Virtela Announces Managed MPLS Service

Startup Virtela Communications announced on Monday the widespread availability of fully managed Multiprotocol Label Switching (MPLS) services, the latest addition to the company's unique menu of resold managed networking services.

Since Virtela, of Denver, doesn't own its own network, the company must purchase, administer and resell the core networking feeds for all the services it offers. Still, Virtela claims its integration and negotiating skills, combined with some innovative in-house networking smarts, allows it to offer businesses better-run MPLS services than the giant backbone carriers Virtela must purchase the same wholesale services from.

In fact, the company even paints its independence and lack of wiring infrastructure as an asset, not a liability, in the still-developing market for network services based on MPLS, an emerging standard whose proponents say can bring LAN-type performance (and performance guarantees) to wide-area connections.

"If you use MPLS today, you choose one carrier, and you have to use that carrier," said Ian Dix, Virtela's senior vice president of marketing. Virtela's MPLS service, he said, doesn't lock customers in to a single carrier's service, but allows for interconnections between "best of breed" services in whatever markets a customer's intended networking path intends to cross.

According to Virtela, its MPLS services are generally available today, in more than 190 countries at more than 5,000 MPLS-enabled network access points. "Anywhere you can get on the MPLS network, you can get to Virtela," Dix claimed. Pricing is set individually with each customer, the company said, and typically includes one-time setup fees, plus monthly access and management charges.If tying together MPLS services for global multinational concerns seems like a tall task for a 100-employee startup, perhaps it is. But Virtela, founded in 2000, has already won a long list of customers and awards for its IP VPN (virtual private network) services, including a Well-Connected award this past spring from Network Computing magazine. Virtela also says that IBM's global services division resells Virtela services.

MPLS services, however, might step up Virtela's challenge a notch or two, since right now MPLS is of concern mainly to big multinational companies, who are aggressively looking for cheaper and better performance over their WAN connections. In an already tight telecom services market, it might seem like Virtela is in over its head, competing directly against the large carriers like AT&T and MCI, whose MPLS services it must purchase to resell.

But according to Dix, the glut of available bandwidth on the world's networking backbones provides market opportunity for a nimble player who can execute well.

"There is an overglut of capacity [in the WAN services market], and I've never seen prices increase," Dix said. Virtela, he said, sees itself as providing "co-opetition" to the big carriers, competing on some accounts but also purchasing wholesale services from them for other customers that the big carriers might not land themselves.

Still, to avoid being trampled by the backbone behemoths, Virtela must be fast, smart and solid. Dix said Virtela's own reliance on others for its services makes the company extremely experienced at negotiating service-level agreements, a skill it can pass down to its customers."We buy services from more than 200 carriers across the world," Dix said. "Our own SLAs are the most aggressive in the industry."

When that negotiating skill is combined with Virtela's engineering smarts (which include proprietary routing algorithms that the company claims improves WAN performance, as well as a roster full of well-educated staffers in its network operation centers), it produces a service that may not be the cheapest list price, but offers "soft" benefits that add up.

"It is a fully managed [MPLS] service, so go calculate the soft dollars on that," Dix said. Plus, at the end of the day, he said, Virtela customers have the proverbial "one necktie to pull" if something does go wrong, instead of a long list of networked finger-pointing.

Should Virtela prove successful in harvesting profits from MPLS, the company will probably be watched more closely by Wall Street, in terms of a prospective public offering. With a sterling investor list that includes Norwest Venture Partners (Norwest partner Vab Goel is currently serving as Virtela's chairman and CEO, while managing partner and networking VC legend Promod Haque is also an investor) as well as router vendor Juniper Networks, Virtela could be looking at an IPO in the not-too-distant future.

That would require contined performance against a list of big, motivated players like the aforementioned AT&T and MCI as well as other managed-service concerns, such as France Telecom's Equant operation.While Dix wouldn't comment specifically on any IPO plans, he did say of Virtela: "We are disciplined, and we're cash-flow positive." And now, the latest entrant in the managed MPLS services space.