Small carriers boost VPN competition

Increased competition in the virtual private network (VPN) market this year is likely to lead to better deals for business users, according to analysts.

IDC's IP VPN Carrier Market Shares and Competitive Analysis report claims that small carriers and specialist internet service providers (ISPs) are involved in a fierce battle for market share with the major carriers.

The research reveals that smaller players are dominating the $2.3bn (£1.44bn) outsourced and managed IP VPN market in the US, despite the tier-one carriers holding most of the top 10 places.

Almost two-thirds of this year's revenues will be captured by small carriers, speciality VPN service providers, outsourcers and local ISPs, according to IDC.

As a result, the analyst said it expects to see significantly greater competition as many market players fight it out to deliver the VPN services in high demand by businesses of all sizes and in all industries.

The IDC report stated: "The major carriers, primarily focused on each other, will continue to fiercely fight over Fortune 1000 customers in the months ahead.

"This leaves a vast market to smaller carriers, ISPs, value-add resellers and IP VPN specialists to mop up the medium and small companies that are also deploying IP VPNs in large numbers."

The analyst went on to predict that the biggest winner in a year's time will be the provider that can successfully penetrate the huge do-it-yourself (DIY) market.

IDC estimates this market to have reached a value of $6.8bn (£4.27bn) in 2002, and indicated that it will grow to $10.3bn (£6.46bn) in 2007.

"The DIY pie is huge and largely unassailed to date by even the largest carriers and outsourcers," said the analyst.