Oracle, Xsigo set network virtualization consolidation in motion

Following VMware's billion dollar Nicira buy, will trend force Cisco to respond or defend?

With Oracle's acquisition of Xsigo this week, it's now clear we have consolidation occurring in the server and network virtualization markets.

Oracle buying Xsigo, a maker of virtual I/O systems, follow last week's big deal: VMware acquiring network virtualization start-up Nicira for $1.26 billion. And it is, of course, a follow on to Oracle's biggest data center expansion deal - the acquisition of server stalwart Sun in 2010.

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The deals are indicative of the importance networking plays in the converged data center/cloud infrastructure fray, and in particular how vital it is to virtualize the network along with servers and storage in these infrastructures. And if three is said to be a trend, two is an emerging trend - observers expect more deals to come between large server and storage vendors, and network virtualization players, putting more pressure on networking incumbents such as Cisco to respond or defend.

It's early yet for that, though, some analysts believe. The network virtualization and software-defined networking market is still in its embryonic stage and Cisco is still in the catbird's seat as far as everything networking.

"Between (Cisco's) ONE (programmability architecture), and its (Nexus 1000v virtual switch), I think Cisco is covered for now," says Jon Oltsik, principal analyst at Enterprise Strategy Group. "In truth, data center competition is coming from Arista and Juniper, not the SDN guys -- yet. However I think Cisco will get much more aggressive on messaging/promoting its network virtualization technology. Look for Cisco to go to its base of customers and CCNEs with SDKs, use cases, further education, etc. It will play its cards often and try to maintain its installed base and mindshare advantages."

Cisco had no comment on Oracle's acquisition of Xsigo, which makes products that serve as an alternative to Cisco's Fibre Channel-over-Ethernet (FCoE) LAN/storage convergence switches and adapters. Of the VMware/Nicira union, a Cisco spokesperson stated:

"VMware, EMC and Cisco remain strategic partners, and will continue to shape the future of the data center together. A key aspect of our partnership is a shared focus on bringing greater programmability and flexibility to physical and virtual network and data center infrastructure via an open-standards-based approach. Cisco and VMware will continue working closely together toward that goal during the next phase of our partnership, as VMware expands its product portfolio through the acquisition of Nicira."

While it appears to be business as usual on that front, other major vendors are stockpiling their converged infrastructure arsenals, with systems and software folks nabbing the network virtualization pieces for this.

"It's becoming a game of stacks," says Zeus Kerravala, principal of ZK Research. "Oracle's not going to use this to steal share form Cisco. But if it was very tough to penetrate the Oracle (server and networking stack), this makes it tougher. It creates more of a closed market for the other guys."

Cisco's stack includes switches -- virtual switches, fabric interconnects, access and core switches - that serve as "pivot points" to its Unified Computing System servers, FCoE converged networking strategy, and virtualization and security offerings, Oltsik says. He believes server and server virtualization vendors like Oracle and VMware are trying to catch Cisco and the breadth of its stack.

"(Cisco's) is a broader position than the virtual networking guys have," Oltsik says. "Xsigo (with Oracle) has a similar position but Oracle's virtualization footprint is marginal."

Expect the consolidation to continue. Kerravala believes HP and Dell will have to respond to the network virtualization/SDN acquisition activity. OpenFlow controller start-up Big Switch Networks is believed to be an apple for someone's eye.

"What the heck are (Dell and HP) doing?" Kerravala asks. "I would have expected so much more from HP right now. But I think you'll see more M&A activity in this space."

Kerravala says Citrix might appeal to Cisco to complete its stack. Citrix's XenDesktop virtualization technology could allow Cisco to add desktop control through its network offerings, he says.

A Cisco/Citrix union has been rumored in the past.

So has one involving Cisco and NetApp. In addition to honing its messaging, Oltsik believes that the data center/cloud stack wars might have Cisco looking a little more closely at this storage component, now that Oracle and VMware are stockpiling.

"Look for Cisco to push a heterogenous message with support for Xen, Hyper-V, OpenStack, CloudStack," he says. "There has been a persistent rumor over time that Cisco would buy NetApp, this may be the right time."

Oltsik also believes Cisco might more aggressively back technologies that clearly position how physical switches participate in virtualized data centers with virtual switches, such as the IEEE 802.1bg Ethernet Virtual Bridging (EVB) standards and its offshoots. This specification offloads a lot of switch processing from servers with virtual switches onto the physical network.

One thing's for sure, all of the maneuverings around all the different piece parts for filling out vendor virtualization stacks are likely to confuse enterprise IT shops. And that might be in Cisco's favor, Oltsik notes.

"The industry is asking the poor IT professional community to gets its arms around FCoE, fabric architectures, SDN, EVB, cloud platforms," he says. "There are too many moving parts. Market confusion is good for Cisco as many customers have come to trust it for good reason: quality products, excellent service, market leadership. If Cisco can communicate clearly and manage customers, it is still in a great position."

Jim Duffy has been covering technology for over 25 years, 21 at Network World. He also writes The Cisco Connection blog and can be reached on Twitter @Jim_Duffy.

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