With servers and storage well into the process of virtualization, networks are next, Wikibon CTO David Floyer advises Cisco CEO John Chambers in his latest Alert, “Network Virtualization – Transition or Transformation?”.

The increasing importance of the network in the infrastructure is measured in part by the huge jump in attendance at this year’s Cisco Live, from 7,000 in 2011 to 17,000 in 2012. In his keynote at that conference, Chambers promised that Cisco was listening to customers and innovating around IT industry transitions.

The conference showed that Cisco is on top of the transition to converged infrastructure, with VCE Vblocks and NetApp Flexpods in large numbers on the show floor. If Chambers is looking for this year’s IT transition, Floyer says, then it should look at brand new start-up Nicira, with its pure focus on network virtualization for the enterprise. And indeed, in April Cisco announced a $100 million investment in Insieme, a somewhat mysterious internal “startup” focused on a “software network” that sounds a lot like virtual networking.

Just as with server and storage virtualization, the virtual network creates much greater flexibility to support and, for service providers, monetize multiple SLAs over a single physical infrastructure. This is particularly important for service providers that need maximum efficiency and the ability to provide different service levels to different clients. However, it can also benefit internal IT by allowing it to dedicate the right amount of network capacity to meet different SLAs for different business services dynamically without needing to over-provision the network.

Floyer concludes that network virtualization will be an important trend in the coming 12 months and beyond, first for very large scale users and later for enterprise data centers.

As with all Wikibon research, this piece is available free on the Internet. Interested parties are invited to read, make changes where appropriate, and leave comments.