VMware-Nicira acquisition: Is Cisco in trouble?

The VMware-Nicira acquisition signals that software defined networking is here to stay, but what does it mean for Cisco and other hardware vendors?

The morning after VMware Inc. announced its intended $1.2 billion acquisition of network virtualization company Nicira Networks Inc., my email inbox was packed with notes from giddy software defined networking players with two messages: 1. Cisco Systems Inc. is in big trouble. 2. SDN is here to stay.

What's clear is that VMware's acquisition of Nicira validates the future of SDN as a technology. That's important, considering SDN was more vendor vision than actual product until recently. Nicira's staggering sale price "puts a dollar value on the space," said Eric Hanselman, research director at 451 Research.

Whether Cisco is now facing mega trouble is less clear. It's probably fair to say that Cisco isn't in immediate danger but soon will be under the gun to lay out a much clearer SDN vision than the Cisco Open Networking Environment (ONE) announcement it made at Cisco Live this year. The company might also need to partner with an SDN and network-virtualization heavy-hitter and begin to get more open about open standards.

Why would the VMware-Nicira acquisition spell trouble for Cisco?

Some say the VMware-Nicira acquisition will lead to direct competition between VMware and Cisco in the virtual network, a realm where the two companies have been allies until now. Cisco has been in a tight partnership with VMware, resulting in the development of Cisco's Nexus 1000v virtual switch and the establishment of the VCE Coalition (along with storage vendor EMC Corp.) to develop technology (such as the VXLAN tunnelling protocol) that helps solve the network challenges that prevent agile virtual machine provisioning and migration. Nicira makes network virtualization and SDN technology that can run on top of any underlying physical hardware and solves many of the same problems.

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If Nicira's technology lives in the VMware stack, VMware will provide easy provisioning of both virtual server and virtual network resources on demand. This new capability could threaten or break the VMware-Cisco alliance.

For now, both VMware and Cisco swear that won't be the case. In an email this week, a VMware spokesperson said, "The movement towards the software-defined data center and software-defined networking in particular does not remove the need and opportunity for other suppliers to participate. We will continue to maintain our open approach and provide access to our networking technology and APIs to our close partners to allow them to add new value through both hardware and software advancements, as well as by providing compatibility with existing systems."

Meanwhile, Cisco said in a statement: "VMware, EMC and Cisco remain strategic partners, and will continue to shape the future of the data center together. A key aspect of our partnership is a shared focus on bringing greater programmability and flexibility to physical and virtual network and data-center infrastructure via an open-standards-based approach. Cisco and VMware will continue working closely together toward that goal during the next phase of our partnership, as VMware expands its product portfolio through the acquisition of Nicira."

But because the Nicira acquisition is a sign of SDN validation, Cisco's problems could be more complicated than a battle with VMware. Some predict that SDN uptake will spawn a war between software and hardware, as well as one between commodity and proprietary hardware.

SDN would enable massive network virtualization, which would require many fewer physical network parts. Cisco depends on selling large volumes of expensive hardware, which is "at odds" with the future of SDN, said Kelly Herrell, CEO at software-based firewall and VPN vendor Vyatta Inc.

Going further, if SDN abstracts the data plane of a network into one centralized controller, then switches can be dumb, bare metal boxes, right? Not so fast.

Guido Appenzeller, CEO at Big Switch Networks Inc., said the "positioning of SDN vs. physical hardware doesn't make any sense" and "doesn't match" what his company sees in customer environments. "We are in customers together with a hardware partner. There is always a [traditional] networking vendor involved somewhere," he said.

In an SDN environment, physical hardware doesn't completely disappear, it must evolve -- and Cisco might be right for the job. "SDN moves the edge of the network where you need physical networking further out. You still have to get an edge that transitions away from that blob of compute and starts to shift that outward," 451 Research's Hanselman said. "Cisco, Arista, Juniper all have high-capacity platforms and are in a position to offer significant differentiation," he said.

Beyond the remaining need for some underlying hardware, SDN technology could still need an overarching management console that can stretch across controllers, Hanselman said. "The reality is that even in an OpenFlow world, there are going to be multiple controllers and there will have to be something that manages multiple controllers," he said. Cisco's Prime management system could be adapted to manage this kind of environment, he added.

Cisco needs a firmer SDN plan, and fast

Even if Cisco provides this evolved hardware, it will need a sellable SDN strategy, and it could face problems with its lack of a detailed SDN plan and its unwillingness to let go of its old proprietary ways. When Cisco unveiled Cisco ONE this spring, lots of pundits grumbled about the company's unwillingness to embrace OpenFlow (which is open source). They also bemoaned Cisco's intent to keep data-plane decision making intelligence within individual components instead of moving to a centralized strategy. The message they got was that Cisco -- despite its extensive efforts in the OpenFlow development community -- was unwilling to bend on old networking architectures and proprietary standards.

That unwillingness eventually could mean trouble for Cisco, especially if companies like Big Switch are getting in the customer door with open APIs (or even going completely open source) and letting them tailor-make their networks.

Should Cisco seek help in SDN partnerships? Maybe Big Switch?

It's possible Cisco would do best by picking up a network virtualization partner that uses OpenFlow and is already in play in many networks -- namely, Big Switch. Almost as soon as the Nicira news hit, market commentators pointed to Big Switch as an obvious acquisition target, perhaps even by Cisco.

Big Switch's Appenzeller says Big Switch is focused on building its business and staying true to its open source roots -- not to getting acquired. However, the company is open to building an alliance with Cisco or any other networking vendor.

"With Nicira being part of the VMware stack, they're looking at a proprietary solution, as opposed to the open SDN approach that we are pursuing," Appenzeller said. "We are working on a wide partner ecosystem. We have worked with VMware and Xen or KVM on the virtual side, and we also work with physical hardware from HP, IBM and Dell."

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