IP VPN Equipment Market Reaches $267 Million

The network-based IP virtual private network (VPN) market is one of the hot areas in business networking services, with worldwide equipment sales of $267 million worldwide in 2003, reports market research firm In-Stat/MDR in a new report. With the growth in IP VPN, service providers have been able to offer customers a secure, low-cost alternative to traditional network connections.

"Network-Based IP VPN Equipment: What Service Providers Want" notes that revenues from the sales of network-based IP VPN equipment were $267 million worldwide in 2003. Edge routers were a particularly hot product, according to the report, representing 51% of total IP VPN equipment sales, with multiservice and IP services switches posting similarly strong sales performances.

By moving VPN intelligence to the network edge rather than initiating tunneling at the customer premises, network-based IP VPN services allow service providers to realize economies of scale. They can serve multiple customers from equipment at an edge point of presence, thereby reducing operational provisioning, management, and maintenance costs.

According to In-Stat/MDR senior analyst Henry Goldberg, most service providers currently offer enterprises at least one network-based IP VPN service. "MPLS IP VPN and Virtual Routing over ATM services also allow service providers to earn incremental revenues by offering classes-of-service for different priority applications, and enable end-users to reduce costs by converging all of their voice/data/video traffic onto a single service," Goldberg said in a statement.

The study notes that network-based IP VPN services have allowed service providers to offer small and mid-sized customers DSL access lines as an economical alternative to traditional leased lines. According to In-Stat/MDR, providers are offering these customers with the necessary broadband subscriber management services on the same platform as their VPN services.Moreover, equipment vendors have responded to the growing demand for outsourced security services by integrating more security features into their IP VPN equipment offerings, including gateway services to connect remote users with IPSec and secure sockets layer clients to corporate sites on layer 3 or layer 2 VPN services.