VMware's $1.26 billion purchase of network virtualization startup Nicira this week is expected to increase competition and strain between VMware and longtime partner Cisco. VMware, the leader in server virtualization, is broadening its reach into network virtualization with the Nicira acquisition.
Cisco and VMware have partnered on key developments, such as Cisco's Nexus 1000v virtual switch and the VXLAN VLAN scalability specification. Cisco took a $150 million stake in VMware several years ago, and the two, along with VMware parent EMC, are tied into the VCE joint venture to sell pre-packaged data center compute, virtualization, switch and storage "vBlocks" to accelerate adoption of cloud computing.
So why didn't VMware continue to leverage its relationship with Cisco for network virtualization --- especially since Cisco recently outlined its own network programmability strategy, Cisco ONE?
"VMware may have been feeling threatened by Cisco," says Jon Oltsik, principal analyst at Enterprise Strategy Group. "Cisco was winning the virtual switch market. Lots of organizations use VMware for server consolidation but if they stop there and don't move on to private cloud etc., VMware gets marginalized. I think VMware feels like it needs to accelerate the ownership of the stack to avoid becoming a commodity hypervisor."
Analysts stressed that Nicira makes network virtualization controllers, not programmable network switches. In that regard, it poses little, if any, threat to Cisco's entrenched data center switching business.
But still, VMware encroaching even peripherally on partner Cisco's networking domain - like Cisco did not so peripherally with server partners HP and IBM - is certain to make the relationship awkward.
"There could be a tug-of-war or tension" in the relationship, says IDC analyst Rohit Mehra. "But Nicira is not a network switch. It's the glue that brings together network orchestration, management and virtualization."
Mehra says some Nicira functionality baked into VMware hypervisors and orchestration tools could compete or overlap with that offered by Cisco and its Unified Computing. And Nicira's controller is designed to work in any vendor's network or server environment - Cisco ONE is designed to instill programmability into Cisco's IOS, IOS XR and NX-OS operating systems so adopting that for network virtualization would be somewhat limiting for VMware.
Therein lies the key though: Cisco never pitched Cisco ONE as a network virtualization overlay. It's offered as a programmability framework for its own router and switch operating systems. Virtualization marginalizes the underlying hardware, which would disrupt Cisco's business model, as Brad Casemore points out here. So Cisco is resisting the network virtualization/SDN movement, not leading it, he notes. And partner VMware now owns strategic network virtualization technology that Cisco likely wants to kill.
Some analysts, however, expect business to continue as usual between Cisco and VMware due to the ubiquity of both in the data center.
"The best way for VMware to have the most control (over its network virtualization strategy) is to own the technology," says Zeus Kerravala, principal of ZK Research. "They have a multipronged approach. Nicira's not threatening Cisco's switching business. Keeping the relationship healthy protects them both."
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