CoSine Sells VPN Combo to China Netcom
China Netcom will be one of the first carriers to incorporate MPLS, IPSec encryption, and firewalling -- all separate approaches to network security -- in a single service offering. To date, most carriers have offered either network-based MPLS VPNS (virtual private networks) or they have offered managed secure VPNs using IPSec. Few have offered services that combine both.
Now carriers like China Netcom are offering integrated solutions that include MPLS VPN technology along with IPSec functionality. British Telecom (BT) (NYSE: BTY; London: BTA) has been offering similar services with Cisco Systems Inc. (Nasdaq: CSCO) gear, as has Cable & Wireless (NYSE: CWP) with CoSine’s platform.
The deal includes deployments of the IPSX in the Beijing area, but the company is hopeful it will lead to deployments in the 35 other provinces where China Netcom has a network. The size of the deal hasn’t been disclosed, though Mark Weingarten, vice president of marketing for CoSine, admits it's small in comparison to other contract wins with Sprint Corp. (NYSE: FON) and Cable & Wireless. Still, he says it is important because it provides the company a foothold in Asia, which is seeing a big surge in IP VPN deployments.
In many ways, the move shows signs of CoSine having a technological edge. Some experts say that the trend could play out well for CoSine, which currently claims to have the only box out there that supports firewalling, Layer-3 MPLS, and IPSec encryption.
China Netcom had been offering MPLS-based VPN service using Cisco equipment since last year. But now it will use the CoSine platform to integrate this service with a secure VPN service that implements customer premises IPSec deployments.
“It’s a natural progression to combine these services,” says Simon Jenner, principal security consultant with Trinity Security Services. “I think we will be seeing other carriers following suit very soon.”
“Service providers need to offer a range of options for VPNs,” says Kevin Mitchell an analyst with Infonetics Research Inc. “I think that is one of the reasons why revenues for VPN services haven’t taken off in a big way. But we are already seeing that start to change.”
Juniper Networks Inc. (Nasdaq: JNPR) offers IPSec encryption blades for its ERX and M series edge routers, but it lacks the firewalling functionality of the CoSine box, says Mitchell.
What’s the benefit of combining these services anyway? It allows carriers to integrate their secure traffic with their MPLS VPN services. Mitchell says this is similar to the plan that BellSouth Corp. (NYSE: BLS) unveiled at Supercomm. As these service providers rollout managed MPLS VPN services, they will need to find ways to include off-network traffic, like traffic from remote users using IPSec encryption with the MPLS network.
“IP service switches like CoSine will increasingly play a role in bridging these two networks together,” says Mitchell.
Eliminating a connection may also help reduce provisioning costs for the carrier.
"Cost is a top concern when it comes to IP,” says Mitchell. “So anytime you can provision one circuit instead of two you save money, and that will be attractive to carriers as well as to enterprise customers.”
According to Infonetics, the edge aggregation router and IP service switch market in Asia is expected to grow to $1.85 billion in 2005 from $298 million in 2001. Revenue for these products in that region is expected to become a larger piece of the total pie in the future, as well. In 2001 Asia made up 18 percent of worldwide sales in this category, and by 2005 it will likely make up 26 percent.
CoSine has already generated revenue from its deal with NTT Communications Corp. And other equipment vendors are announcing big deals in the region. Redback Networks Inc. (Nasdaq: RBAK), which makes a router that supports MPLS VPNs but not IPSec encryption, has announced contracts with China Telecom subsidiary Shanghai Telecom and Chunghwa Telecom Co. Ltd. in the past few months (seeRedback's Router Gets Shanghaied and Chunghwa Deploys Redback).
— Marguerite Reardon, Senior Editor, Light Reading