8/11/2009 -- The economic outlook is still murky, but one thing seems clear: The market for Ethernet and IP MPLS VPN services is actually growing -- and at a surprisingly healthy clip -- in spite of a pronounced downward trend across most other segments in the networking industry.

The driver is, of all things, business spending. Enterprise buyers perceive Ethernet and IP MPLS VPN investments as not simply safe but as ROI-generating investments in a climate where cash-strapped companies are struggling to stretch their IT dollars and boost their operating efficiencies. The perception, for good or ill, is that investing in Ethernet or IP MPLS VPNs can help them do both, says market watcher Infonetics Research.

"In spite of the downturn, and in part because of it, uptake of IP MPLS VPN and Ethernet services is growing at a healthy pace as companies seek to increase efficiencies and decrease costs," said Michael Howard, a principal analyst with Infonetics, in a prepared release. "In today's über-competitive, fast-changing, network-oriented world, organizations are looking to control WAN costs despite rising bandwidth needs by turning to Ethernet, a known cost-per-bit champion, and to managed Layer 2 and Layer 3 services, where service provider expertise and tools can help stabilize costs, prioritize critical applications, and increase capacities."

Demand for Ethernet VPN services is all but surging. In 2008, for example, Ethernet VPN revenues grow at a 36 percent clip (relative to 2007). By 2013, Infonetics projects, Ethernet VPN services should crest at about $33 billion -- nearly double their 2008 tally ($16.9 billion). Among other drivers, Ethernet services are typically much cheaper than the frame relay or private line services that they're replacing, Infonetics says; typical Ethernet VPN service costs clock in at 20 to 30 percent less than the cost of legacy gear.

Elsewhere, Infonetics indicates, Layer 2 and Layer 3 IP MPLS VPN revenues grew at a less explosive, but still respectable, 16 percent clip from 2007 to 2008. --Stephen Swoyer