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Nimbostratus
"If you look at the standard SDN model, [Layer 4-7 services] are applications that can basically run on the [SDN] controller platform.".... this statement is plain wrong as applications don't "run" on the controller but are delegated to the various vswitch and gateways in the network.
John Giacomoni's comment is also misleading as he mixes multiple types of "flows" and "states" in his post and brings one to a false conclusion: as controllers need to know the state of the "flows" or path entries, they have no needs for instance for the state of the network (handled by the routing protocols) or the stateful flow entries of a firewall which would be local to that firewall instance only.
It follows that the model you are proposing "centralized control and decentralized execution" is exactly what is being currently implemented.
Glad to see F5 jumping on the virtual networking bandwagon and looking forward to more details on the integration / implementation with what is the best L7 proxy out there.