There are three magic words that make virtual private networks (VPNs) a welcome offering for channel companies: cost, speed and security. Located on an existing router, firewall, or in a standalone box, VPNs use encryption to send information over the public Internet as though it were a private connection. In their youth, VPN tools were aimed at the high-end enterprise market and failed to spark much of an interest in the SME sector until smaller scaleable offerings began to appear.
Analysts have been predicting that VPNs would suffer a dramatic increase in interest as end users came to terms with some of the problems associated with early implementation. According to research group Gartner, end users were initially not interested in grappling with poor ISP performance and continually frustrated by a lack of inter-ISP standards and settlement procedures. However, as ISPs have improved and proliferated, and as VPN technology vendors creep closer to setting standards across the sector, networking-focussed resellers are increasingly finding a welcoming market.
Gary Costa, technical director of networking and communications company AllTel, is now offering VPN technology for voice, fax, data and video transfer to SME customers along the east coast of Australia.
"VPNs are ideal for communicating with remote sites. Anyone who is on the road can boost their business through VPNs because the technology will save them money," Costa said.
Servicing the sale
In the VPN arena, AllTel has been focussing on the possibilities offered through service provider-type arrangements. According to Costa, the application service provider (ASP) has received a positive response because it lets end users spread their expenditure over time.
"We have had a great response to the subscription-style services. Every business has its highs and lows and subscription is a painless exercise. In the long run, they are not left with outdated products, and they can plan their expenditure better," Costa said.
Although ASP sales models provide the opportunity for ongoing earnings, not everybody is getting in on the act. VPNs come in different forms and channel sales models depend very much on where reseller product allegiances sit.
Tim Rosser, managing director of networking integrator Rosser Communications, is open to the different VPN options, although he broadly supports hardware offerings for speed and reliability.
"We tend to focus on hardware options so we make most of our money on the initial sale and implementation. There is a bit of ongoing work in terms of maintenance contracts and that type of thing," Rosser said.
Bert Forbes, managing director of the Asia Pacific edge access systems for Lucent Technologies, told ARN that although most of the income associated with VPNs would come at the implementation phase, the trend toward outsourcing of services may make VPN maintenance an ongoing winner for high-end VARs.
"Larger enterprises could get these things up and going themselves, but the trend at the moment is to focus on core competencies, so there is the opportunity for resellers to pick up an ongoing market," Forbes said.
Forbes identifies areas such as ongoing maintenance, adding and subtracting clients, and dynamic monitoring as areas which would provide resellers with the potential for service revenues after the initial implementation phase was complete.
He also said that while VPN implementation is not rocket science, it still requires an extensive understanding of networking protocols and procedures and therefore would require a certain amount of ongoing support even for smaller clients.
Securing a sale
When it comes to the services element of VPN technology, the security factor may drive further sales. While vendors are pushing the security aspect of VPN technology, channel players are quick to point out that even if a VPN is based on strong encryption, it is only as secure as either end of the connection.
Sebastian Rice, senior marketing manager with networking vendor Enterasys Networks, supports a security-based approach to VPN implementation where the encrypted network functions within an overall security infrastructure.
"Security infrastructure, secure tracking of logging, firewalls and network infrastructure are all areas where there are a lot of opportunities for an ongoing services element in the sale. VPNs are becoming increasingly integrated into that structure," Rice said. "It is still often a piecemeal approach, however the enterprise sector is more aware of the need for an integrated service."
According to Rice's vision, VPNs should be an integrated part of any secure networking offering, not just a stand-alone sale.
Server-based software vendor Citrix Systems is focussing on the burgeoning opportunities for VPN technology in the e-commerce and ASP arenas.
Radu Macovei, Citrix Systems product manager, suggests that VPNs could be used to reassure potential clients that their personal details are kept safe as they are transferred over the ether.
"We are providing application access technology and portal technology, which allows our resellers to provide their clients with access to different offerings and services through a Web browser. Because of the secure nature of the connection, VPNs are going to provide a massive boost to this market," Macovei said.
"Now that the SMB sector is taking interest in business models that rely on B2B and B2C transactions, they are also looking for technologies that can support these new directions. VPN technologies go hand in hand with their needs."
