In the NSX-T Data Center deployment, you need to ensure an overlay transport zone and overlay-backed logical switches exists.
East-West service insertion is applied to an entire NSX-T deployment. You can deploy the service at a cluster-level or a host-level.
With an east-west network introspection service enabled to introspect traffic between VMs, ensure the transport nodes that host these guest VMs and service VMs are configured with an overlay transport zone. Without an overlay transport zone and logical switches (segments), east-west service cannot be applied to traffic flowing between VMs. Even if all the segments on a VLAN-backed transport zone, you must configure a segment on an overlay-backed transport zone to apply the east-west service to the traffic.
A overlay-backed (GENEVE-backed) logical switch is provisioned internally and not visible on the user interface.
Even if you plan a deployment using only VLAN-backed segments, East-West traffic passes through overlay transport zones and overlay-backed segments. So, ensure that you create an overlay transport zone and GENEVE-backed segments. Without these requirements, during a vMotion, the guestVM on a host cannot be migrated to another transport node. The guestVM goes into Disconnected state causing configuration errors in the East-West service.