Boom time for IP network services

The managed IP Virtual Private Network (VPN) market is estimated to have grown by more than 107 per cent last year, but this growth will not continue past 2007, according to IDC.

Spending on managed IP VPN services is expected to show double-digit growth in the next three years, but a report by the research firm said this will tail off to five per cent towards 2007.

IDC cited several reasons for this. These include: saturation among large companies after the current rapid growth phase; a shift in spending from standard IP VPN connectivity to applications such as voice over IP and hosted business applications; price competition; and alternative Layer 2 services such as Ethernet beginning to cause migration from Layer 3 IP services.

James Eibisch, IDC EMEA research director for IP and hosting services, said the availability of cheap broadband and the benefits of Multiprotocol Label Switching (MPLS), separating public and private networks and offering reliability and performance, have enabled IP to become the default method of private networking for high-end enterprises.

"IP VPNs have taken the managed data market by storm, and 2003 was the year of MPLS," Eibisch said.

IDC predicted a decline in growth as spending shifts from standard IP VPN connectivity to new applications. In the managed market, MPLS will increase its share over IPSec and other technologies, such as Secure Socket Layer, the analyst claimed.

Darren Scully, commercial director at Nexus Open Systems, said most of the reseller's managed IP VPN business is with smaller companies.

"Our larger customers will take care of VPNs themselves. The sub-100 user customer base are the people that ask us to take over and take the problems away," he said.

"But managed services will be increasingly taken up by larger firms when new applications come on board such as IP telephony."

karl_flinders@vnu.co.uk