InformationWeek

August 28, 2000

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New VPNs For A Global Economy

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Global VPN services can get expensive. While vendors are reluctant to cite pricing because there are so many variables--the amount of bandwidth needed, the number of VPN and dial-up connections, the guaranteed level of service--they say a global VPN could easily cost $100,000 a month for a multinational deployment.

Cognizant has built its international VPN using hardware at both its own and its clients' locations. Hardware such as routers with built-in tunneling, encryption, and other technologies make up what analysts say will ultimately represent the largest share of the global VPN pie. This so-called customer-premise equipment includes VPN routers that offer high-speed, full-time connections over ATM, frame relay, or the Internet and are located in branch offices, at partner locations, and at corporate headquarters. The routers may be owned and managed by the customer or a vendor. The Yankee Group's Miller says this market may grow from $390 million to $4 billion during the next five years.

By using VPN routers at its client locations, Cognizant can leverage a technically savvy and relatively low-cost labor force in India. Cognizant combines consultants working at the customer sites with India-based software programmers, each of whom has direct access, via a VPN, to the customers' mainframes or client-server computer systems anywhere in the world. Cognizant must rely on and manage a heterogeneous VPN because, in some cases, the equipment boxes at the customer site are owned by the client. In other cases, the boxes are installed by Cognizant, usually within a few days of getting an assignment.

The 2,000 software technicians based in India can communicate directly with the client's network via links ranging from 64 Kbps to 512 Kbps, depending on the network setup. "Our India programmers are working while the client is sleeping," D'Souza says.

Although D'Souza says Cognizant can offer lower-cost services because of the more economical pay scale for IT workers in India (senior-level workers make about half what their U.S. contemporaries make), customers would probably not agree to the VPN if it took too long to deploy. The process of installing and configuring a VPN router used to take one to three months, he says, but the technology has evolved to the point where a router and VPN connection to Cognizant's nine offices in India takes only one to three days. D'Souza says this saves Cognizant and its customers millions of dollars.

Unlike the European Union, which didn't have to consider trashing an existing network or a bunch of expensive routers to build its multinational VPN, Cognizant's investments in its heterogeneous VPN make the new VPN managed services less attractive. Most of the big VPN vendors want to see customers on a homogeneous hardware network (such as all Cisco or Lucent Technologies Inc. VPN routers), which isn't practical for Cognizant's model, Margolin says.

PeopleSoft's Hennessy agrees with Margolin that homogeneous network services aren't always practical, especially for a company evolving its international VPN. But he says that as the equipment gets older, replacement will offer the opportunity to select a unified carrier.

In fact, equipment obsolescence may be the key for global providers looking to win managed-service customers during the next few years. With more than half the largest publicly traded companies in the world already using some type of VPN, and bandwidth needs changing rapidly, wholesale replacements are almost always on the horizon. "If you can keep a piece of network hardware for three years, you're doing well," Slaby says. In addition, owning your own equipment and having to rely on a number of service providers to piecemeal a global VPN can often result in high maintenance costs, network management issues, deployment to remote users and offices, and logistics problems with securing telecom services in many countries. These demands are magnified on a huge scale when customers need assured service in 20 countries. Seamlessly tackling these challenges could be a top selling point for a single-provider global VPN service.

It's one thing to forge alliances with a number of national telecommunications companies to provide the carrier lines between countries. It's another thing to give same-day service when your Swiss trading partner's or subsidiary's VPN hardware breaks. "If you tell a customer you'll fly in a tech to fix a critical application tomorrow," says Danny C�té, Global One's senior VP for data and IP network services, "you won't have the account for long."

Bill Wagner, VP of marketing at Fiberlink, agrees. "Companies need to make sure they're going to have 24-by-7 support that spans all the different time zones," he says. "And you need a single point of contact, because no one should have to make more than one phone call to get a problem fixed."

Hennessy says the cohesive technical support VPN service providers can offer is attractive. "We have very qualified network techs all over the world, but there's plenty of other things for them to do," he says. And as his worldwide network grows, his own equipment ages, and the vendors build out their international infrastructure or create partnerships to extend their global presence, Hennessy says, a unified VPN might make more sense.

Hennessy is considering a fully managed IP VPN from UUnet and a fully managed frame relay VPN from WorldCom. "I have to see that I can save millions of dollars every year if I do this," Hennessy says. "I think we're at that point."