Ex-Microcom execs plan assault on VPN switch mart

By Chris Nerney
Network World, 09/21/98

Franklin, Mass. - A start-up formed by ex-Microcom executives is getting ready to challenge Nortel and others in the crowded virtual private network (VPN) market.

Altiga Networks, Inc. plans to roll out hardware that will compete with products such as the $50,000 extranet access switch developed by New Oak Communications, an industry source says.

New Oak launched its NOC 4000 device last December, providing customers with a combination of firewall, authentication and LAN switching technologies in one box.

Just one month later, Bay Networks (now a division of Nortel) purchased New Oak for $156 million.

One venture capitalist familiar with Altiga's business plan says the company "originally was going to develop a product similar to New Oak's, but lower end, for the small- to mid-size business market.

"After New Oak was bought, Altiga shifted strategy and started developing a New Oak clone - a high-end enterprise VPN system," he says.

The venture capitalist says Altiga is "using some compression technology and is licensing DSP code from another vendor."

Altiga's access device will use Internet technology to connect employees, customers and business partners through their LANs.

Company officials refused to discuss details of the product, but Altiga plans to debut the technology next month at NetWorld+Interop 98 in Atlanta.

Big first round

Founded in January by former Microcom executives Mark Freitas, Gregory Marcotte and Keith Mader, Altiga in April received a $6.25 million first round of venture capital from three investors (see graphic).

Freitas, Altiga's president, has a software and product development background. Engineering Vice President Mader most recently was at Bay, where he headed a team working on WAN protocols for the company's Backbone Node routers.

VPNs are an emerging option for organizations to extend access to their networks via the Internet. VPN boxes typically include features such as TCP/IP routing, tunneling, encryption, quality of service and firewall security.

Advocates of VPNs say they are a less expensive way than private dial-in lines for linking remote users to corporate network resources.

However, customer concerns about the security of packets traveling through IP tunnels, performance delays caused by encryption procedures and the actual level of cost savings have slowed the adoption of VPNs.

"We're seeing very few VPN deployments," says Ted Julian, an analyst with Forrester Research of Cambridge, Mass.

Still, major players already are fighting for position in the VPN hardware and software markets. Nortel, Lucent, Cisco, IBM and Ascend Communications all are pitching products for the extended enterprise.

Throw in start-ups such as Altiga, Indus River Networks and Assured Digital, and the activity around VPNs clearly is increasing.

"If the vendor community making products is an indication of the market, then the market's heating up," says Jeff McCarthy, former president of New Oak.

But most potential customers still aren't buying, and Forrester's Julian predicts they won't until 2000.

"The problem with this market is that no start-ups will have an opportunity to build up a defensible share," he says. "It will just go straight to the big vendors."