There is a trend towards moving switching (L2) out of the hypervisor and onto a NIC. After multiple false starts, it looks like it might actually happen.
Overlay networks essentially empower a virtual management tool or orchestrator to perform the control functions of a L2 network. The tool knows the full lifecycle of a VM and does not really need to learn any mac addresses. Coupled with a intelligent NIC and some standard based overlay (MacInIP), this tool can remove the need for a L2 switch in Hypervisor and facilitate bring L3 network directly to a server. If this happens, it will shift the network edge inside a server and shift the market power away from pure networkers to server vendors.
