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June 1, 2004
By Tara Seals
IP virtual private networks (VPN) are the Lear Jets of the networking world: They make sure offices, departments, telecommuters or employees on the road with broadband access can travel safely across the public Internet by using secure, encrypted tunnels to open up private paths of communication. There’s no need to clear flight paths or wait for your group to be called to board. As a VPNer, you’re above the hoi polloi of the rest of the Web traffic.
Now, just as free movies and signature drinks on $99 JetBlue flights are revolutionizing air travel, the IP VPN is becoming a trendsetter. Providers are giving resellers fresh options to take to the budget-conscious - yet discerning - small and medium business (SMB) segment. With attractive price points and managed or simplified administration options to run them, IP VPNs aren’t just for VIPs anymore.
The down-market segment is a greenfield opportunity. Research firm Access Markets International (AMI) Partners reports only 425,000 small businesses and 67,000 medium businesses use VPNs today. That’s projected to increase to almost 1.75 million small businesses and 104,000 medium businesses by 2008.
Researchers at Stratecast Partners concur. “Despite its sheer size, encompassing nearly 8 million companies, the SMB market has historically been underserved,” says Michael Suby, research program manager at Stratecast Partners, a division of Frost & Sullivan. “With budget limitations and little to no dedicated IT staff, SMBs have been forced to make compromises on their network security.”
Diving into the low-cost breach is New Edge Networks, which recently unveiled a $99 per-user, per-site managed IP VPN option, available via resellers and agents. Dan Moffat, president and CEO of New Edge, counsels resellers to focus on the multilocation SMBs - a space that’s “tough for the big guys” to tap. “Until recent years most small and midsize businesses, as well as small enterprises, could not justify the cost of deploying high-speed connections at each of their remote locations to establish a single multisite network,” says Moffat. “In high data traffic sites, they installed costly T1 lines or used traditional frame relay. In low traffic areas, they installed dial-up connections. New, less expensive technology options are motivating smart business managers to take another look at their networking and are migrating to VPNs.”
Not to be outdone in the low-cost area, ClearPath Networks in April launched SNAP VPN, a plug-and-play network security appliance just for SMBs. The company developed it as an alternative to iVPN, a high-end, network-based MPLS service. SNAP VPN service goes for $49 per user, per month, plus the cost of the appliance itself, which can be rented or purchased for $595 for a 10-user version or $895 for a 25-user. It is available to resellers as a private-labeled service delivery platform. Cliff Young, ClearPath Networks’ president and CEO, says resellers can go back to clients that couldn’t afford IP VPNs before. “Service providers benefit by providing SNAP VPN to their existing customers, increasing average revenue per line, and creating stickiness to their customer base, lower churn and service cancellation rates,” he notes.
One particularly lucrative segment is retail, New Edge Networks’ Moffat notes, since these businesses typically have a few locations and a need for realtime transactions, but are cost-sensitive. “A large retail establishment with two or more dial-up connections used for credit card transactions, for example, could replace those connections with an IP-based network and save money,” he says. “What’s more, they get high-speed, always-on connections and ability to perform various business functions simultaneously. [New Edge VPN client] Anna’s Linens reported its best holiday season sales because shoppers didn’t have to wait in long lines that discourage shoppers and spontaneous buying decisions.”
Resellers can pitch productivity gains from location interconnection, too. Gaining Internet VIP status with a VPN also means endpoints can communicate with each other in a meshed fashion, as opposed to frame relay’s hub-andspoke set-up. Donald Trump doesn’t have to transfer through Dallas to get to Atlantic City, after all.
“The enormous trend I’ve seen over the last year and a half is the SMEs getting into this: Traditionally, office interconnection for SMEs with two or three offices was virtually impossible,” explains Marcus Coya, sales engineer at VPN reseller Broadband National. “Companies who otherwise couldn’t merge systems or databases, that did not have access to these technologies due to cost issues, are now able to take advantage of increased productivity with interconnection.”
Another route to closing SMB sales is for resellers to address the lack of technical expertise and IT staff in these companies. “Medium-sized businesses don’t have the internal resources or any desire to go out and acquire the internal resources to manage their own VPNs,” says Steve Murphy, director of business development at telecom consultancy and reseller NetGain Communications. “They might have one Cisco person on staff and they’re running around managing the local area networks, and measuring the security for the Internet connections, and they just don’t have additional bandwidth to implement site-to-site technologies that require monitoring and management.”
