Background

Virtual private network (VPN) has not exactly been a term cast in concrete—its meaning seems to change with the technology. If you threw the term “VPN” around ten years ago, everyone knew you were talking about enterprise-class voice products, AT&T’s SDN, MCI’s VNET, and Sprint’s VPN. These products gave the corporate user the look and feel of working in their local private branch exchange (PBX) environment, even though the abbreviated dialing plan and office-to-office local intercom could be spread across the entire country, or even around the world. Today VPN is being used almost exclusively to describe new data networking capability offered by the carriers—and it has become increasingly popular among enterprise customers for many of the same reasons that these same companies were attracted to the VPNs’ voice predecessors.

The Internet Engineering Task Force (IETF) defines a virtual private network as “the emulation of a private wide area network using public facilities, including the public Internet or private IP backbones.” Insight defines a VPN as secure, private data networking over the public Internet or private IP networks for individual user remote access, site-to-site, or corporation-to-corporation communications. The term virtual private network is meant to convey the sense that, from the user’s perspective, the network operates as if it is a private network, but in reality the network utilizes pieces of the public network. The user is assured that communications on the network remains private, meaning it can only be used by the business purchasing the service and cannot be accessed by the general public.

Historically, enterprise data wide area networks (WANs) have been private and usually based on an infrastructure of private lines and non-public, secure connections such as frame relay. The growth of the Internet during the mid-1990s and its wide acceptance as a business tool presented the corporate data manager with some interesting choices. Certainly, the public Internet was a relatively easy and a less expensive way to interconnect enterprise LANs—but what manager would entrust that wide open public medium with confidential corporate materials and risk a career?

The Attraction of a VPN

With the advent of encryption and secure networking standards applicable to the public Internet, that corporate data manager could begin to seriously consider replacing private WANs and enterprise networks with virtual versions built around the Internet. In a sense, the VPN is a further evolution of the enterprise frame relay networks where communication sessions are established directly between devices on a permanent virtual circuit (PVC). But instead of linking devices across a private enterprise network, VPNs create tunnels (encrypted data communications sessions) directly between VPN devices across the public Internet.

It is the ability to remotely access corporate data in a secure fashion that is the biggest selling point of a VPN service. The VPN allows mobile or telecommuting employees to access sensitive company data across an Internet connection while maintaining security. The VPN infrastructure is made up of access and transport networks. Transport occurs over the public Internet backbone utilizing transmission control protocol/Internet protocol (TCP/IP). There are essentially two types of access to the VPN network: 

• Dial-up Access:
  Off-site and mobile users today generally utilize dial-up access for connecting to the VPN. These users can be company employees, telecommuters or traveling/mobile personnel, or customers and other trusted third party users. This type of access provides the user with client software for either their desktop or laptop computer. The client software includes encryption, security, and a directory of dial-up numbers for accessing the VPN service provider’s dial-up POP.
  
  
• Dedicated Access:
  Dedicated access provides users at specific premises, such as branch offices, a direct connection from that premises to the VPN provider’s POP. As the name implies, dedicated access has heretofore been a point-to-point communications path established on a full-time basis between the customer’s premises or service site and the VPN service provider’s POP. This has traditionally been accomplished using some form of private line which could only be accessed by the users at the customer’s branch office location. However, alternative forms of high-speed, always-on access solutions (such as cable modems and DSL connections) are just now becoming available, and will begin to have a major impact on VPN markets in the years ahead. 

Market Forecast

Insight's research has identified several major trends that will have an impact on VPN market acceptance and growth: deployment of

• broadband services in the local loop;
• the trend toward network outsourcing; and
• standardization of hardware and software.

The growth of local access broadband connections is a major industry trend and will be a major driver in the growth of data VPN services in the years ahead. Dial-up access for VPNs is currently the most widely used for mobile workers and telecommuters. But over the next few years, Insight’s research suggests that dial-up connections will be displaced with the always-on broadband connection provided by either a DSL line or a cable modem. Telecommuters and smaller branch offices will increasingly turn to broadband to support their data networking needs including shared applications and large file transfers.

The lack of standardization affects both the service provider and the end-user. Customers installing VPNs today nearly always standardize around a single manufacturer’s hardware and software systems. This is as true for both the major multi-national corporations that install and manage their own systems as it is for smaller enterprises that install fully managed VPN services from their VPN service providers. The lack of standardization carriers through to the VPN service providers; they tend to create their own working standards by focusing on a single manufacturer to reduce any implementation and operational problems.

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