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Software Defined Everything: Oracle to Acquire Xsigo

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Another morning and another announcement that yet another so called "Software defined Networking" (SDN) company will be acquired. This time it's Oracle's turn, announcing the acquisition of Xsigo.

The financial terms of the deal were not disclosed. Oracle did note that the two companies will continue to operate independently and it is "business as usual." San JoseCA-based Xsigo will mark Oracle's sixth acquisition this year, after high profile purchases including social enterprise firms Collective Intellect and Vitrue. The deal is expected to go through in the fall, subject to closing conditions.

Although Xsigo may not specifically meet the SDN definition for some, this is still a prime example of how cloud computing and more specifically, Internet centric software is quickly changing the enterprise computing landscape. The move comes shortly after last week's announcement that VMWare plans to buy Xsigo competitor Nicira for US$1.26 billion. Estimates put VMWare's acquisition at between 40-100x forward revenue.

According to Xsigo, the company's software connects any server to any network or storage device in real time, without the complexity of cards, cables and switch ports.

The real question is why all the sudden interest in SDN? Like many industry M&A bubbles, SDN is a combination of several converging trends. The efficiency found in virtualization combined with the freedom of API driven software and the removal of the costs and complexity of hardware as a deployment requirement. Essentially it's a virtualization layer that decouples workloads from the physical network, where previously networking was a static component, it can now adapt and change as the demands and technology with in a network evolve. Add a rapid rate of adoption of Internet centric applications (a.k.a. cloud computing) and voila. You have the making of the next big thing in technology.

Another major driver are the economics of moving to a software defined approach. According to Nicira, in addition to the value of new business enablement and operational savings, Nicira's large data center customers can save $15 - $30 million per data center in server and network infrastructure. Below is a example of the savings:

Lately it seems that hardware has become nothing more than a packaging and deployment method for the lastest software. SDN is just the latest in a long line of traditional areas of enterprise hardware quickly becoming disrupted by this trend of sofware defining all aspects of the data center stack.

SDN is turning into a very interesting space, I'd expect to see major moves from IBM, HP, CA and Citrix in the coming months.