VMware announced yesterday its plan to purchase Nicira. The deal is expected to close during the second half of this year. It includes $1.05 billion in cash and $210 million in assumed unvested equity awards. Nicira is a well-known start-up company and is considered a leader in network virtualization. It has focused on Layer 2 to deliver SDN based networking solution for data centers. It makes a virtual switch which sits in the hypervisor and a distributed network controller which talks to a collection of virtual switches and controls them. It delivers intelligence at the edge. Its approach is non-disruptive to existing network infrastructure which is major plus-point.

VMware needs no introduction in the world of virtualization and cloud computing. In the world of cloud computing, the network is seen as a bottleneck to agility. Software Defined Networking or network virtualization addresses that challenge. This merger makes a lot of sense. With the acquisition of Nicira, VMware completes its virtualization portfolio and can remain a dominant player for the next decade. While many leading vendors preferred to take a wait-and-watch approach, VMware leapfrogs into the network virtualization world with this acquisition.

The new wave of software defined networking is at an early stage of adoption (http://soa.sys-con.com/node/2282570). But this deal endorses the paradigm shift in networking and gives network virtualization a much-needed impetus. It moves SDN to the next stage on the maturity curve. This is good for customers and for innovations in the field of networking as well as cloud computing. We will see a few more mergers in this area. It will be interesting to see what moves Cisco and Juniper make. Some have already predicted the end of VCE but in this mature industry, there are no permanent partners or competitors. The partnership is all about increasing the size of the pie so the individual piece of the pie also increases. One can be sure that the networking will not be dull any more.

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