Virtualisation software vendor VMware is to acquire network virtualisation company Nicira in a deal valued at $1.26bn (£815m).
Nicira claims to be the first company to offer network virtualisation. Its software-defined networking (SDN) decouples virtual networks from the physical components of the network, "enabling the physical network to do what it does best: forward packets". "The physical network becomes a fabric, a pool of IP capacity," claims the company.
Nicira customers include AT&T, DreamHost, eBay, Fidelity Investments, NTT and Rackspace.
According to VMware chief executive Paul Maritz, the acquisition will enable the company to do in datacentre and cloud networking what it has done in server virtualisation. "The acquisition of Nicira adds to our portfolio of networking assets, and positions VMware to be the industry leader in software-defined networking," he said.
Network virtualisation is the next step in utility (or cloud) computing. The aim is to further drive the flexibility of computing and network power by abstracting the software and services that people and organisations need from the underlying hardware that ultimately delivers it.
The combination of VMware's and Nicira's software will enable what the former calls "the software-defined datacentre". "Customers utilising the software-defined datacentre can have their own virtual datacentre with an isolated collection of all the compute, storage, networking and security resources that they are used to," it said.
VMware added: "Furthermore, this virtual datacentre can grow and shrink to efficiently utilise physical resources. This is what the software-defined datacentre is all about, and it is the architecture for the cloud."
Mosharaf Chowdhury of the AMP (Algorithms, Machines and People) Lab at the University of California, Berkeley, is a specialist in network virtualisation.
In a separate interview, he said: "Network virtualisation enables service providers to dynamically compose multiple heterogeneous virtual networks that co-exist together in isolation from each other."
He added: "It also helps in the deployment of customised, end-to-end services on-the-fly - as well as managing them on those virtual networks - for the end-users by effectively sharing and utilising underlying network resources."
VMware will acquire Nicira for approximately $1.05bn in cash plus approximately $210m of assumed unvested equity awards. The acquisition is subject to regulatory approvals and is expected to close some time before the end of the year. The acquisition has already been approved by the directors of both VMware and Nicira, as well as Nicira's stockholders.