Network virtualization is the transformation of a network that was once hardware-dependent into a network that is software-based. Like all forms of IT virtualization, the basic goal of network virtualization is to introduce a layer of abstraction between physical hardware and the applications and services that use that hardware.

More specifically, network virtualization allows network functions, hardware resources, and software resources to be delivered independent of hardware—as a virtual network. It can be used to consolidate many physical networks, subdivide one such network, or connect virtual machines (VMs) together.

Most digital service providers are already committed to network functions virtualization (NFV). NFV is a way to virtualize network services—such as routers, firewalls, virtual private networks (VPNs), and load balancers—that have traditionally been run on proprietary hardware. With an NFV strategy, these services are instead packaged as VMs or containers on commodity hardware, which allows service providers to run their network on less expensive, standard servers.

With these services virtualized, providers can distribute network functions across different servers or move them around as needed when demand changes. This flexibility helps improve the speed of network provisioning, service updates, and application delivery, without requiring additional hardware resources. The segmentation of workloads into VMs or containers can also boost network security. With network virtualization, digital service providers can optimize their server resources (i.e. fewer idle servers), allow them to use standard servers for functions that once required expensive proprietary hardware, and generally improve the speed, flexibility, and reliability of their networks.