InformationWeek
Defining The Business Value Of Technology
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August 28, 2000 |
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New VPNs For A Global Economy
Telecommunications carriers are beginning to offer a new generation of virtual private networks that promise to join geographically dispersed offices in a single worldwide
By Norbert Turek
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ompanies doing international business have long wished for a data network service that would let workers in Tokyo communicate as easily and cheaply with colleagues sitting in San Francisco as with those in the next town. But reality intrudes: To run a global operation, most companies still have to rely on a patchwork of long-distance service, toll-free dial-up connections, wide area networks, and private leased lines from multiple providers. The larger the international solution, the bigger the headache.But help may be on the way. Telecommunications providers are rolling out improved global virtual private networks that promise a single service that can join far-flung offices into a single network. Sure, managers have heard those promises before, but the new services may bring that ideal closer to reality. Most often, these new services let companies take advantage of existing asynchronous transfer mode and frame relay connections, and they blend dial-up access for remote users and always-on pipes for linking worldwide offices and partners into a single managed service. The services also expand coverage to include points of presence in a multitude of countries. Ubiquitous coverage is key in a market that has 45% of its customers outside the United States, according to a study by the Yankee Group. (Western Europe has 28% of the market, the Pacific Rim has 5%, and all other areas outside the United States total 12%.)
Carriers offering global VPNs include Global One (a France Telecom company), Sprint, WorldCom and its subsidiary UUnet, and AT&T, both through its Concert joint venture with BT and through its own Global Network Services (which it acquired from IBM in 1999). In addition, some of the most ubiquitous global VPN service providers, including Equant and Infonet, primarily own nodes and switches in hundreds of countries and territories and base their business on managing that giant network. Fiberlink Communications Inc. offers services through established partnerships with other service providers in more than 150 countries and 8,000 points of presence.
The European Union is turning to a managed VPN service to help link its 15 member countries and other candidate countries via a single, homogeneous backbone network. The supranational governmental organization has hired Global One to build the international VPN; each of the different countries can then use its data provider of choice (such as a national telecom company) to connect to the backbone, says Bernard Schnittger, administrator for the EU's Telecoms Project.
Because the backbone provides any-to-any connectivity among all the countries, each country needs only one connection--instead of 14--to communicate with all the others. Schnittger says Global One was picked using a public procurement process that included standards for quality of service, the ability to grow, and price, which is about $30 million for a three-year contract that includes a two-year extension.
The new global VPN services offer a choice of data-carrying technologies while touting the IP-over-Internet structure, which emerged a few years ago as a more flexible and economical alternative to circuit-based VPNs (which in turn are a much more economical alternative to private leased lines). The problem is that IP-based VPNs, which carry data in encrypted form over the Internet using standard TCP/IP, have yet to earn the trust of most IT managers.
"IP technology is tricky. If it breaks, you can be in real trouble," says Neil Hennessy, VP of engineering in the IT department at PeopleSoft Inc. The software company has VPNs in several regions, including Latin America and Asia, so employees there can access PeopleSoft's companywide intranet via dial-up over the Internet. But PeopleSoft employees aren't using the VPNs for critical apps; instead, most of the VPN traffic is E-mail.
The service providers concede that the vast majority of customers are still using--and asking for--frame relay and ATM VPNs. Tim Brotherton, VP of product marketing at Concert Communications Co., says that 80% of its customers' data moves through Concert's frame relay and ATM switches. "The Internet is still seen as a new technology and companies are having a hard time trusting it for moving essential data," he says.
WorldCom's Business Class IP service, which will be available by year's end, can handle frame relay, ATM, or IP traffic over a single access link, and provide any-to-any connections to other users by carrying the data across WorldCom's frame relay, ATM, and IP networks. Companies can extend their existing networks to company sites and partners via the VPN by buying a WorldCom or UUnet access link to the nearest switch, which will route the traffic over the network appropriate for its data type.
The advantage to such an IP-based service, analysts say, is the any-to-any connectivity. Each site needs only one link to the VPN in order to communicate with any other sites. That compares with a pure frame relay network, which--although it's also a meshed network that allows for any-to-any connectivity--requires companies to identify all the specific locations each site wants to communicate with, thus compounding administration and management requirements.
Last month, AT&T began offering IP ATM, which complements its existing IP Frame Relay service. The vendor says the services marry the reliability of ATM and frame relay with the ubiquity of IP, meaning businesses can use their existing frame relay and ATM networks to build IP-based intranets and extranets without having to build a separate IP network or modify the IP applications they're using.
Although the VPN services market is still relatively small, many analysts, including Todd Miller of the Yankee Group, say it's going to take off over the next five years. Miller says that revenue for VPNs over frame relay and ATM will grow from $90 million this year to $531 million in 2005.
Illustration by Randy Hess
Photo of Hennessy by Gary Parker
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