Nicira's main product is its Network Virtualization Platform (NVP), which is primarily a software product that runs on servers and gateways attached to a data center network. It provides a logical view and management of network resources, much in the same sense as VMware's hypervisor and vSphere provide a logical view and management of compute resources. With NVP, customers can define logical virtual networks that serve the needs of specific workloads. The NVP virtual switches running on each server take care of implementing the virtual network on the physical hardware.
Nicira uses a distributed controller and requires no special networking hardware; it can use older two- or three-tier network designs, or the new data center fabrics in vogue with most of the networking hardware manufacturers. Currently, Nicira talks of cloud management through either OpenStack or vSphere. Its marquis customers may manage some vSphere clouds, but it's likely that Nicira's primary use is in KVM and XenServer OpenStack environments. It's far too early to know how VMware will treat other cloud management environments, but we're betting this deal has given pause to some of Nicira's largest customers.
While Nicira's software-only architecture fits perfectly into EMC and VMware's shared vision of a software-defined data center, that vision will likely be at odds with VMware partner Cisco--and even with many of EMC's own products. Both VMware and Nicira are working to build smarts into a software layer that in many ways makes low-cost commodity servers, switches and storage systems perform acceptably for enterprises and service providers. In its product literature, Nicira speaks of its customers often preferring high-performance commodity switches over (one assumes) the high-priced, feature-rich products coming from the likes of Cisco.
With its recent executive moves, EMC seems to be embracing the notion that growth in sales and margins are likely to come from software like private cloud management systems rather than from its traditional storage array and backup products. As it does so, it's creating an environment where commodity servers, storage and networking will perform just as well as name-brand products. In many ways, this is exactly the opposite of what HP, IBM, Dell, Oracle and Cisco are doing.
The big four server vendors and Cisco are all working to create hardware stacks that implement private clouds with their own servers, networking and storage gear--all are pursuing a "better together" strategy that encourages customers to buy a complete line of data center gear and management software from a single vender. EMC's "doesn't matter what's under the hood" strategy is particularly problematic for partner Cisco, which has no storage products of its own. As sides are chosen, Cisco starts to look like the last kid picked for the softball team in gym class--in other words, at least in the data center, it's looking like a choice to avoid, either because it won't fit as well with other products, or because the features that would otherwise justify the price largely go unused by the Niciras of the world.
The strategies are divergent enough that we wonder about the stability of the VCE joint venture among VMware, Cisco and EMC. VCE has some solid customers, but it has never taken off quite the way its founders had thought it might.
As the strategy unfolds, it also leads to concerns about EMC's dedication to its storage hardware business. While it's clear that the company is looking to beef up its software portfolio, we don't expect that it'll abandon its storage business anytime soon--or even slow its development. We see in poll after poll that, regardless of the product category, IT pros value reliability and performance above all other features--but reliability is especially valued in the storage market, which is notoriously conservative and cautious in adopting new technologies.
EMC has plenty to do within its own products to further its software-defined data center vision; value-added services like deduplication from Avamar and Data Domain may embrace virtualization more strongly, or simply benefit from a more flexible network infrastructure. EMC's late-2010 purchase of Isilon indicates that the company saw the trend to scale-out storage systems coming, and Isilon's OneFS software fits well into the software-defined vision.
About the only thing to question about the Nicira purchase is the price EMC paid. Paying more than a billion dollars for the company sounds like a deal a possibly reluctant Nicira just couldn't refuse.