The Battle Between Network Virtualization Overlay vs. Forklift Upgrade

Michael Vizard July 19, 2018
12:00 pm MT

There are essentially two competing views concerning the best path forward when it comes to injecting some much-needed agility into networking environments within the data center.

The first is to upgrade networking switches that come with software-defined networking (SDN) capabilities. The second is to employ network virtualization software to create a network overlay between switches. The former approach essentially amounts to a forklift upgrade that makes sense when an organization needs more network bandwidth in the data center. Without available budget to upgrade the physical switching environment, a network virtualization overlay often makes the most economic sense.

A report from Forrester Consulting that was commissioned by VMware comes to the same conclusion. The report finds an organization that on average has 3,000 virtual machines can save as much as $5.4 million by deploying network virtualization software rather than upgrade the network underlay to create a software-defined network.

Specifically, the report suggests organizations will see a return on investment (ROI) of 88 percent by deploying a VMware NSX network overlay. Forrester cites the following areas where companies will save money:

• A 37 percent reduction in hosts required;
• $6.5 million in security savings derived from being able to microsegment network traffic on an East-West basis within the data center;
• $3.3 million savings on other hardware expenditures;
• Operational cost avoidance of maintaining hardware and avoiding hardware purchases yielded of slightly more than $1 million over three years;
• Reduced system/network administration time that yields a $1.2 million over three years by saving over 6,000 hours of administration time per year on average; and
• Reduced downtime that results in a savings of $1.6 million over three years.

In contrast, the report estimates VMware NSX software licensing and support fees amounted to $5.8 million over three years, while deployment and training costs amounted to more than $275,616.

Making the Case

How companies account for hard and soft cost savings varies. But the fact that NV software provides all the benefits of software-defined networking without requiring a forklift upgrade of the underlying network infrastructure create a compelling financial argument, said Matt de Vincentis, group product marketing manager for networking and security business unit at VMware.

That approach allows IT organizations to extend the life of their existing infrastructure and prevents them from getting locked into any specific network underlay because NSX can run anywhere there is a hypervisor, de Vincentis said. In fact, NSX makes it easier for organizations to transition to a new networking architecture based on commercial processors or industry-standard x86 processors or embrace spine leaf networking switches alongside legacy switches, he said. “It makes it easier to embrace disaggregation.”

Much of the tension that exists in the data center as it relates to networking has as much to do with cultural biases as it does what makes financial sense, said Craig Matsumoto, an industry analyst with 451 Research. “Network people still tend to think in terms of buying boxes,” he added.

Network overlays may be the path of least economic resistance when it comes to achieving network agility. But at some point, organizations for bandwidth reasons will need to upgrade the network infrastructure. Once that occurs, there’s a natural tendency to flatten the network architecture in a way that eliminates the need for a network overlay because SDN functionality is now built into the switch. Changes to the U.S. tax code also make it easier to write those hardware investments off immediately versus having to wait several years to justify the cost of another hardware upgrade cycle.

It’s likely that most organizations will eventually embrace both NV software overlays and SDN hardware. The question is how long will companies rely on NV overlays in the data center before eventually implementing a truly modern SDN network.