However, not all the vendors are placing a heavy emphasis on security as an issue for VPN technology. Brendan Leitch, senior consulting engineer at Cisco Systems Australia/New Zealand, believes the security element of VPN technology is a given.
"VPNs in themselves do not guarantee the secure transfer of information because the connection is only as secure as the end points. The beauty of VPN offerings stems from two factors, speed and cost," Leitch said.
Lucent's Forbes agrees, although he pointed out there was a very good reason for focussing on the secure nature of a VPN connection.
"Three letters - FUD - fear, uncertainty and doubt. True VPN protocols offer you very little in terms of security and encryption technology is not new. What is exciting about VPN offerings is that by utilising Internet infrastructure instead of wide area network (WAN) technology, corporations can save a significant portion of their connection costs," Forbes said.
While there is general agreement that networking integrators involved in VPN technologies are on a winner, there is no real agreement about the type of VPN technology best suited to the needs of the channel and its customers.
VPNs are following the well-trodden path from flexible but slow software-based solutions, to high-speed but rigid hardware offerings, and gradually developing standards on the way.
Rosser Communications' Rosser is concerned that vendors work together to agree upon certain standards for their offerings before pre-standardised offerings become hardwired.
"You are always faced with the difficulty of when things become hard wired, they become faster, but they are less flexible," Rosser said. "While on the one hand, hardware solutions are easier to implement, they are a lot less flexible and more difficult to make compatible with products from different vendors and that can cause real headaches."
For this reason, Rosser is calling on the VPN vendor community to focus on the establishment of product protocols. "They are not too bad on this front, but more work needs to be done, otherwise the implementation of VPN technology will become too complex and limit its market potential," Rosser said.
VPN technologies rely heavily on the presence of the ISP and this element of the offerings may open some interesting business partnership opportunities in the channel.
One of the main selling points of VPN technology is the cost savings to be made by connecting to a corporate network via a local ISP point of presence (POP), rather than paying long-distance connection rates.
For this reason, the choice of the ISP is a key factor in determining the efficiency of the VPN connection.
Networking integrators will need to have a clear understanding of the client's needs to recommend an appropriate ISP. No doubt, the rise in VPN use will see closer relationships between ISPs and networking integrators, although at this stage Rosser believes the standard ISP business model largely prevents such relationships from growing.
"Clearly our referrals will become important to ISPs generally. However, we have to be very attentive to the needs of our clients. ISPs tend to want to lock their clients into proprietary solutions, where they only deal with the one service provider," Rosser said. "VPN solutions have to offer the client flexibility, and they become meaningless if the client can't access an appropriate POP."
Rosser suggested that while corporate clients may require the services of some of the larger international ISPs, he said that SME clients were generally limited in terms of the geographical area they covered and therefore would require less ISP coverage.
According to Peter Sandilands, regional manager of network security vendor Check Point, VPN possibilities will lead some VARs to offer ISP services in their own right.
"Some resellers are becoming ISPs, they are buying bulk bandwidth and offering it as part of their VPN solutions," Sandilands said. "This works at a regional level - a reseller could do it in Sydney or Melbourne for example - but when it comes to providing global coverage, resellers have to partner with global ISPs."
Locating the market
There is no doubt that the entry and usage price difference between VPN technologies and the more traditional WAN technologies has opened remote access to SMB markets.
Sandilands describes VPN technology as a "classic opportunity for small business environments.
"The only people that don't fit this type of solution are those who sit in the one place all day and can not improve performance by being able to move around," Sandilands said.
According to Rosser, sales are already starting to pick up in areas such as law and accountancy.
"VPNs have broad appeal, but the markets that are already picking up are those that have a lot of people on the road. Law and accountancy firms represent a strong market, as do companies with a large mobile sales force," Rosser said.
"Generally, we are not focussing on any vertical in particular. These are just the areas where we have seen growth so far."
Rosser suggests that the bulk of the VPN market at this stage is centred around the transfer from WAN to VPN technologies.
"We are seeing the direct dial remote market plateauing and even stopping. Whilst a year ago larger enterprises would have used a WAN as their main remote link and a VPN as a back-up, the situation has now reversed and we are seeing people using VPNs as their main link and WANs as the back-up connection," he said.