NFV also reduces the need to overprovision: rather than buying big firewall or IDS/IPS boxes that can handle a whole network, the customer can buy functions for the specific tunnels that need them. This reduces initial Capex, but the operational gains are the real advantage. NFV can be thought of as a parallel to VMware, with a few boxes running a lot of virtual servers, and a point and click provisioning system.
Customers understand the difference between NV and NFV, but they may not want to go to two different vendors to get them. That's why VMware now offers NV and NFV security functions in VMware NSX.
Software Defined Networking
SDN uses canned processes to provision the network. For example, instead of building a network tap using an appliance, users should be able to program the network when they want to build a tap.
SDN makes the network programmable by separating the control plane (telling the network what goes where) from the data plane (sending packets to specific destinations). It relies on switches that can be programmed through an SDN controller using an industry standard control protocol, such as OpenFlow.
While NV and NFV add virtual tunnels and functions to the physical network, SDN changes the physical network, and therefore is really a new externally driven means to provision and manage the network. A use case may involve moving a large "elephant flow" from a 1G port to a 10G port, or aggregation of lot of "mice flows" to one 1G port. SDN is implemented on network switches, rather than x86 servers. BigSwitch and Pica8 are examples of companies selling SDN-related products.
All three types of technology are designed to address mobility and agility. We need to find a way to program the network, and there are different approaches to that: NV, NFV, and SDN.
NV and NFV can work on existing networks because they reside on servers and interact with "groomed" traffic sent to them; SDN requires a new network construct where the data and control planes are separate.
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