VMware confirms its decision of buying Nicira by paying a sum of $1.26 billion in cash and a percentage of equity. Nicira is known for creating networking related software. What comes as surprise is that why VMware is shelling such a big amount on Nicira and its software that is produced only in a limited number.

Nicira was founded by Diane Greene five years back. At that point of time, the company raised a fund of $50 million from investors that included founder Diane Greene to create software that could be used for moving data and packets around a network without the restrictions of networking hardware. Nicira’s software offered the much needed solution for highly virtualized and webscale data centers.

Nicira at this point of time aims to solve the problem of hypervisors and virtualization. The moment servers became virtualized, it became easy to separate computing from its body. Server virtualization was very well accepted as it offered many benefits that included agile compute infrastructures and consolidating IT. Furthermore, it gave more options for storage. But getting the complete infrastructure virtualized was not easy as IT was completely dependent on physical hardware by networking.

Nicira’s software is used by number of companies that use online payment option such as eBay, AT&T, Rackspace and NTT. Nevertheless, no one is sure if these companies are using Nicira’s software in their production environment. With VMware buying Nicira it is expected that VMware is planning to get into production.

VMware CTO Steve Herrod after closing the deal, in a blog post mentioned that, “that Nicira will fit in with VMware’s vision of a software defined data center — although the specifics of that vision have yet to be unveiled. And it’s true that if we consider how Nicira customer Calligo is using the Nicira controller, it fits within what I would think of as a software-defined data center — essentially a pool of compute resources that are tied together with software and where the physical hardware can reside in different data centers and pulled up for use as needed. The whole process is programmable and automated.”

The blog post also read that VMware could not have managed without the partnership which was much needed if the company had to attain success in delivering the software-defined networking elements. Company has made it clear that by buying Nicira it has fulfilled it’s that requirement.

The deal is expected to materialize in the second half of the year.