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NSX available, but price of VMware network virtualization stays secret

VMware announced general availability of its NSX network virtualization software, but it won't tell us how much it will cost.

VMware announced that its NSX network virtualization software is now generally available to customers, but the company remains vague on how much it will charge for the technology.

A VMware spokesman emailed the following information about price and licensing terms for VMware network virtualization: "VMware NSX is sold with a term-based license and in volume is priced as low as single digit [U.S. dollars] on a per-VM [virtual machine], per-month basis."

These price parameters are extremely broad. It is unclear how large of a virtual network one must license in order to get the price under $10 per VM. It's also unclear how high the per-VM license is at lower deployment numbers. For instance, how much would it cost a customer to build a virtual network for 200 VMs on a monthly basis, versus a network for 2,000 VMs?

It appears VMware would prefer to engage directly with customers on the question of price rather than release a concrete set of rates.

"I think they are trying to give themselves maximum flexibility," said Joe Skorupa, research vice president for Stamford, Conn.-based Gartner Inc. VMware would rather close some deals out of the spotlight without letting potential customers know how low they are willing to go on price, he said.

VMware might be able to win over early adopters with that approach, "but certainly not in volume," Skorupa added. "Once customers start talking about what they paid, it will get out anyway.

"What they could be doing -- and I've seen them do this before -- is they don't want to get it out there in the industry and then get beat up on price. Then they would lose momentum to their competitors," said Teren Bryson, IT director at a multinational industrial technology company.

In the meantime, competing network virtualization products have been more open with their pricing. For instance, Juniper charges a $1700 perpetual license or a $1000 annual subscription license per server CPU socket for its Contrail platform rather than charging per VM. An enterprise might run 10 or 15 VMs per server socket.

Why VMware NSX price matters so much

VMware NSX pricing is such a point of interest because network virtualization creates a new layer of infrastructure in the network and is an entirely new line item in most IT budgets.

VMware has argued that NSX reduces costs in the data center by automating the provisioning of network connectivity and services in virtualized data centers, thus reducing the burden of adding a new budget line item. But CIOs will want to see more proof that the platform comes close to paying for itself before they invest.

"They'll definitely push the OpEx card," said Brad Casemore, research director for Framingham, Mass.-based IDC. "Their core constituency of [virtualization] admins will be receptive to that story. Depending on the organizations they work for and the degree to which they are fully invested in a cloud strategy, they will see the network as a bottleneck and will perceive business benefits [from NSX]. It's going to be a harder case for the traditional networking constituency."

"An additional layer of infrastructure is not always ideal," Bryson said. "You'd like to solve the problems you have in the context of what you have already built and have a budget for. But unfortunately it doesn't always work out that way."

Potential customers are also wary that VMware may be under pressure to charge a premium for the platform, given that it spent $1.26 billion to acquire Nicira, the startup whose software forms the core of NSX.

More on VMware network virtualization

VMware NSX will launch a turf war

On the other hand, VMware NSX doesn't have to launch a turf war

Companies that are really struggling with the network as a bottleneck and are already invested in VMware will find the money for NSX, Bryson said. But VMware has a track record of being a high-cost vendor in the hypervisor industry, which has led to growth for alternatives like Microsoft Hyper-V and Xen.  "I would look at [the absence of specific prices] as an indication that it's going to be fairly expensive and a hard sell," he said.

The relative value of the VMware network virtualization platform will also depend on what applications and features are bundled into the product, Skorupa said. For instance, will a basic NSX license include software firewalls and load balancers? Some enterprises might recognize an opportunity to replace some legacy firewalls and load balancers, thus avoiding a costly hardware refresh.

Whatever the case, because network virtualization is a new frontier, VMware needs to be aggressive, Skorupa said.

"It's about getting customers locked up and getting out there ahead of whatever Cisco will be announcing. It's not about showing Wall Street that they're making a lot of money off the dollars they spent on Nicira. I advise them to treat [network virtualization] as a land grab for an opportunity that comes once every 15 years," Skorupa said.

SearchSDN pressed VMware for more details on the price of NSX. With many VMware executives in Europe this week for VMworld Barcelona, the company was unable to provide answers at press time.

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