The exciting part of Software Defined Networking (SDN) is that it has the potential to shake up the current networking technology system and be revolutionary, not just evolutionary. One of the ideas is that SDN could driver cheaper, software based solutions to more expensive purpose-built hardware products such as edge routers.

Karl May, the outspoken CEO of SDN startup Vello Systems sees this happened. He describes the networking world as split between those that believe that SDN is just a marketing buzzword and those that believe it will bring fundamental change to networks. May is in the latter camp. He asks why customers continue to pay for expensive, proprietary routing platforms when the same can be achieved with more open, software-based routing.

"SDN is even more confusing than cloud, because it creates more questions," says May. "But SDN is an architecture more than anything else. What we do is fundamental. We have leveraged an SDN-style architecture. We're changing the way applications are deployed on networks."

Okay, great. But how? May says the Menlo Park-based Vello has focused on developing new ways of routing and building dynamic, flexible networks, with an emphasis on software that can run on a number of different hardware platforms. Vello calls it "dynamic path networking." It consists on better algorithms and protocols for determining the paths applications should take through the network to make them more resilient.

"There has been little or no innovation in protocol development [for decades], said May in a recent interview with The Rayno Report. "Virtually no innovation in BGP [Border Gateway Protocol] or routing protocols for 24 years."

To make it worse, May says the current IP-based routing systems don't always work. They go down too much.

"Why are [customers] paying millions of dollars for the fancy MPLS network that has outages?" May asks.

Vello's routing software is a true SDN solution, in that it is designed as software that can run on standard networking boxes and systems to virtualize network functions, such as load balancing or application prioritization. It's designed to be a threat to the current system of installing expensive hardware-based edge routers for private network services.

Vello's bread-and-butter is its own Operating System (OS), VellOS, an SDN platform that can be configured on both optical and Ethernet switches.

"Our software is independent whether it runs on a 100-Gig switch or an optical cross connect, it does not matter," says May. "Just like it doesn't matter you ran office on an off the shelf PC or a $2,000 Mac, what's the difference? The functions are the same."

The idea is that the Vello system can run on a standard box, creating an instant network-as-a-service or  application load balancer. From the service-provider perspective, Vello can be used to create and provision dynamic services, such as a service for an high-availability application that can dynamically scale at peak usage times, with the customer paying only for high bandwidth at specified hours.

May says this shakes up the current business model for both established router vendors and some service vendors, which often rely on expensive routing hardware to create private networks that they pay for monthly.

"We've focused on the more traditional routing problem at the edge, where bandwidth is very expensive," says May. "In the some case [routing customers] are spending more on annual maintenance for router than they pay us for all the software. Something's gotta give."

That, in a nutshell is a classic SDN story: Use software coupled with cheaper hardware to create more dyamic network services -- for less.

May hopes to back up Vello's stories with real-world examples of customers using its product to build more robust networks. Vello has several paying customers, one of which is State Street Bank. State Street is using the Vello software to prioritize its applications using cheaper hardware, says May, who is a networking veteran with past gigs at OpVista, AP Engines, Convergent Networks, and the Nortel's broadband division.

Another real-world example cited by Vello was featured in a recent Accenture whitepaper on technology trends. Vello customer CurrenEX used Vello software to build a network that could dynamically re-route itself in the case of network failures, by sourcing multiple service providers. CurrenEx says it was the only New York-based currency exchange that remained up during the Sandy natural disaster in 2012, because it used Vello to dynamically reconfigure its network.

Vello raised $25 million in October of 2011, but hasn't disclosed any financing since. May says that's because Vello has chosen to be financed by partners and strategic investors, rather than the standard venture-capital route. It has kept those details private. The company has about 50 employees.

May says the company is shipping product for revenue and has several key customers in the financial and service-provider space. In addition to State Street and CurrenEx, PacNet is another publicly disclosed customer.