Today, VMware spent an astounding $1.26 billion to buy Nicira, a 100-person startup that had just came out of stealth mode in February.We caught up with VMware’s Bogomil Balkansky, senior vice president of Cloud Infrastructure Products, to find out why his team lead VMware into the biggest acquisition in its history.
Even before it launched, the Valley was talking about Nicira.
Its tech takes the smarts of complicated data networks and puts it all into software.
Just as server virtualization created by VMware helped to usher in cloud computing, Nicira’s “network virtualization” tech should be the next step. And just as virtualization threatened established hardware players, network virtualization could be a big threat to the likes of Cisco.
Balkansky lead VMware’s crucial vSphere product and is now leading the company’s push into cloud.
He explained two key points:
- VMware was already creating similar technology to what Nicira was doing. By buying the company it gave itself a big shortcut to own this new multibillion market.
- Cisco has been put on notice, but has also been given a big opportunity to create great new hardware.
Here is a lightly edited transcript.
BI: Why did VMware want to buy Nicira?
BB: VMware has a strategy that we call Software-Defined Data centre. Software-defined data centre is a chance to abstract all the domains in data centre services in a software form factor. In other words, provide the logical control point for server, storage, networking, security etc. Nicira is the leader in software-defined networking. It’s really is in the bullseye of the software-defined data centre strategy. It represents a major milestone in terms of executing, a leadership position in when it comes to virtualizing the networking domain.
By the way, at VMware, we have our own organic effort when it comes to software-defined networking but our efforts have been mostly and squarely focused on VMware’s cloud infrastructure stack with vSphere and vCloud Director.
Nicira is actually very strong providing network virtualization for open-source cloud environments.
It will complement our own internal efforts. They have significant design wins with service providers building cloud services on top of open source technologies.
BI: Why so much money?
BB: VMware has proven beyond reasonable doubt the great potential of virtualization technologies.
If you look at the server, the savings our customers reap from server virtualization are tremendous and measured in I-don’t-know-how-many-billions-of- dollars. When VMware was getting started no one know how big virtualization would become. At this point, it’s clear that virtualization is a big thing.
The networking domain is probably the same order of magnitude as the server domain.
Also, server virtualization created opportunities for the server eco-system. I believe the same thing will happen with networking. As we provide logical networks that are easier to manage and really overcome some of the inherent limitation of existing networking architectures, I think that will open the door to a lot more innovation as well.
BI: VMware and Cisco are partners in a joint venture, VCE. Cisco invested $100 million in a company called Insieme. You guys just spent $1.26 Billion on Nicira. These are significant investments each company is making in competitive products. How do you see your partnership affected?
BB: If you look at the history of VMware and Cisco over the past five to six years, we have really cooperated very well for the benefit of our customers. Our cooperation started around 2007 with a distributed [software-based] switch, provided with our vSphere product. Cisco also provides an alternative distributed switch called the Nexus 1000V. VMware resells that Cisco-distributed switch. We offer our joint customers an option. You can use the one with vSphere or if you want a switch that integrates with the rest of your Cisco network management, you can use Cisco’s.
As both companies are investing in SDN, I take that as an industry trend that SDN is bigger than VMware and Cisco. It’s something our customers require. We have a good track record of increasing the pie and increasing the opportunity by offering choices to customers.
I believe software-defined networking, and Nicira in particular, will create new opportunities for Cisco on the hardware side. SDN doesn’t eliminate hardware. So our customers will not be getting rid of Cisco routers. But it will enable new scenarios in cloud. It essentially calls for more packets [of data] to be carried over larger distances. That is call for new innovation on the networking gear side. A serious opportunity for Cisco and other network vendors, just like server virtualization was—and Cisco’s UCS server is a prime illustration of that.
BI: What happens with the Nicira team?
BB: We’re very excited about acquiring the Nicira team, a world-class team. We now have two teams that are capable of SDN, our team working internally on the same problem. Culturally, we’re very similar. VMware hails from Stanford’s computer-science department and they have the same zeal about transforming an industry that has been our guiding light here.
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