VMware's competitors, including the OpenStack community, instead call VMware a proprietary vendor as it has not made its core technology available to the open-source community.
Nicira, on the other hand, is a very active member of the OpenStack community, and has been a leader in the development of OpenFlow, an open standard for letting software on a separate server determine how data packets move across multiple heterogeneous network switches and routers.
The company is also active in the development of Open vSwitch, a multi-layer virtual switch licensed under the Apache 2.0 license for network automation to support distribution across multiple physical servers.
Both are central to developing virtual networks in clouds built on open source technologies.
That means VMware is changing how it views 'open' cloud computing, Balkansky said. "So now the definition is, the ability to manage any heterogeneous cloud with a single plane of glass, the ability to allow third party technologies, and the ability to span management across heterogeneous clouds," he said.
Prior to announcing the acquisition of Nicira, VMware was in the process of developing its own virtualized networking technology called VXLAN, which works similar to the Nicira technology but is specific to the VMware cloud platform. It was unveiled early last year in conjunction with networking technology partners such as Cisco, Arista, Emulex, Brocade, Intel, and Broadcom. No delivery time has been announced.
Balkansky said the acquisition of Nicira means VMware will be offer virtual networking capabilities in both its own and in non-VMware clouds.
He discounted the possibility that paying $1.2 billion for a company which has only recently started shipping products is too expensive.
"For us to build that technology organically was definitely an option," he said. "But we made the decision to acquire Nicira because it is already the leader in the open cloud market. If we built our own, it would take a lot of time and resources, and would have given Nicira time to take the leadership in that market."
VMware and Rackspace, one of the founders of the OpenStack open-source cloud community, have been eyeing each other warily as potential rivals with competing cloud platforms where VMware’s licensing model would seem to run counter to Rackspace's embrace of OpenStack.
NEXT: Rackspace Welcomes VMware's Nicira Buy
However, Rackspace CIO John Engates declined to criticize VMware’s cloud approach Tuesday in an interview with CRN. He said Rackspace partners with VMware and uses its virtualization technology to manage its cloud infrastructure.
Engates said he thinks VMware’s Nicira purchase will lead VMware to adopt more OpenStack practices. Nicira is a Rackspace partner and is a leader in the OpenStack Quantum project to develop network connectivity as a service.
“It’s important for VMware to have that [Nicira] technology inside the hypervisor,” Engates said. “It’s the reason we were going in that path with Nicira. The reason we worked to integrate Nicira into OpenStack is because ultimately you can’t build a large-scale cloud without virtualizing the network layer.
“Rackspace cloud has hundreds of thousands of virtual machines running, all connected to the network,” Engates added. “We need a virtual, scaled network. Nicira takes intelligence out of the network and moves it to the cloud layer.”
Keith Norbie, vice president of Nexus, the Minnetonka, Minn. office of Stratos Management Services, an Atlanta-based solution provider and partner to both VMware and Rackspace, said what is most interesting with Nicira is that it was VMware, and not an OpenStack partner, which moved to acquire it.
"Customers are looking at how to manage clouds across the future hypervisor, or in other words, across not only VMware's vSphere," Norbie said. "I'm wondering if this is VMware's way to integrate into this scheme."
Norbie said this also looks like a play by VMware for the software-defined data center market, which is built on commodity hardware and which features a high degree of automated management.
"If you look at networking hardware, other than the proprietary backplane, nothing is proprietary," he said. "Look at [VMware's] vCloud Director. There's lots of technologies running on the processor. ... Why are people talking about software-defined data centers? They're struggling with multi-tenancy issues. You need software and automation to manage it."
Elizabeth Hedstrom Henlin, an analyst at Technology Business Research (TBR), a Hampton, N.H.-based analyst firm, wrote in a Tuesday research report that Nicira's open-source traction will be important to VMware's cloud growth.
"VMware's open-source credibility remains nascent, and Nicira's executives can deliver significant visibility to VMware's open-source assets -- particularly with Nicira's ongoing involvement with OpenStack and the Open Networking Forum," Henlin wrote. "With technologists at Nicira's helm... along with VMware's broadening go-to-market approach (inclusive of cloud and virtualization), TBR believes VMware is well-positioned to integrate and monetize the acquisition of Nicira by the end of 2012."
NEXT: Nicira Likely To Bring VMware Closer To, Not Farther From, Networking Vendors