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Should you offer managed VPN services?

Enterprises are turning to systems integrators for managed VPN services to ensure bandwidth optimization for improved application performance.

Partner takeaway: Providing managed VPN services has its pros and cons, but ultimately offering these services could be a great opportunity for VARs.

Enterprise VPNs, long considered the secure way to keep data private as it traverses the wide area network (WAN), are generally built, deployed and managed in-house. But recently enterprises have begun turning to channel partners for managed VPN services. Lynda Stadtmueller, program director of cloud services with Frost & Sullivan, explains what kinds of companies will be candidates for managed VPN services, as well as the pros and cons for both users and channel partners.

Let’s begin by establishing clarity around the lingo related to managed VPN services—which have been referred to as cloud VPN services and outsourced VPN services.

Linda Stadtmueller: I call it managed VPN services. My thought about managed VPN services is it extends remote visibility and monitoring into the premises for a better look across the entire network. Managed network services have been around for a while. Just because these services are delivered over the Internet doesn’t necessarily mean they're cloud services. In some cases, there are providers beefing up their offerings and calling these managed services cloud and they may not be. What they are referring to are managed services that are Web accessible with nothing on-site.

There’s also a difference between outsourced services and managed services. With outsourced services, the enterprise hands responsibility to the service provider and doesn't share in the day-to-day management responsibility. In the case of managed services, there’s a degree of collaboration between the enterprise and the service provider. The enterprise and provider each has similar views of what will happen, enacting changes in real-time or near time, and collaborating to tweak the network as needed.

Why go with managed VPN services?

Stadtmueller: What we’re seeing today is a push to have more applications where the code isn’t contiguous to the user because of things like data center consolidation, remote hosting or cloud computing.  Also, applications are consuming more network bandwidth than they used to, creating more performance issues.  And, the VPN market is growing, very much displacing Frame Relay and ATM in large enterprises. And this situation is also creeping more into the midmarket. The stakes are getting higher; businesses need to know more about their network but also how they’re utilizing the network bandwidth they have [in order] to make sure that application performance is appropriate as needed.

In many large enterprises, it’s traditional that the enterprise owns the hardware, primarily a router in the case of a VPN and the management software and maybe a server. However, in-house VPN monitoring and management is expensive as it requires some degree of expertise and people power. When it comes to midsize companies, they don’t have the sophisticated management tools or in-house expertise to monitor the network.

What are the pros and the cons of managed VPN services?

Stadtmueller: The primary advantage of managed VPN services is that it gives a business a way to protect its investment. It’s investing in network access, and with managed services it will understand how it’s using it rather than simply throwing more bandwidth when there’s a problem.

Also, companies incur a month-to- month cost with managed services rather than having to make investments in a server and management software and on-site expertise.

There’s also the issue of accountability—as in having access to more information and someone else screening the network. When network issues arise that need addressing, the business has a partner to work with.

Some cons: If the company already invested in on-site tools and expertise and opted for managed VPN services, it’ll have to pay a monthly fee. Also, in some organizations there’s a cultural hurdle to overcome around managed services. For providers, a managed service is labor intensive and requires expertise. Not every provider that hangs out a shingle has the resources or business model to perform.

What are the VAR opportunities in offering managed VPN services ?

Stadtmueller: Today, the managed network services provider market is fragmented. There are some large national players that offer services to larger companies. Regionally we’re seeing some of the VAR 500 beefing up their current offerings.  We’re also seeing the independent VAR adding cloud-managed services into their portfolios and becoming the virtual IT department for the SBM market.

Offering managed VPN services can be very attractive to a VAR looking for a source of reoccurring revenue and to expand their service offerings.

I think it’s still early in the game for managed VPN services, but I expect that we will see more of it in the future because it makes good business sense. In the next few years, companies will move more applications out of the data center and application performance will become more of an issue. At that point businesses will realize the importance of the network and look outside for managed services.

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