Oracle to Buy Cloud Infrastructure Technology Provider Xsigo

Oracle Corp. on Monday agreed to acquire network-technology provider Xsigo Systems Inc. for an undisclosed sum, broadening the software giant’s already growing footprint in the data center.

Based in San Jose, Calif., Xsigo provides appliances that more efficiently manage the tangle of connections needed to access stored data. The technology cuts electricity costs and boosts performance for companies that manage large data centers.

Privately held Xsigo has more than 300 enterprise customers, according to its website, including Verizon Communications Inc. (VZ) and BT Group PLC (BT).

Oracle’s latest acquisition, expected to close this fall, comes as more companies opt to run their computer systems in the cloud–a catch-all term for software and data accessed online rather than through an onsite machine.

Managing the software and servers that support such systems has become a multibillion-dollar business, prompting Oracle Chief Executive Larry Ellison, who once dismissed the “cloud” term as “complete gibberish,” to actively pursue the model along with his Silicon Valley peers.

Cloud computing relies on virtualization, a process that allows users to run the operations of several computers on a single machine. The process puts an enormous burden on networks.

Now, cloud-computing companies are taking a growing interest in controlling the routers and switches of networks by using a similar virtualization model in order to manage data-center hardware and cut down on bottlenecks and inefficiencies.

VMware Inc. (VMW), which pioneered the virtualization model with software, last week agreed to pay up to $1.26 billion for networking-software provider Nicira Inc.

Xsigo’s technology differs from Nicira’s, which uses software to virtually manage an entire network. Xsigo’s hardware addresses a narrower part of the cloud.

“Most people think of software-defined networking as something that creates a new network…on top of the existing physical network,” ISI Group analyst Brian Marshall said.

Oracle also has remained active in the software sector. Just this month, the technology giant agreed to buy the social-marketing company Involver and said it would acquire privately held Skire, a provider of capital program management and facilities management applications.

Oracle has also bought the cloud-based customer service company RightNow Technologies Inc. for $1.43 billion and the human-resources software maker Taleo Corp. for $1.9 billion.

“They are already racing ahead on the software side,” said Global Equities Research analyst Trip Chowdhry. “Now they are strengthening their cloud infrastructure.”

Xsigo, founded in 2004, was funded by Kleiner Perkins, Khosla Ventures, Greylock Partners and North Bridge Venture Partners.