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

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.


head (corporate business), Wipro Net

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

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