Steady growth expected for IP VPN market

Virtual Private Network (VPN) adoption is expected to remain solid for at least the next five years, according to the research company, IDC.

IDC analysts expect the Australian Internet Protocol (IP) VPN market to grow at a compound annual growth rate of 16 per cent for the next five years, reaching $855 million by 2007.

VPN solutions are expected to be among most companies’ “must-buy list”, the research company said, as prices and reliability of services continued to improve.

The growing maturity in IP telephony technology was also contributing to the demand, the company said.

IDC analyst, Landry Fevre, said that, to date, the strongest growth in the VPN market had been among companies that purchased networking equipment through the IT channel and self-implement VPN solutions, most often with the assistance of a systems/network integrator.

But the growing maturity of the technology had forced the hand of telecommunications service providers to offer a low-cost alternative, he said.

IDC expects that future growth will be based around managed services offered by carriers.

“Through a service provider, the cost of ownership and maintenance is lower and it brightens up the balance sheet,” Fevre said.

IDC warned that the technology might cause some channel conflict in the Australian market, as telcos and systems integrators both push for customer involvement.

“The line is blurring between service providers and system integrators with growing tensions around co-opetition,” it said.

“Systems integrators such as IBM, EDS, HP, DiData or CSC could compete in some instances with Equant, Telstra or Optus; and in other cases come together to bid for a deal jointly.”

Fevre said systems integrators were looking at IP VPN as a means of re-visiting corporate and Government customers.

“IP VPN is the service enabler for the IP network,” he said. “The systems integrator can walk in to a customer and say, we implemented your ERP or your supply chain solution. To do so we had to gain an understanding of your network, as these were IP-based applications. We can now manage that network for you.”

The carriers and service providers were selling the solutions as a value-add on top of the networks they already owned or managed, Fevre said.

Telstra is leading the IP VPN market with 34.7 per cent, according to IDC research.

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