Managed VPNs and security offer service providers a good opportunity to boost revenues, according to Infonetics Research Inc., which says the combined market will grow to $38 billion by 2008 (see Infonetics: VPN Services Hit $18B).

This reflects an overall growth trend in the security market, as spending on hardware and software also continues to rise (see Security Spending Soars). Revenue from VPN services was $18 billion last year and, driven by the quest for increased productivity and cost savings, is projected to reach over $30 billion in 2008. Demand for security services is also on the up, with revenues growing from $3.1 billion in 2003 to $7.7 billion in 2008.

If service providers aren’t already offering these services, they’re looking to do so now, according to principal analyst Jeff Wilson, as everyone from ISPs to rural ILECs to large IXCs finds ways to bring in more cash.

Unmanaged VPNs will account for 59 percent of VPN service revenue this year, followed by managed CPE services and network-based services, but the balance will shift the opposite way by 2008. This will provide new revenue opportunities for providers offering managed services, which they can blend with security technologies for high-margin services. The distinction between VPNs and security in general is blurring, Wilson says.



IPSec will remain the dominant technology for VPNs this year, with 79 percent of the market, but will lose ground to MPLS, MPLS/IPSec, and SSL, which will all increase 7 percent by 2008. Within security, although device management services will make up the majority of revenues this year, active monitoring is expected to take over by 2008.

— Nicole Willing, Reporter, Light Reading