'Benefits of convergence yet to be realised'

The Indian IP Virtual Private Network (IP-VPN) market is expected to grow at a compounded annual rate (CAGR) of 31.6 per cent over the next four years. It will rely heavily on BPO, global firms and Indian companies having a global geographic spread, according to a report by independent research firm Frost & Sullivan (F&S).

The report forecasts that the Indian VPN service and equipment market is expected to grow to $86.2 million in 2005. VPN can be defined as emulating a private wide area network facility using the internet.

The report has added that the market is likely to depend on the growth of the segments, as the adoption by small and medium enterprises is insignificant presently.

Compounding the hurdle is also the approach of the banking sector in India which is slow in taking up the technology in a big way despite the growth in online banking and e-commerce. This is largely due to security issues and other doubts.

According to F&S, though IP VPN was perceived as a mere tool to connect various locations in the past few years, it is now viewed as an application-centric network, with increasingly more verticals adopting IP VPN and consistent efforts of enterprises to integrate various application onto the network.

At the broader level, data presently dominates around 90 per cent with voice accounting for 10 per cent. "The pattern is likely to shift in favour of voice, once most verticals embrace IP VPN with voice traffic going up to 20 per cent, by end of 2009."

Talking about the challenges facing the growth of IP VPN in India, the report notes that though service providers are maintaining service quality like guaranteed response time, user expectation on up-time and transport performance are often higher than what is provided as part of the service-level agreement.

These factors, the report highlights, are likely to become a critical issue when customers consider adding applications without commensurate increase in the bandwidth capacity.

"The most common concern of a user is how secure is the connection and is there any threat to the data over the internet. Users continue to perceive that there is a low level of security and data integrity. However, this is expected to decrease when there is widespread adoption of the IP VPN service," the report adds.

Detailing how the market can accelerate in India, the report adds nearly 7 lakh km of optical fibres have been laid by operators in India and an attractive solution for providing services in villages is to offer multiple services at low cost.

"A rural network based on the extensive optical fibre network, using IP and offering a variety of services and availability of open platforms for service development, appears to be an attractive proposition. The existing fibre networks can be easily converted to next generation network and then can be used for delivering multiple services at cheaper rates," the report said.