US SMBs to spend $6.5bn on IP VPN in 2012

NEW YORK, USA: The need for high-quality, high-performance network connectivity will drive US-based small and medium-size businesses (SMBs) to spend heavily on IP VPN managed services over the next five years, with annual revenues rising from less than $2 billion last year to more than $6.5 billion in 2012, according to the latest report from Light Reading Insider.

Managed IP VPN Services: SMB Market Opportunities analyzes the market opportunity for U.S. network operators selling IP VPN managed services to SMBs. It lays out the expectations that SMB customers have for IP VPN managed services, including key technology features, service management, and cost factors.

The report also addresses the specific issues that managed services providers must address to build their SMB customer base, focusing on the key differences between the SMB sector and the large-enterprise market. Different technology approaches to delivering IP VPN managed services to SMBs and marketing strategies are analyzed. The report also profiles 10 emerging IP VPN managed services providers that specifically target the SMB sector.

"The SMB market is the next great networking frontier," says Charles Carr, research analyst for Light Reading Insider and co-author of the report. Presently, the total US managed IP services market is split between two networking solution types: "Within the IP VPN market, the SMB sector is clearly a sweet spot for service providers and is projected to grow at a compound annual rate of 28 percent, versus only 12 percent in the large-enterprise space through 2012."

SMBs that have relied on legacy Frame Relay services need more robust and flexible connections to remain competitive, Carr notes. "SMBs need the flexibility and scaleability of a more robust networking solution, such as the MPLS/IP virtual private network," he says. "For this reason, SMBs represent a clear and attractive market opportunity for providers of managed IP VPN services."

Key findings of Managed IP VPN Services: SMB Market Opportunities include:

* Service providers now consider managed MPLS/IP VPN network solutions critical to a winning strategy in the US SMB market.

* Indirect marketing/sales channels will dominate service providers' go-to-market strategies and currently account for the majority of managed IP VPN sales in the SMB market.

* The biggest challenges facing service providers are setting expectations through SMB education and developing a cost-effective long-term partnership with SMB customers.

* New network deployment in the SMB markets is now entirely IP-based VPN, which will dominate network revenue generation in SMB by 2009.