Nicira, a five-year old company born out of academic research from Stanford University just like VMware, has been a pioneer in the much buzzed about SDN market. Its acquisition by EMC subsidiary VMware promises to help VMware address customer needs beyond server virtualization and into virtualizing the network layer of the data center.

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While the price is steep, VMware has historically lacked networking sophistication, which it gets in spades with Nicira, says Eric Hanselman, networking research director at the 451 Research Group. He sees the all-software networking approach fitting in well with VMwares hypervisor and private cloud management software, vSphere.

Nicira technology gives VMware an opportunity to do to networking what its virtualization technology has done to servers, says VMware CTO Steve Herrod in a announcing the deal. Network virtualization is the next logical step in virtualizing the datacenter, he says. While a virtual machine can be provisioned in minutes, setting up the networking can require the configuration of thousands of routers and switches. Nicira addresses this by enabling customers to build a virtual networking layer.