Juniper Networks on Wednesday unveiled its latest competitive move: acquiring a California-based software-defined networking startup. Juniper acquired Contrail Systems for $176 million. A testimony to the fast-rising SDN market, Contrail just launched in early 2012. Juniper expects to close on the acquisition before the end of 2012.

Contrail was founded by a veteran team of networking and software platform experts from Google, Juniper, Cisco, and Aruba. The team was directly engaged with its early customers to address the significant networking and operational challenges encountered when scaling their private and hybrid cloud architectures.

"With this acquisition, Juniper gains SDN technology that augments our portfolio of products and services," said Bob Muglia, executive vice president of Juniper's Software Solutions Division. "As a strategic investor earlier this year, we recognized the inherent advantages of Contrail Systems' architectural approach and we are excited to take this next step to acquire and combine Contrail Systems into our team."

VMware vs. Juniper's Strategy

Zeus Kerravala, principal analyst at ZK Research, told us this is the time when networking players are building SDN strategies -- and acquiring the technology was the right approach for Juniper.

"It's fair to say Juniper hasn't been a great acquirer of product companies over the years. Because Contrail is so early stage this is more of a technology buy. Juniper should be able to take this technology and drop it into its Junos network operating system, which the company feels is one of its competitive differentiators, and move forward from there," Kerravala said.

In July, VMware took a similar approach to building an SDN strategy with the acquisition of Nicira. The difference is, Juniper paid $176 million for a young startup while VMware shelled out $1.2 billion to acquire a more mature startup. What does the flurry say about the SDN market?

"The market has overhyped SDN a little bit. We are very early stage right now. We are probably a couple of years from having mainstream SDN options. But it is the right time for companies to start building their strategy," Kerravala said. "So I think Juniper buying a small company like this is not a competitive disadvantage to VMware, which dropped a whole bunch of money on a more mature one."

Contrail's Two Cents

Contrail has been actively blogging about network virtualization. In a recent post entitled, "Network Virtualization: Past, Present & Future," Parantap Lahiri, vice president of Solution Engineering at Contrail Systems, said even though new approaches are emerging, a huge number of existing data centers and enterprise networks are still being built out of VLAN technologies that expose operators to substantial scaling and operational risks.

What is missing is the capability to orchestrate the topology, segmentation and policy in an automated and standards-based way within a data center and on a multi-data-center/multi-cloud basis," Lahiri said. "This becomes quite a challenging and complex problem as different cloud operators have their own variants of the compute and storage orchestration systems. However, since network is all-pervasive and fundamentally critical glue, standardization is extremely important in this area."