11/29/2004 -- According to market research firm In-Stat/MDR, network-based IP VPN services—which include MPLS IP VPN, Virtual Router, and Network-Based IPSec services—are one of the biggest growth areas in business networking services.

In 2003, for example, worldwide revenues for network-based IP VPN equipment totaled $267 million, with edge routers accounting for just over half of that total. These numbers are only going to improve over time, In-Stat believes.

Unlike conventional VPN services—which initiate tunneling at a customer’s site—network-based IP VPN services move VPN intelligence to the edge of the network. “Network-based IP VPN services enable service providers to achieve economies-of-scale by serving multiple customers from equipment at an edge POP, and to substantially reduce operational costs of provisioning, management and maintenance,” said Henry Goldberg, a senior analyst with In-Stat/MDR, in a statement. “MPLS IP VPN and Virtual Routing over ATM services also allow service providers to earn incremental revenues by offering classes-of-service for different priority applications, and enable end users to reduce costs by converging all of their voice/data/video traffic onto a single service.”

Because of booming demand for network-based IP VPN services, service providers are pitching DSL access lines to SMEs and branch offices as lower-cost alternatives to traditional leased lines, In-Stat says.

At the same time, customers who tap DSL-based VPN services typically require broadband subscriber management services, and—voila—several vendors are now offering these services on the same platform as their VPN services.

Another upshot of the booming market for network-based IP VPN services is that edge router and IP services switch vendors are building more security services into their products, along with IP VPN services. For example, some vendors offer gateway services to connect remote users with IPSec and SSL clients to corporate sites on layer 3 or layer 2 VPN services, In-Stat finds. -Stephen Swoyer