Market Drivers
Virtual private networks (VPNs) offer solutions to some of today’s most critical networking challenges. Enterprises need a more affordable, scalable way to meet the demands of a growing community of remote users and to manage branch office connectivity. They need to be able to accommodate the pace and unpredictability of business by linking customers and partners into extranets on an ad-hoc basis. And they need to be able to provide all of this access to networked resources, including legacy systems and enterprise protocols, without compromising security.
Small office and home office (SOHO) users need to have an affordable, scalable way to meet the demands of their customers, and compete with medium or large companies which have greater networking resources. SOHO users are also concerned about investment protection, enterprise protocols, and maintaining security. These objectives must be attained on a reasonable budget for these companies to remain competitive in their market.
The benefits of VPNs to the corporate or SOHO user, include the opportunity to save 50 percent or more in the cost of remote access and branch office connectivity. VPNs also offer tremendously increased strategic flexibility, which can lead to additional cost savings and important business advantages.
During this same time that enterprise and SOHO customers are facing these business challenges, many Internet service providers (ISPs) are looking to shift the focus of their current business from commodity-priced dial only access, to higher-margin value-added services for corporations and SOHO businesses. Serving the needs of corporate and SOHO clients, however, may require that ISPs expand their capacity and geographic coverage. VPNs are an opportunity for the ISPs to add new services and expand reach while avoiding major capital investments and facilities negotiations.
Some larger ISPs as well as other types of network service providers (NSPs) already own significant infrastructure and are continuing to invest in it. VPNs offer these NSPs/ISPs the opportunity to improve asset utilization and return on investment by leasing available capacity to other providers. These facility-owning service providers can generate new streams of revenue that can help justify expansion costs. For those NSPs/ISPs whose business plans call for expansion of both infrastructure and services, leased facilities can be a means of accelerating coverage, broadening services, and generating revenues to support new service development.
Industry analysts predict that by 1999, eighty percent of corporate workers will have at least one mobile computing device 1. Information Technology (IT) organizations everywhere are struggling to meet this ballooning demand for remote connectivity and to deal with the resulting increases in network complexity and end-user support costs.
At the same time, IT must support growing branch office connectivity. Particularly in organizations growing through acquisition or merger, the ability to rapidly integrate separate and frequently incompatible infrastructures can be critical to the success of business relationships. In addition, there is the emerging requirement to deploy extranets that support unpredictable relationships with customers and business partners. IT also has to cope with the plethora of management and security issues these connections entail.
Virtual private networks (VPNs) offer solutions to these dilemmas. They provide enterprises and SOHOs with a number of ways to achieve substantial and immediate remote access and branch connectivity cost reductions by taking advantage of the networking infrastructures and services of Internet service providers (ISPs) and other network service providers (NSPs). VPNs offer a cost-effective, scalable, flexible, manageable, and secure means of handling network growth, of linking in newly acquired business units, and of supporting ad-hoc business relationships. Companies can get all these benefits while retaining central control over security and management of adds, moves, and changes.
VPNs enable ISPs and NSPs to use the Internet or their own IP backbones to provide enterprises with remote access and branch connectivity services. The benefits to enterprises include dramatically lower costs, reduced management and end user support requirements, and increased strategic flexibility. The benefits to service providers include opportunities to grow the business by offering a variety of value-added services, to grow customer base and geographic range, and to increase return on assets.
Enterprises deploying VPNs will have an increasing range of VPN-based services to chose from. Infonetics Research 2 predicts that the VPN market will grow at more than 100 percent per year through 2001, when it will reach nearly $12 billion. They report that 92 percent of large ISPs and 60 percent of all ISPs plan to offer value-added VPN services by mid-1998.