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Report: Converged networks spur IP VPN growth

Voice, video and other real-time, mission-critical applications are prompting companies to ditch their old VPNs and migrate to an IP VPN, according to a study by In-Stat/MDR.

Revenue from network-based IP VPN deployments are expected to nearly double by 2009, a jump fueled by companies looking to replace their traditional VPNs to make way for converged networks.

A recent report by Scottsdale, Ariz.-based research firm In-Stat/MDR suggests several companies are getting rid of their older VPNs and replacing them with an IP VPN, considered a next-generation network service. IP VPN services include MPLS IP VPN, virtual routers and network-based IPSec services.

Older VPN services like ATM, Ethernet and frame relay are customer premises equipment based, meaning they initiate tunneling at the CPE. IP VPN services move VPN intelligence to the network edge, allowing for the transmission of voice, video and other real-time, or mission-critical, data over one network.

"Customers are migrating from old services," said In-Stat senior network analyst Henry Goldberg. "They're looking to move VPN intelligence to the edge of the network, instead of initiating tunneling at the CPE."

According to Goldberg, IP VPN services will see dramatic growth, with worldwide revenues skyrocketing from $347 million in 2004 to nearly double that -- $658 million -- in 2009.

"The number of end users that are converging voice and video onto their IP VPN services continues to grow, and this convergence creates a greater demand for the use of different classes of service," he said.

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In-Stat's report closely mirrors a study released by Cambridge, Mass.-based Forrester Research Inc. in October 2005 that said IP VPN adoption is surging; however, some companies are still hung up on the high transition cost.

Forrester's study, "2005 Enterprise VPN Adoption Trends," found 80% of 653 large businesses planned to either upgrade or deploy an IP VPN by the end of 2005.

Though many companies polled were apprehensive about the cost, the study's author, Robert Whiteley, said many businesses realize that an IP VPN is cheaper to maintain than the traditional counterpart. After the initial capital investment, companies that deploy an IP VPN realize operational savings. End users see the savings because all their voice, data and video traffic is converged onto a single service, reducing the cost of provisioning, management and maintenance.

The In-Stat report, "The Equipment Options for Implementing Network-Based IP VPN Services," breaks gear down into three separate categories of providers that offer network-based IP VPN services -- edge routers, multiservice switches and other equipment -- and identifies the leading vendors in each area.

In the edge router category, Cisco Systems Inc., Juniper Networks and Alcatel lead the pack. Cisco also leads in the multiservice switch space, along with other vendors like Nortel Networks, Lucent Technologies and Marconi. The other equipment category comprises vendors that are mostly security-focused like Check Point Software Technologies Ltd. and Juniper Networks, Goldberg said.

The report also found that:

  • Service providers are selling DSL access lines to small and midsized businesses and branch offices as a lower-cost alternative to traditional leased lines.
  • End users who have DSL access lines to connect to network-based VPN services require broadband subscriber management services, and some vendors offer such services on the same platform as their VPN services.
  • Support for value-added security services, such as firewalls and intrusion prevention, enable service providers to generate substantial additional revenues beyond those for IP VPN connectivity services.

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