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Is it an absolute requirement? No. Do you need a beefy fabric architecture for it to run efficiently? Probably yes, at some point -- especially at scale -- but it's perfectly feasible to deploy a network virtualization overlay on relatively conventional Ethernet switches without any fancy VXLAN tunneling features. For organizations with small or geographically dispersed requirements, you can still use a local network virtualization overlay without having to spend a lot of money on infrastructure just to get the thing operational.
SDN-type deployments are usually going to create a lot of east-west traffic as virtual devices and functions can be moved around the physical architecture at will or on demand. This will likely increase the demands on your infrastructure, and, depending on where you are in the project cycle, you may want to think about upgrading some parts of your network. While leaf-spine architecture is generally the gold standard in this context, it's not a requirement; and other fabric types would work (Juniper Networks' QFabric, for one). Many organizations would probably start a network virtualization overlay project with what they have, especially as switch refresh cycles are very long.
Tunneling to boost multi-tenancy
SDN and network virtualization work together
Overlays and the future of networking
Dig Deeper on Network virtualization technology
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