VPN Customers Spoilt by Choices
Last week’s announcement by MCI (Nasdaq: MCIT) of a new managed virtual private network (VPN) service has raised an issue that may come to haunt carriers -- customer confusion.
MCI’s new VPN service targets the retail industry, giving companies a way of connecting large numbers of stores or branch offices via DSL or cable connections (see MCI Launches IP VPN Service). However, it's one of seven VPN services offered by MCI. Prospective customers also have other options, including deploying their own VPN solutions.
Jeff Wilson, an analyst with Infonetics Research Inc., says customer confusion could be one reason that nearly 85 percent of enterprise customers are still choosing to implement VPNs themselves rather than outsourcing to carriers (see VPN/Security Market Grows Strong).
“Carriers like MCI are selling between four and 10 different managed VPNs,” he says. “That’s why it’s been so hard for them to sell these services over the past couple of years. Not only are the customers confused, but it’s got to be hard for the sales people to know which service to push.”
Even some carriers admit that customers could be grappling with too many choices.
“I think that customers are confused,” says Ralph Montfort, director of access products for MCI. “There are a lot of services to choose from.”
But Montfort says that carriers need to offer customers choices. “It’s a competitive marketplace,” he adds. “You can’t force customers into one or two choices. Some customers are religious about the technology. If you just offer IPSec you’ll miss some sales opportunities, and if you just offer MPLS you’ll miss others.”
MCI already offers five IPSec VPNs: two remote access services, a broadband service, and two dedicated services. It also offers two MPLS VPN services: managed and unmanaged. It will be offering another VPN offering in early 2004 when it announces its Secure Sockets Layer (SSL) service.
AT&T Corp. (NYSE: T) also has several IP VPN offerings, as do its competitors, including SBC Communications Inc. (NYSE: SBC), BellSouth Corp. (NYSE: BLS), Qwest Communications International Inc. (NYSE: Q), and Verizon Communications Inc. (NYSE: VZ). These carriers offer everything from IPSec VPNs to MPLS-based VPNS using Layer 3 and Layer 2 technologies. And now more of these carriers are starting to roll out remote-access VPNs based on SSL technology, as well as VOIP services over VPNs (see Service Providers See Green in SSL and RBOC VOIP Coming in 2004).
Montfort admits that too many services can be a problem. “If you go much beyond five or six choices, it’s hard to differentiate them.”
But Rose Klimovich, vice president of global IP VPNs at AT&T, says that customers are not confused. She believes customers are simply trying to figure out which services they want. Whether they outsource or do it themselves has more to do with the bottom line than with confusion, she adds.
“It really comes down to whether or not the customer has the expertise to manage the service themselves,” she says. “The total cost of ownership needs to be compelling. Some customers will always want to do it themselves, while others will look for strong service provider partners.”
— Marguerite Reardon, Senior Editor, Light Reading
Archives of Related Light Reading Webinars:
- Carrier VPNs: Secure and Flexible Solutions That Can Scale
- The Challenges and Rewards of Building Profitable MPLS VPN Services
- IPSec VPN Stress Test Results