capabilities via vShield Network and Security services and support for the VXLAN protocol. "These go a long way to virtualizing networking hardware and put them under the hypervisor domain," Bartoletti said in a blog post, adding VMware's vSphere Storage Appliance and various array integrations simplify and automate the allocation of storage to virtual workloads.

While vSwitch was an appropriate entre for VMware, the company until now has had a reputation for focusing on its own world. "The DynamicOps acquisition changed this conversation," Bartoletti added. "DynamicOps already manages non-VMware hypervisors as well as workloads running on open virtualization platforms in multiple clouds. (Read: heterogeneous VM support.) And now with Nicira, VMware owns a software defined networking solution that was designed for heterogeneous hypervisor and cloud environments."

Moreover, Nicira's NVP is a pure network hypervisor, effectively a thin software layer between the physical network and the virtual machine which enables network virtualization to work with existing physical datacenter network devices, IDC said in a research note.

"The Open vSwitch runs natively in the hypervisor and is managed by Nicira. Nicira is attractive in that it is designed to enable any hypervisor on the same logical network, providing a common network experience across the datacenter. The virtual networks bring flexibility and agility to datacenter designs while enabling isolation to support multi-tenancy," the note said.

"VMware clearly recognized the need for more advanced networking years ago and has been actively working with its networking partners to advance the network functionality in the virtual datacenter. To date, however, the company has not been perceived as a leading voice in the broader networking community. The acquisition underscores the fact that VMware can no longer rely on partners for networking expertise. Networking is a critical pillar in private cloud delivery, and Nicira gets VMware closer to having a full solution."

There are still many open questions. For one, what impact will VMware's move ultimately have on its alliance with Cisco and VCE, the venture the two companies and EMC have to develop converged cloud infrastructure. Just last week VCE named 19-year Cisco veteran Praveen Akkiraju as its CEO.

Another burning question is whether VMware will make a push into the OpenStack consortium. Nicira is a key contributor to the evolving Quantum networking component of OpenStack. Will VMware support other components of OpenStack?

As these and many other questions play out, a clearer picture of where VMware is headed has unfolded. And VMworld is still a month away.

Posted by Jeffrey Schwartz on 07/26/2012 at 1:14 PM