IP VPN investment on the rise

The European IP VPN hardware and software gateway market grew rapidly in 2000 as vendors developed product lines in response to demand for private IP connectivity, says Frost & Sullivan. The market has since slowed, hit by the global economic slowdown, budgetary restraints and reduced capital expenditures by service providers and large enterprises.

However, the powerful return on investment of using the Internet as a communications backbone for the corporate world has offset such growth-inhibiting factors.

New applications, the prospect of tapping into new national market opportunities and mounting competition will drive IP VPN gateways, from a EUR428m market in 2001 to EUR1.2bn in 2006.

Europe's increasingly mobile workforce will drive implementation for secure and cost-effective remote access to corporate networks.

This trend will continue as companies expand geographic reach, exploit new markets and cut capital outlay. This trend will play a vital role in transitioning LANs into private WANs.

"Much of the difficulty associated with administering VPNs has been alleviated through intuitive user interfaces. Noticeable improvements in ease of deployment, set-up and administration have relieved many complications historically associated with using VPNs," says analyst Jose Lopez.

The Internet's inherent weakness is the inability to offer quality of service beyond the basic requirement, especially in VPN configurations communicating across vast distances. The latency experienced using the public network is unacceptable for some applications that are sensitive to delays. Leased-line alternatives that are able to guarantee QOS levels may be more suitable.

Service providers are increasingly making the transition to IP VPN, but vendors agree that leased-line technology will co-exist for the foreseeable future.

The biggest player in Europe is Check Point, which has leveraged its brand strength in firewalls. But even though it is still generating strong profits, hardware vendors are encroaching on its dominance. It has therefore formed high-profile alliances with several appliance vendors such as Nokia.

Cisco is emerging as a contender to lead the overall market as hardware-based solutions grow at a much faster rate than software-based ones. Cisco is leading the hardware-based market.

"The larger players active bring established distribution channels, reputable customer service, increased breadth of product offerings, economies of scale and scope, substantial capital backing for development and marketing expenses, and the experience of effectively integrating companies and product lines into their existing business models."

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