What Thwarts VPN Growth?

In these days of convergence, building a wide area net work (WAN) is the

dream of every company that has a wide network of offices to look after. The

need for cost-effective point-to-point connectivity that offers speed and

consistency gave way to the popularity for virtual private networks (VPN)

solutions in the market. A VPN solution typically supports both the Intranet and

Extranet services similar to those supported by a traditional WAN. These

solutions have also gained popularity for their ability to support remote access

service.

The key feature of a VPN is its ability to use public networks, like the

Internet, rather than rely on private leased lines. This has resulted in more

and more corporates preferring VPN solutions to leased line connectivity.

Market overview



In the light of the present economic conditions, it may be difficult to put

a definite number on the VPN market projections in India. However the growth in

the VPN equipment and service market is certainly noticeable. An IDC report puts

the Indian VPN service and equipment market at Rs 1.68 billion in 2001, which is

slated to grow to Rs 12.76 billion in 2005. The growth is also evident from the

VPN revenue turnover recorded/expected by several players in this space. The

huge growth potential can also be gauged by the number of ISPs venturing into

the VPN space to offer their services. Tata Internet Services has expanded its

corporate services and is currently present across 32 cities in India offering

VPN services.

Vertical industry adoption



IDC states that the major segment that would lead in terms of adopting VPN

solutions in India is finance and banking for countrywide branch connectivity.

However, the manufacturing and distribution industry also possesses a high

demand pattern in the market, largely for connecting various regional offices

and online logistics. Nevertheless, government institutions such as the Income

Tax Department and police force are also considered to be the next adopters of

VPN solutions in the market.

Anil Gupta, director for business development and service marketing at

Convergent Communications, points out that banking and financial services are

faster adopters of VPN solutions as they have computerized multi-location

presence. The demand in these verticals are also driven by several other

favoring factors in the country.

Drivers for VPN market



In light of the economic slowdown, today’s market is more or less limited

to cost-effective communication solutions, such as VPNs. Though the

infrastructure investments from organizations has slimmed, the VPN market still

seems to be growing. P Muralidharan, head of corporate business at Wipro Net,

points out, "IT and infrastructural investments in general have been

getting postponed in the market. Nevertheless, we expect the market to improve

because VPN would add to the productivity of businesses due to its cost

effectiveness." However, compared to the traditional methods of providing

point-to-point connectivity with equivalent levels of service management,

security, bandwidth and quality of service (QoS), IP-based VPN service

potentially provides significant cost savings. Also the prime driver in the

Indian context for the VPNs will be the growing e-business activities. With the

advent of the concept of SCM and CRM, the basic need to get connected with

suppliers and customers has fueled the demand of VPNs especially in the

distribution and logistics companies.

Factors affecting market growth



All said and done, VPN is not free from shortcomings. Currently in India,

these solutions are going through a second level evolution, but it is still far

away from full blown adoption and implementation in the market. Issues like

security and reliability of network are still being addressed. Bhagath G,

Technical Executive of ZeeNext, echoing a similar opinion says, "The demand

for VPN solutions is affected due to the awareness level, which is low."

Also the legality issues has barred voice/video file transfers through VPN

networks and it is currently limited to data files. However, the traditional

dedicated private networks allows voice, video and data file transfers.

Sunila Paul/DQCI in Bangalore