VMware's Acquisition of SD-WAN Startup VeloCloud Another Stab at Cisco update from November 2017

VMware is entering the land of "branch and edge," as its spokespeople described it on a conference call Thursday to discuss the company's acquisition of SD-WAN startup VeloCloud that's currently in the works. The phrase refers to corporate branches and the edges of corporate networks, which VMware sees as the scope of wide area networks in the modern era.

The cost of taking the startup into VMware's family hasn't been divulged. The deal to acquire VeloCloud, which to date has raised $84 million in four funding rounds, is expected to close in the first quarter of 2018.

Interestingly, VMware's rival in the data center Cisco Systems was one of two strategic investors in VeloCloud's $27 million Series C, raised in early 2016. Cisco made a bet on a startup whose tech will soon join VMware's network virtualization and security platform NSX in the Dell Technology subsidiary's product portfolio.

Despite being a startup, VeloCloud, with over a 1,000 customers and more than 50 service partners (a number which has included VMware since August), is a leader in its field.

"The network that got us here today is not the network that will carry us forward," a VMware spokesperson said during Thursday's conference call. "Networking has to be delivered in software. It will also be delivered as a service."

The sun is rapidly setting on the era when corporate networks could be hardwired to serve static "branches." A sea change brought about by the rise of IoT and mobile devices means the edge, where these devices reside, is constantly in motion and constantly changing. Old school hardware solutions are not only more costly than bits and bytes, they're not agile and don't adapt quickly.

"In the digital era, a new networking approach is required to solve the hyper distribution of applications and data, as we move from a model of data centers to one of centers of data at the edge," Pat Gelsinger, VMware's CEO, said in a statement. "At the heart of VMware's networking strategy is the belief in delivering pervasive connectivity with embedded security that connects users to applications wherever they may be."

VeloCloud promises to pick up where hardware solutions leave users wanting and fill the gaps in VMware's network product portfolio. According to a VMware statement, it "leverages intelligent x86 edge appliances to aggregate multiple broadband links at the branch office, and using cloud-based orchestration, connects the branch office to any type of data center: enterprise, cloud, or software-as-a-service." It's also agile and can shift with the tide at the edge.

VMware executives on the call indicated they don't yet have the post-acquisition product road map completely plotted, so they don't know exactly what direction this deal will take or have a time line on when new products can be expected to be rolled out. They have some ideas on direction and are certain that some kind of integration with NSX will take place. They also maintain that Dell will have a place on the hardware end.

Until then, the two companies will work side-by-side. The two organizations already "go after the same customers," so much so that they have some clients in common, meaning customer issues will be easy enough to sort out after the dust has settled. VeloCloud CEO Sanjay Uppal and the rest of his team will remain on board.

"Enterprises are transforming how they architect and utilize their infrastructure, with a shift towards a cloud-delivered, software-defined model," Uppal said in a statement. "This enables organizations to have a globally consistent infrastructure regardless of where it is deployed -- from the data center and the cloud to the edge. We look forward to helping VMware, the leader in software-defined infrastructure, in the next evolution of the company's networking and NFV strategies."