CAMBRIDGE, UK, July 3, 2001 - The Western European market for IP virtual private network (IP-VPN) services is set to increase seven fold in the next five years to US$6.6 billion (see Figure 1), despite service providers paying insufficient attention to user requirements. This is one of the major conclusions of Market Realities of IP-VPNs, a new report and survey published today by Analysys, the global advisors in telecoms, IT and new media (www.analysys.com).
Figure 1 - Forecast IP-VPN revenues for service providers for Western Europe 2001-2006 [Source: Analysys Research, 2001] - chart available to journalists on request.
Margaret Hopkins, lead author of the report, commented, "When service providers are desperate for revenues, we found it surprising that they were not putting more effort into attracting users - especially SMEs - to the obvious benefits of this developing network technology and in matching users' requirements."
An in-depth survey of more than 50 companies in the USA and Europe was commissioned for the report. The companies surveyed ranged from 50 employees to multinational corporates with thousands of employees and covered a wide range of industries. The survey reveals that IP-VPNs are attractive to a wide spectrum of industries, irrespective of geographical location, the number and distribution of its sites, communications environment, or a company's spend on communications.
The survey indicated that users are drawn to IP-VPNs by the imperatives of cost effectiveness, competitive strategy, the dynamics of their own industry and technological attractiveness. It revealed that service providers have virtually no influence on users' interest in the technology.
Despite the many positive aspects of IP-VPNs, under 60% of survey respondents felt that all their expectations of the technology had been met. Concerns included the failure to obtain expected cost benefits, and performance issues such as network latency, bandwidth and security. According to the report, there is an evident tension between the perceived virtues of IP with the realities of business networking and IP service provision.
Existing and potential users of IP-VPNs emphasise the desirability for a relatively small number of basic applications and network uses - such as email, Web browsing, remote database access, remote network access and intranets (see Figure 2). They gave a low priority to voice and data integration, and many stated they were not yet convinced of the maturity of the technology or its benefits. Extranets also appear to be a minority interest, despite the substantial attention given to them by the telecoms industry itself.
"Many service providers are currently concentrating on tailored IP-VPN solutions for large companies - where the emphasis is on quality of service (QoS) and added value - rather than on simple service packages for SMEs," says Hopkins. "Multi-site SMEs, and those with teleworkers or mobile staff, are enthusiastic about IP-VPNs, and as a result offer service providers a potentially lucrative market which remains relatively untapped." However, the report stresses that the coverage of broadband access is still a critical factor in offering IP-VPNs to the SME market.
Figure 2 - IP-VPN user applications for all companies surveyed, now and within two years. [Source: Analysys Research, 2001] - chart available to journalists on request.
The report concludes that there is large scope for rapid growth in the market even though, on current projections, IP-VPNs will still have only 10% of the data market by 2006. In the longer term they have the potential to take a significant part of the business datacomms market, but service providers will need to turn their attention to the requirements and demands of SMEs more than they have done so far.
Market Realities of IP-VPNs establishes a clear understanding of the technical issues by identifying the varieties of VPNs. It explains the operation of IP-VPNs, the relevant standards, the features and capabilities supported, and their role in service-provider network infrastructures. The report also examines the product strategies of leading IP-VPN vendors - such as Cisco Systems, CoSine Communications and Nortel Networks; and analyses the recent rollout of IP-VPNs by service providers - such as Cable & Wireless, Concert, Equant/Global One, Global Crossing, Infonet and XO Communications.
Written by Tim Hills and Margaret Hopkins, the report is published by Analysys Research and is available in paper format priced at £1800 (US$3060), via the Web priced at £2000 (US$3400), or £2500 (US$4250) including an extra paper copy and one hour of analyst support. The Annex, which details the user interviews, is also available, priced at £1000 (US$1700) if bought with the main report or £2000 (US$3400) if bought seperately. For more information telephone Analysys Research on +44 (0)1223 341300 or email email@example.com.
A VPN is a virtual private network. VPNs combine the telecoms traffic of many different users in such a way that each user appears to have a private network dedicated solely to its own use. IP-VPNs are based on the TCP/IP protocols, and operate over the public Internet or managed carrier IP networks.
Analysys, the global advisors in telecoms, IT and new media, works at the forefront of the communications revolution, delivering advice and insight to established and new entrant players. From offices in Cambridge, London, Glasgow, Madrid, Milan, Munich, Paris, Kuala Lumpur, San Francisco and Washington DC, over 250 Analysys staff provide strategy and systems consultancy, information services and start-up support to the companies which are creating the networked economy.
Analysys Research reports, online services and conferences provide authoritative coverage of this convergent industry, based on an unrivalled ability to fuse real-world experience, rigorous research and forward-looking analysis. For further information visit http://www.analysys.com
Recent reports include:
* Controlling the 3G Value Chain (July 2001)
* Marketing Data Services to SMEs (July 2001)
* Evaluating the Business Case for 3G Network Sharing (June 2001)
* Maximising Revenues through Advanced Service Provision: The survival strategy for European data centre operators (June 2001)
* Interactive Consumer Broadband: Sex, Sport and Shopping? (June 2001)
* IP Local Loop: Key Facts (April 2001)
* Business-to-Business Infrastructure Providers: Network Operators in Ecommerce (April 2001)
* Business-to-Business E-billing (March 2001)
* Global IP Operators (February 2001)
* Mobile Location Services and Technologies (February 2001)
* Delivering DSL in Europe (December 2000)
* 3G, MVNOs and Acquisitions: Opportunities for Entering Mobile Markets (November 2000)
* ASPs: Business Models and Application (November 2000)
* Delivering DSL in Europe (November 2000)
* Mobile Portals and ASPs (October 2000)
* New Entrants: Central & Eastern Europe (October 2000)
* World Ecommerce Marketplace (October 2000)
* ISP Markets: Central & Eastern Europe (September 2000)
* ISP Markets: Western Europe (August 2000)
* Fixed Telecoms Projections: Western Europe (July 2000)
* ISP Interconnect: Revenue Models for Dial-up Access (May 2000)
Tel: +44 (0)1223 341300
Martin Brooke Associates
Tel: +44 (0)1223 264050
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