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Neoteris Scores Service Provider Win

Two weeks after NetScreen Technologies Inc. (Nasdaq: NSCN) announced it was buying Neoteris Inc. for $265 million, the startup has landed some new service provider business (see NetScreen Snags SSL Leader).

Today, Neoteris announced that VPN service provider TManage, a MegaPath Networks company, will be using its gear to offer a managed secure socket layer (SSL) virtual private network (VPN) service. Details of the contract haven’t been disclosed, but John Mosier, senior vice president of customer solutions at TManage, says he expects to be one of Neoteris’s largest customers.

TManage is a small service provider, but the contract is important because service providers will likely be a significant market for Neoteris and its competitors in the future.

While the bulk of VPN equipment sales come from corporate buyers, revenue from carriers is expected to grow over the next few years. Service provider expenditures on network-based products for VPN and security services are expected to grow to $931 million in North America and $382 million in Europe in 2007, according to Infonetics Research Inc. (see VPN/Security Market Grows Strong). IPSec should continue to be the dominant technology used to deliver these new services, but the number of enterprises using SSL will likely double between 2003 and 2004.

Up to this point, service providers have used VPNs to connect corporate sites. Because IPSec VPNs require software to be downloaded on each access device, they have mostly been used for static site-to-site connections instead of remote access. But with clientless SSL VPN technology, carriers will now be able to offer a simple and scaleable remote access service.

"It’s a different service model," says Dana Hendrickson, president of Breakway Marketing Group, a research firm specializing in secure remote access technology. "But SSL VPNs are a natural extension to the IPSec VPN business. If you have the resources to build VPN networks, and you have the people to take advantage of those services, it’s a good fit. It doesn’t take a lot of expertise to set up the SSL VPN technology."

Neoteris has also won business with another small service provider, Fiberlink Communications Corp. (see Fiberlink, Neoteris Team on SSL). Unlike its key competitor, Aventail Corp., the company has yet to announce a major carrier win. Aventail supplies its SSL VPN products to Bell Canada (NYSE/Toronto: BCE), and AT&T Corp. (NYSE: T) resells its managed SSL VPN solution to its customers (see Service Providers See Green in SSL).

From a technology perspective, Neoteris is in a good position to win more carrier business. Mosier says he tested several different vendors’ gear, including an unannounced offering from Cisco Systems Inc. (Nasdaq: CSCO). He says he was impressed with Neoteris’s ability to be integrated with existing security capabilities. For example, he says the Neoteris box is able to check policy on devices running personal firewalls.

In the past year, Neoteris has increased its visibility with customers and is now viewed as the top SSL VPN player in the market, according to a recent report from Frost & Sullivan (see F&S: Neoteris Leads in SSL VPNs).

Neoteris/Netscreen will soon have much more competition, as bigger players acquire smaller SSL VPN startups. Just yesterday security software maker Symantec Corp. (Nasdaq: SYMC) announced it was buying SafeWeb Inc. (see Symantec Acquires SafeWeb). F5 Networks Inc. (Nasdaq: FFIV) announced in July that it is acquiring uRoam Inc. (see F5 Buys Into SSL VPNs).

Nokia Corp. (NYSE: NOK) has already announced a product (see Nokia Sweetens SSL ). Cisco and Check Point Software Technologies Ltd. (Nasdaq: CHKP) are also expected to announce products soon.

— Marguerite Reardon, Senior Editor, Light Reading

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