With this in mind, Young says ClearPath’s SNAP VPN is suitable even for tech-challenged telecommuters, despite the fact it’s CPE. “SNAP VPN combines a network security and VPN appliance with a managed service that automatically updates virus definitions, intrusion detection policies and content filtering URLs,” he says. “ClearPath has made it easy for smaller businesses to maintain a robust network security solution.” It also offers network management through an online interface, SNAP View.
Such simplicity gives resellers yet another selling point. “As an access provider, I am asked over and over again by my partners and customers to guide them to reliable security solutions for their LANs and WANs,” says Eric Da Versa, sales director at ISP SkyRiver Communications. “This can be overwhelming, considering the huge array of products on the market and the typically high price points associated with ‘best of breed’ solutions.”
IP Dynamics has launched a new platform for hosted IP VPN service, Secure VCN, aimed at smaller businesses with no technical expertise. Available via the company’s resellers and deployed to five carriers to date, the platform allows VPN groups to be created by clicking a mouse. These members appear to each other as though they are fully connected in their own IP subnet, but the users can come from any set of locations, and no customer premise equipment is required. “As a result, we allow a person who is just computer literate, but not IT-sophisticated to provision, create and use the virtual network without having to involve an IT department,” IP Dynamics CEO Hasan Alkhatib says. “This solution is particularly well suited to the small and medium-sized businesses. For secure communications, to get remote access, collaboration, telecommuting, it’s all here, at an economical cost.”
IP Dynamic’s customer Deutsche Telecom allows users to go to its Web site, sign in with a log-in name and password, and access a self-serve provisioning interface. “You identify the users by the name and the e-mail address,” explains Alkhatib. “You receive an email invitation to join the network.”
Behind the scenes, there is end-to-end IP Sec security host to host, and full access control management. DT sells it for 12 Euros ($14) per month per user, and the charge can be added to an existing DSL bill. ROVA, whose reseller partners include Qwest Communications International Inc. and AT&T Corp., also addresses IP VPN management issues for SMBs, including how to deploy cheaply, how to ensure proper use, how to provide a varied array of services “and, most importantly, how to accomplish these things without eliminating the cost savings the VPN was designed to provide,” says Joe Bronowich, CEO of ROVA.
The platform-agnostic ROVA is a remote access management system that layers on top of VPN solutions and takes care of ongoing support, network/access demand reduction, reporting and data, software updates, SLA audits and more, via a user-friendly interface. The company says ROVA can cut deployment cost by as much as 90 percent, and it can be customized for end users-points that Bronowich says resale partners like Qwest are using to differentiate themselves.
Another approach to pitching IP VPNs to SMBs is showing customers a demonstrable return on investment, since many have existing, outdated WAN strategies among remote offices. “A few private lines, some frame relay, some DSL,” says Murphy. “VPNs allow them to have consistency across all of their locations. It allows them to bump up their bandwidth and show an ROI because you’re taking traffic off a per-minute economic model and putting it on an all-you-can-eat plan. So it allows them to fund the equipment and network upgrades they need to standardize the networks.”
Resellers can sell or upgrade the SMBs’ underlying broadband connections, and to layer other applications on top of the VPN itself. The deployment of converged services only will serve to deepen this opportunity, say industry watchers. ClearPath resellers for instance have access to a nationwide ATM fiber-optic backbone in tandem with the SNAP VPN. “This program is ideal for solution providers seeking to leverage a private network environment with additional value added services or distributed applications,” Young says.
VoIP over VPN also is gaining steam. VoIP allows price-conscious SMBs to reduce telephony costs, while VPN VoIP dialing provides features like four-digit dialing between remote sites - a teleworker can use the company voice mail and extension system exactly as if she were in the office. “A lot of medium and smaller customers are looking intently at deploying VPNs,” says Murphy. “The traditional wide-area solution is obvious, but what we’re seeing right now, working with a number of Tier 1 voice integrators and PBX companies, are companies leveraging VPNs to voice on their IP network. In the past, they’ve used PSTN and they weren’t comfortable putting their voice over the public Internet without security. Now that the firewall issues have been substantially resolved to allow ports to be open and shut in a dynamic fashion, and folks are really starting to look at that as a solution for toll bypass, or least-cost routing and so forth.”
Resellers know they have a choice in VPN technology, and are embracing the opportunity to go after the SMB market. “The supplier partners that we resell for are offering a larger menu of services,” A.J. Koontz, founder and vice president of business development at Broadband National. “That flexibility is helping to develop the industry. For instance, a network-based VPN helps take out capex, so for SMEs it’s now affordable for them.”
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