IP VPN sales buck industry slump

Sales of IP virtual private network (VPN) services bucked unfavourable conditions in the telecoms industry to register substantial growth during 2003 and 2004, market research has found.

Despite reduced demand for telecoms services, growing pricing pressures and increasing competition, IP VPN uptake is buoyant, indicating that the market is taking a "significant turn for the better", according to analyst firm Frost & Sullivan.

IP providers are waking up to the market potential of IP VPN, and companies are beginning to migrate networks from Frame Relay and ATM to IP VPN.

The Frost & Sullivan study estimated that the European IP VPN services market was worth €2.73bn in 2003. In 2008, it is estimated to be worth €8.56bn, which suggests that almost 70 per cent of the total potential market is likely to implement an IP VPN by that time.

"The biggest growth is occurring at present, as customers gain confidence in the technology, trials reach completion and actual deployments and replacements take place," noted Frost & Sullivan research analyst Lucy Liu.

One of the primary factors driving IP VPNs was found to be their outstanding global reach, which enables connectivity of branch offices as well as mobile employees on a worldwide basis.

They also provide additional flexibility, scalability and cost benefits that increase their appeal significantly when compared to traditional wide area network technologies.

The security of IP VPN services has also improved considerably and is nearing the levels of private networks, making them acceptable to enterprises and end users demanding extremely high standards, Frost & Sullivan reported.

While questions abound on whether IP VPNs will emerge as a replacement for Frame Relay and ATM, Frost & Sullivan believes that revenues for this market will continue to grow over the forecast period of 2004-2008.