Virtual Nets: Web Sparks Real
Growth
Date: 3/11/98
Author: Reinhardt Krause
Every day, companies face the choice: Should they
manage their data networks themselves or hire outside
companies to do the job?
That dilemma is magnified for Internet-based virtual
private networks. It's a new type of network that can be
complex.
VPNs - ''virtually'' private in that they use the public
Internet - provide a way to send private business data
over the Web securely. VPNs let data on computer
servers be accessed by a company's satellite offices,
telecommuters working from home or key customers.
Communications still travel along the public Internet,
but the data are scrambled by encryption for security.
Many companies have jumped into the business of
running VPNs, and with good reason. The market is
expected to boom, analysts say. And there are many
ways to get a piece of the pie.
''VPNs are a partnership between service providers and
corporations,'' said Michael Howard, president of
Infonetics Research Inc. ''Systems integrators can do a
little or 100% of it.''
VPN expenditures for integration, or outsourcing, will
rise to almost $2 billion in 2001 from only $425 million in
1999 and a mere $45 million in 1997, says San Jose,
Calif.-based Infonetics.
Most corporations already lease private-line
connections from long-distance phone carriers. With a
VPN, companies can lower costs by using the existing
Internet instead of building their own, more expensive,
private networks, says David Goodtree, an analyst at
Forrester Research Inc. in Cambridge, Mass.
Security is one reason companies hire third-party firms
to manage their VPNs. Even large corporations can lack
the in-house skills needed to start a VPN and put
security in place.
Among companies offering VPN services are the leading
long- distance phone companies: AT&T Corp., MCI
Communications Corp. and Sprint Corp.
Companies also can opt to farm out the VPN to a big
Internet service provider, such as PSINet Inc. or GTE
Corp.'s BBN Unit, or to companies that set up and
maintain computer systems, such as Plano, Texas-based
Electronic Data Systems Corp.
Outsourcing VPN work to a network-savvy phone or
systems company makes sense, says Dan Merriman, an
analyst at Giga Information Group in Cambridge, Mass.
The communications system, rather than any hardware
or software, is the key to VPNs, he says. ''With a VPN,
you're really building security capability onto a
communications service,'' Merriman said.
He points out that phone carriers already specialize in
providing highly reliable, consistent performance -
essential for VPNs.
Sprint offers several outsourcing options, says Sue
Sentell, Sprint Business vice president of marketing.
Companies may need help designing a VPN, setting it
up or operating it day to day, she says. Sprint will do
any or all of those tasks.
Designing a VPN often involves replacing leased phone
lines in an existing wide-area network. Many companies
lease Frame Relay lines from carriers for high-speed data
traffic.
That's where AT&T thinks it has an edge.
''We think customers want support in a hybrid
networking environment, where they have public
networking (the Internet), private networking over
Frame Relay, and virtual private networking,'' said Eric
Wohlford, director of AT&T Worldnet business service
marketing.
Wohlford says companies may be able to reuse many
existing connections to set up their VPNs.
To attract customers, AT&T promises to carry VPN
traffic on its own Internet backbone, or connections.
This provides a higher level of network availability.
Washington, D.C.-based MCI's strategy is similar, said
Bob Smith, MCI's senior manager of Internet marketing.
Moving a customer's VPN to MCI's own Internet
backbone offers added security, he says.
''Security is a core competency of ours,'' Smith said.
In fact, many companies setting up VPNs are expected
to outsource just the security aspect of those networks.
Managing security consists of several parts:
authentication - determining who is trying to access
data; encryption -scrambling data so they can't be read
by unwanted people; and authorization -overseeing
which software applications or data can be accessed
and by whom.
Some security is handled by ''firewalls'' - special-purpose
computer hardware or software that resides on company
networks to block access from outsiders.
More companies are looking to hire outside companies,
at least to help manage their firewalls, Giga's Merriman
says.
Phone companies, for example, have skill in ''tunneling''
software. This software encrypts data into tamperproof
formats and creates private connections over the
Internet.
That's important because key VPN users are corporate
employees who need to access the network from their
homes or while traveling.
Help desks also need VPNs. Help desks are companies'
specialized information centers that handle queries from
employees, customers and partners.
Companies are looking to outsource help-desk services,
MCI's Smith says.
Of course, all these services will cost corporate VPN
users money. When they look at the bottom line, some
companies will decide to outsource the entire VPN setup
and management. That will mean a good source of
business for the service providers.
''Some customers want the carrier to (have) end-to-end
responsibility,'' said AT&T's Wohlford. ''For that,
they're willing to pay a premium.''
(C) Copyright 1998 Investors Business Daily, Inc. |
