Cisco Mulling Over Starting Company for Software Networking: Report

Cisco Systems reportedly is considering funding a startup run by Cisco engineers that would focus on the growing trend within data centers of software-defined networking.

According to a story in The New York Times, the startup€”which would be called Insiemi€”would develop a switch that essentially would take many of the networking tasks that now are done on expensive pieces of hardware and do them in software instead.

Such software-defined networking (SDN) environments, which leverage the OpenFlow protocol, are cropping up in data centers that run such computing models as cloud computing. In March 2011, a number of major tech firms€”including Google, Facebook, Microsoft, Yahoo and Verizon€”created the Open Networking Foundation, a nonprofit group whose aim is to drive innovation around SDN, in part by pushing the continued development of OpenFlow.

SDN is seen by proponents as a way to give IT administrators greater control over their networking environments, thanks to such aspects as relatively easy software upgrades and by powering down routers that are not in use, thus saving energy costs. The software works as a controller of everything else going on in the network, something normally done. SDN can run on hardware that uses off-the-shelf processors, rather than needing more expensive proprietary chips.

A growing crop of smaller networking vendors, such as Arista Networks (started by former Cisco employees, including Arista president and CEO, Jayshree Ullal) and Nicira, are leveraging SDN development to better compete with the likes of heavyweights Cisco and Hewlett-Packard, which offer high-end networking hardware.

Cisco officials have said they plan to add OpenFlow to upcoming switches (HP also has embraced the protocol), and President and CEO John Chambers has recently said the company is aggressively pushing to expand its software capabilities in several business areas, including networking and video. During a Webcast last week to talk about Cisco€™s intention to spend $5 billion to buy NDS Group, a video software vendor, Chambers said the deal marked a significant step in his company€™s efforts to grow its software capabilities.

Insiemi would be another step. According to reports, the plan would be to help the three Cisco engineers€”Mario Mazzola, Prem Jain and Luca Cafiero€”start up the company and develop the product through both support and funding. If the product development is successful, Cisco would then bring the company into the fold, buying Insiemi from the Cisco engineers.

Citing unnamed sources, The New York Times said Cisco officials are currently discussing the idea of Insiemi, and could announce their plans in the late spring.

This wouldn€™t be the first such €œspin-in€ (as opposed to a spin-out) project with the same three engineers. Two other companies€”Andiamo Systems (storage networking) and Nuova Systems (data center switch) developed products, and then were bought by Cisco. The networking giant had invested $70 million in Nuova, for example, and bought it for $678 million.

The Times article also said that while such a spin-in project can bring new products to the company, they also can cause morale problems among employees not chosen for the new company. And those engineers who are chosen are handsomely rewarded for working on what ends up being a Cisco product when Cisco buys the company. Arista CEO Ullal, while at Cisco, reportedly was critical of spin-ins.