Demand for network virtualization capabilities, particularly in the Wi-Fi market, appears to be the catalyst for Cisco Systems Inc. (Nasdaq: CSCO)'s planned US$1.2 billion acquisition of Meraki Networks Inc. (See Cisco Shells Out $1.2B for Meraki and Cisco to Buy Meraki.)

Thousands of enterprise users have already opted for a virtualized approach to network management -- Meraki alone has more than 10,000 mid-sized corporate customers -- and now telcos are keen to understand how software-defined networking (SDN) and other new "cloud" approaches might help them run their networks more efficiently. (See Carriers Collaborate on Network of the Future.) Cisco, naturally, is keen to be a player in anything that meets the needs of carrier and enterprise users and is investing in the companies it believes can give it an edge over its rivals. The Meraki deal is just the latest signal of its intent, following hot on the heels of its deal to acquire cloud management specialist Cloupia for $125 million in cash. (See Cisco to Buy Cloupia for Cloud Management .)

Cisco's main interest in Meraki lies in the privately held Wi-Fi company's software-based centralized management capabilities for medium-sized enterprise networks.

Cisco is already the long-time market leader in wireless LAN equipment, according to Infonetics Research Inc. , so it doesn't need to add more Wi-Fi access point or controller products to its portfolio. Instead, the Meraki deal is mainly about the specialist company's virtualized approach to Wi-Fi network management.

"Cisco is keeping ahead of everyone else to stay market leader," says Heavy Reading Senior Analyst Gabriel Brown. "Every other company will have to re-write their products or start from scratch."

As Brown explains, a typical Wi-Fi network deployment will have a Wi-Fi controller that aggregates multiple access points and performs certain services, such as access point configuration, admission control, firewalls or policy control. But now there is potential to employ a virtualized controller whereby the functionality of the controller is software-based and can run on other elements in the enterprise or service provider network.

"I wouldn't say it's widespread yet, but the talk in the industry is about getting to a virtualized controller," says Brown. "It's very early, so it's hard to know how it would look."

For example, a service provider could run the controller as an application on their packet gateway in the mobile core network or on the radio network controller (RNC).

"You've got much more flexibility in how those [controller] functions are implemented," says Brown.

Having greater flexibility is important for enterprises, particularly as they have to deal with the access and security challenges of the bring-your-own-device (BYOD) phenomenon that introduces new smartphones and tablets into their networks.

— Michelle Donegan, European Editor, Light Reading Mobile