Oracle Corp. announced Monday that it's acquiring Xsigo Systems Inc., a network virtualization company, for an undisclosed sum.

Xsigo's realm has been the cloud. Its Virtual I/O allows any server to run any application. And its Server Fabric handles networking between servers -- east/west connections, as they're called -- without using the actual network. Server Fabric competes with the network fabrics being proposed by many networking companies, particularly Cisco Systems Inc. and Juniper Networks Inc..

Oracle says it will combine Xsigo's network virtualization with Oracle's own Oracle VM for server virtualization. It seems obvious that Oracle would also use Xsigo in conjunction with cloud products such as the Exalogic Elastic Cloud (a "cloud-in-a-box" kind of platform).

The deal is expected to close in the fall.

Why this matters
Competition is heating up in the vague and relatively new field of network virtualization. VMware Inc., through its pending acquisition of Nicira Networks Inc., appears to be getting closer to competing with Cisco, and now Oracle has taken a step toward competing with both of them in the data center.

There was a lot of hardware involved in Xsigo's first products, which came out in 2007. But the company can be lumped into the software-defined networking (SDN) craze, as its products let network operators create pools of server or networking resources within the cloud.

If you haven't heard of Xsigo, be aware that it's got a pedigree. Its founders came from Juniper and early on, former Oracle executive Ray Lane was on its board. Early investors included Kleiner Perkins Caufield & Byers, Greylock Partners, Khosla Ventures and Juniper.

For more

• Where VMware Is Outdoing Cisco
• VMware Insists It's Not Warring With Cisco
• Xsigo Says to Ditch the Network
• Xsigo Takes the Gloves Off Against Cisco

— Craig Matsumoto, Managing Editor, Light Reading