Global VPN market soars in downturn

With revenues hitting US$668 million in the third quarter of 2002, the worldwide VPN and firewall market is soaring and is forecasted to increase to US$874 million this time next year, according to Infonetics Research Inc.

Jeff Wilson, executive director of Infonetics, based in San Jose, said this is significant because even in the historically slow third quarter, the market grew.

“And really, for the last six or eight quarters, for the most part, the market has continued to grow while everything else around it fell apart,” he said. “The need for security technology isn’t really dependent on the economy or business growth; people attack your network in bad times just like they do in good times.”

Hot security devices include any network products with integrated security, said Wilson, and routers with integrated security make up 24 per cent of hardware revenue.

“The part of the market that is starting to shrink up, at least on the VPN and firewall side, (include) the software-only products, which were really the primary part of the firewall market years ago,” he said.

And at the top of the vendor heap is Cisco Systems Inc., with about 39 per cent market share. “They have a very broad range of products,” Wilson said. “They have VPN-only products, firewall-only products, combo products, routers with VPN and firewall. Any scenario you can imagine deploying, they have a product for it.”

However, according to Wilson, VPN and firewall software heavyweight Check Point Software Technologies Inc. comes in second, with about 13 per cent market share, but its presence is actually stronger due to their partnerships with companies such as Nokia. NetScreen Technologies Inc. comes in third.

According to Wilson, the market is growing the most in North America. He said it results from heightened awareness about security issues stemming from an increased frequency of attacks on networks over the past couple of years. This is compounded by increased global paranoia about terrorism and a pending deadline for compliance with the Health Insurance Portability and Accountability Act (HIPAA) in the U.S. HIPAA addresses the security and privacy of healthcare data.

Another factor for the growth in North America is increased deployment of broadband networks by small and medium-sized businesses (SMEs), Wilson said, while growth in Europe and Asia can also be accredited to more widespread broadband deployment. “The boom of connectivity happened in the U.S. already,” he said. “But it’s really starting to happen a lot more in Europe and Asia because broadband is becoming more available now.”

In addition, the wireless LAN (WLAN) hardware market is also growing the most in North America. According the Infonetics Research Inc., in Bromley, UK, worldwide WLAN hardware revenue totalled US$436 million in the third quarter of 2002, with 58 per cent of it coming from the North American market.

Richard Webb, market analyst, European networks and wireless LANs, said that while the market is more advanced in Canada and the U.S. than in other regions, the European and Asian markets will catch up during 2003 and could surpass North America.

However, Webb said the promise in the market doesn’t come from public access hotspots, such as coffee shops, hotels and airports, but from adoption within the enterprise. In fact, 39 per cent of revenue from WLANs came from the enterprise, while 53 per cent came from consumers. Eight per cent was derived from service providers.

Starbucks Corp., based in Seattle, has already rolled out 802.11 hotspots, connected to T-Mobile USA’s backbone network. T-Mobile is one of the only large service providers to offer WLAN services.

“There is a broadening customer base of business users getting comfortable with the convenience, low(ish) cost and ease-of-use of WLAN technology,” Webb said. “Now they want it when they travel, and this drives the demand for public hotspots.”

Webb added, however, that “the business model for public access WLAN hotspots has not really been convincingly proven yet. There are a few uncertainties to negotiate, including premises controllers such as airports, hotel chains and coffee shops.”

Webb said that these premises controllers might become aware of the value they are delivering to the WLAN operator, and might try to push for a share of that value, “denting an already thin margin for the WLAN operator.”

Would you recommend this article?


Thanks for taking the time to let us know what you think of this article!
We'd love to hear your opinion about this or any other story you read in our publication.

Jim Love, Chief Content Officer, IT World Canada

Featured Download

Featured Articles

Empowering the hybrid workforce: how technology can build a better employee experience

Across the country, employees from organizations of all sizes expect flexibility...

What’s behind the best customer experience: How to make it real for your business

The best customer experience – the kind that builds businesses and...

Overcoming the obstacles to optimized operations

Network-driven optimization is a top priority for many Canadian business leaders...

Thriving amid Canada’s tech talent shortage

With today’s tight labour market, rising customer demands, fast-evolving cyber threats...

Staying protected and compliant in an evolving IT landscape

Canadian businesses have changed remarkably and quickly over the last few...

Related Tech News

Tech Jobs

Our experienced team of journalists and bloggers bring you engaging in-depth interviews, videos and content targeted to IT professionals and line-of-business executives.

Tech Companies Hiring Right Now