Preparing for life beyond VPNs

Why would you want to use a VPN? Chances are you don’t have an application that demands VPNs because VPNs are largely a way to use IP networks to provide services that otherwise you’d get from frame relay, ATM or even leased lines. Tell the truth – it’s all about money. VPNs are attractive because they’re less expensive than other network service options. That’s why carriers in 2004 will be scrambling to offer users something beyond VPNs to raise profits.

The easiest value to add is another Open Systems Interconnection layer – routing. Layer 3 VPNs are not virtual wires, but little virtual router networks. A single VPN tunnel reaches not just one partner site, but all sites, via a virtual router embedded in the VPN. This lets carriers charge a premium for the service, which is covered by the fact that the customer then spends less on enterprise routers and their support.

Unfortunately, even Layer 3 VPNs haven’t set the world on fire. They’re a form of “managed service,” and traditionally users have been reluctant to trust their carriers – even less so when some of them are in Chapter 11 bankruptcy or ‘fessing up to accounting irregularities. Most problems with VPNs derive from the fact that these services usually are targeted at existing mission-critical data applications, which makes trustworthiness a key concern with buyers. Why not target them elsewhere?

One idea floating around the regional Bell operating company community is the notion of a “parallel VPN,” built on DSL offerings at branch locations and Ethernet access at headquarters. This VPN wouldn’t be used to replace current leased-lines or frame relay services for critical applications like bank branch transaction processing, but rather to offload e-mail, intranet and other applications. Verizon already bundles interstate service somewhat like this in what it calls “DSL Transport.” Some RBOC planners hope this kind of service will provide a low threshold entry into big corporations and that experience with the service will convince buyers to shift all their traffic to it.

The parallel VPN also might be a bridge into even more interesting opportunities. If a Layer 3 VPN is based on virtual routers, why not start adding “virtual servers” as well? A carrier could offer familiar services such as Exchange hosting, but also branch out into application hosting in general and eventually even something exotic such as grid computing. Major hardware and software vendors, including IBM and Microsoft, are promoting the idea of service-oriented computing, and their efforts might make users more comfortable with outsourcing not just network hardware but perhaps applications or even data centers.

For many, the idea of carriers evolving to become computing outsourcers might seem bizarre, but it might be the only way carriers can survive without re-regulation. While extremely low-cost bandwidth would transform many aspects of business and even society, there still has to be a profit model behind the process of network building or it won’t progress very far. If carriers can become players not just in connection and transport but also in services, they stand a good chance of getting the money they need to modernize our networks.

They won’t be without competitors, however. Already players such as Equinix are quietly transforming themselves into repositories of network-resident application storage and computing, and the non-carrier players in this market have the advantage of being better marketers.

Still, the advantage carriers have is that their infrastructure and service plans will drive whatever revolution finally occurs. Non-carrier players must sit back and hope that access and transmission prices fall radically, but that the carriers that let this decline happen are helpless to exploit it. That’s a reasonable hope for established players with nice cash positions, but probably too risky to permit new players to start up.  as a network revenue source is an incumbent’s game. The good news is that regardless of who offers services beyond basic VPNs, the user might end up the winner.