So VMware Nabs Nicira for a Cool Bil…

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A couple of months ago, I wrote a short blog on the buzz and potential around software-defined networking (SDN). Based on news last week, VMware is obviously betting big on that potential. Its recent announcement to purchase networking company Nicira for $1 billion says so loud and clear.

Interestingly, the big price tag isn’t a reflection of Nicira’s current revenue value today—because that’s pretty negligible. In fact, VMware paid 25 times the amount ($50 million) invested in Nicira by its financial backers, which included venture-capital firms Andreessen Horowitz, Lightspeed, and NEA. Former VMware CEO Diane Greene also had an angel stake in the company. Good for you, Diane.

For now though, VMware isn’t all that concerned about the valuations. The company considers this investment a long-term strategic one. You know, a visionary buy. VMware says Nicira will complement its own internal efforts in this realm, where the company wants to provide logical networks that are easier to manage and get rid of the inherent limitation of existing networking architectures.

If nothing more (for the moment), the purchase has given a definite boost to SDN momentum. But what of VMware’s networking partnerships? Nicira’s slogan, per its own overview white paper, has pretty much been: Free yourself from the tyranny of the old hardware network. Kind of begs the question, who’s the tyrant? Might VMware be on the verge of alienating partners like Cisco?

Well, VMware is trying to put a good spin on any possible partnership clashes, saying that because SDN doesn’t eliminate hardware, its Nicira buy will be about providing customers with greater choice, enabling new scenarios in the clouds, and creating new opportunities for network vendors.

At Juniper, we see that as a page taken from our song book. For the past three years, we’ve put the concept of the programmable network at the heart of our strategy . We see the future of the software defined network as one replete with custom software solutions that can optimally leverage high performance underlying hardware and we’re innovating in both.

For more closed approaches, it may be another story.