3/11/98 IBD article "Virtual Nets: Web Sparks Real Growth"
Excerpt: "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.
investors.com
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.
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I/4811 E/IBD E/SN1 E/TECH |
