As VMware's Server Virtualization Business Cools, Software-Defined Networking Is Riding To Rescue

VMware said earlier this week that NSX bookings grew 100 percent year over year in the vendor's fiscal first quarter, which came as welcome news to investors concerned about the slowdown of the vendor's server virtualization business.

While NSX isn't yet as widely deployed as vSphere, VMware partners told CRN they're confident the technology will help VMware maintain its dominance of the data center market.

"Interest is picking up, and I'd say it's more than it's ever been," said Scott Trinque, president of EchoStor, a VMware partner in Hopkinton, Mass. "Customers are seeing the value and investing more."

NSX now has more than 1,400 customers, of which around 350 of them are using the technology in production networks, VMware CEO Pat Gelsinger said on the Palo Alto, Calif.-based vendor's earnings call Tuesday.

Yet VMware's vSphere server virtualization business continued its slow decline during the quarter, with compute license bookings falling 10 percent year over year, and total compute bookings dropping 1 percent. While VMware has been adding new features and functionality to vSphere, this hasn't stemmed the decline.

While NSX has a long way to go to reach vSphere-like status, VMware is more focused on talking about specific use cases for the technology than about sales numbers. NSX was on an annualized run rate of $600 million going into 2016, but VMware hasn't updated that figure since then.

While VMware has said previously that most NSX customers are running the technology on Cisco networking hardware, it also works with a wide range of hardware from other vendors, including purveyors of white-box gear.

VMware now has customers using NSX in conjunction with Cisco's competing Application Centric Infrastructure (ACI) technology, including Shutterfly and SugarCreek, according to Gelsinger. CRN reported earlier this month that VMware partners were .

"We have some very profound new capabilities, and overall, [NSX] is now being unquestionably seen as the premiere overlay technology," Gelsinger said on the call.

Ron Flax, vice president at August Schell, a Rockville, Md.-based VMware partner, said he's seeing strong interest in NSX within his customer base. More recently, August Schell has seen an uptick in services opportunities involving NSX, Flax told CRN.

NSX's microsegmentation -- or network security -- use case is driving most of that activity, Flax said.