Optical/IP Networks

VPNs Are Alive and Well

There’s no question that service providers are in a pinch for cash and the effects are hitting system vendors and component manufacturers alike. But there is light at the end of the tunnel.

Infonetics Research Inc. this week published a report that surveyed over 1,400 large and small businesses across the U.S. and Canada who say that they plan to build out key areas of their networks. What does this mean? More demand for IP services like virtual private networks (VPNs) and managed security services should give service providers incentive to offer new services, which means they, in turn, will need to buy hardware from system vendors that allow them to do this.

“We didn’t focus the report on the impact on service providers,” says Jeff Wilson, executive director at Infonetics. “But when you look at the big picture, you see that everybody is planning to buy more bandwidth, and that will have an effect. The boom isn’t over.”

The study, "Network Technology Adoption Forecasts, US/Canada 2001," examines a cross-section of organizations of various sizes to see how far networking and Internet technologies and services have penetrated organizations. It also provides adoption rate forecasts through 2005.

VPNs represent one of the more encouraging data points in the report. According to the study, 56 percent of large organizations (companies with more than 1,000 employees), had site-to-site VPNs in 2000. This percentage should increase to 84 percent in 2005. Small companies with 20 to 100 employees are expected to grow from 13 percent in 2000 to 50 percent by 2005. The same sort of uptake is also expected to happen in the area of managed security. Twenty-five percent of small businesses used managed security services in 2000 and 69 percent are expected to use them in 2005.

Use a Managed Security Service Growing demand for VPNs and managed services is music to the ears of companies like Ellacoya Networks Inc., Celox Networks, Quarry Technologies Inc., CoSine Communications Inc., and Shasta (now owned by Nortel Networks Corp. -- NYSE/Toronto: NT), all of which are building service aggregration platforms. They are banking on the fact that enterprises and small business customers will want to use VPNs and other outsourced IP services from carriers.

But some analysts question how quickly VPN adoption will occur. Frank Dzubeck, president of Communications Network Architects Inc. says that it could be a long while before larger companies feel comfortable enough with VPNs to use them for critical business applications. He also adds that service providers need to do a better job of offering and deploying services.

“The fact is that most of the services aren’t there yet,” he says. “Look at the big guys like Sprint Corp. (NYSE: FON) and WorldCom Inc. (Nasdaq: WCOM). Their service sucks. And the average corporation isn’t running out to an XO Communications Inc. (Nasdaq:XOXO) or some other startup supplier.”

--Marguerite Reardon, senior editor, Light Reading, http://www.lightreading.com

Marguerite Reardon 12/4/2012 | 8:58:52 PM
re: VPNs Are Alive and Well Do you think this is the year the VPNs will really take off? Or are companies still too leary of the technology?
Marguerite Reardon 12/4/2012 | 8:58:52 PM
re: VPNs Are Alive and Well Do you think this is the year the VPNs will really take off? Or are companies still too leary of the technology?
btackett 12/4/2012 | 8:58:50 PM
re: VPNs Are Alive and Well To the author:

You wrote, "Small companies with 20 to 100 employees are expected to grow from 13 percent in 2000 to 50 percent by 2005." This projection is for "remote-access" VPNs, not "site-to-site" VPNs, as you seem to have implied.

I think you meant to write, "Small companies with 20 to 100 employees are expected to grow from 11 percent in 2000 to 42 percent by 2005 [for site-to-site VPNs."

As for the topic of VPN growth, the majority of VPN equipment growth has already occurred--it's now cooling down. Now it's time for the service providers that now have the equipment to start providing enhanced VPN services (i.e. voice/data/video VPN offerings combined with broadband technology).

Tony Naples 12/4/2012 | 8:58:49 PM
re: VPNs Are Alive and Well Marguerite you forgot to mention Crescent Networks as a player in this market with their Dense Virtual Routed Networks DVRN technology.

VPNs haved a great pent-up demand that is unmet at this point. The VPN service that the Enterprise customer is looking for is managed private IP networks. Maintaining networks is becoming too complex and costly for the enteprise. Labor pool is small, expensive and keeps moving to vendors or better opportunities.

To date the products available have not scaled economically in terms of capital equipment or operational costs. Stacks of routers with technicians using CLI to provision is not economically justifiable. Service providers need economies of scale in order to thrive with any service including managed IP services.

This year you will see solutions to this problem from companies like Crescent Networks that minimize capital outlays and dramatically lower operational costs. Armed with these tools you will see service providers begin to offer profitable managed IP services that meet the technological and price point requirements of the enterprise market..large and small.
guru 12/4/2012 | 8:58:47 PM
re: VPNs Are Alive and Well Who the heck is crescent networks???

That must be their VP of marketing.

goldfinch 12/4/2012 | 8:58:45 PM
re: VPNs Are Alive and Well that was interesting article? but guru, I do agree with the built out of VPN by service providers. It is the most cost-effective way for enterprise to cut down on a lease-line and/or long distant Dial-up. Security is a big issue. But these private lines are pretty wide open and vulnerable. VPN does offer the mean for a security... but it has to be implemented properly to lock-down any potential intrusion. We still don't know what is going on in the so called "the internet cloud". Sure safety is very important but IT manager will have to find way to cut cost. I forsee more and more enterprise will look to these service providers for solutions for secure managed network. As you know, demand creates supply, which result in fierce compition, further refining the technology. In my opinion, Technology resemble a short sprint track-n-field competition. the one that gets out early/first and lead usually win this short race. I would look for hardware sector.
pruudeinvestor 12/4/2012 | 8:58:30 PM
re: VPNs Are Alive and Well VPN's actually started taking of last year. UUNET has a VPN product UUsecure VPN based on the Lucent Access Point Device that has done extremely well in the market place. Lucent's QVPN builder (when it works) is actually removing some of the VPN configuration problems that have plagued this fast adoption of VPNs.

Ancedotely, I have been using a VPN over a DSL line for the last year and it works like a charm.

dmalcolm 12/4/2012 | 8:56:21 PM
re: VPNs Are Alive and Well VPN usage is much overhyped - IMHO. Most organizations invest thousands in VPN technologies only to find out performance levels are really only acceptable to those blessed to have cable, high speed satelite or dsl access. Straight dial up's performance is good enough for only the lightest duty business access (lite e-mail, file transfer, etc). Site to site is viable when a network provider controls most or all of the legs of the circuit through the Internet or their privately controlled shared network, but there is additional costs associated with that approach. Then there is the TCP/IP port issues for users accessing the web from behind a firewall. VPN - Alive & Well? I'll give you alive.
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