Service Providers Poised to Disrupt the VPN Market

Clouds are rolling into our lives and our economy more and more each day giving us full control. My kids were streaming a movie to their iPad in the backseat of our minivan, as we drove from Atlanta to Disney World last week. Many of the resources I use daily in the office are actually in the cloud rather than a Cisco data center now. According to Cisco's GCI (Global Cloud Index), by 2019, 55% (more than 2 billion users) of the consumer Internet population will use personal cloud storage up from 42% (1.1 billion users) in 2014. To facilitate this trend, standard bodies like ETSI have been hard at work defining the architecture for network function virtualization (NFV) that will enable service providers to seamlessly deliver communications and other IT services from their own clouds.

Combining NFV with software-defined networking (SDN) should make service providers more agile. They can react to market and customer needs more quickly. That may mean rapidly releasing an updated service with new options, or it may mean designing, testing, and introducing a new service. The services based onthese new technologies can open avenues to new customer segments and new markets, too. Being more agile will lead to being more efficient and lowering costs. This is good for the service providers, but will this new way of delivering services have an impact on the markets themselves?

To find out, we undertook a study and surveyed businesses from small (<100 employees) to large (>5000 employees). Our objective was to quantify how using NFV and SDN might change the opportunities in the ICT market for service providers. The scope was global but we identified the results in six regions, as well. Overall we identified how the benefits then end business customers would see would influence their behaviors. Then we quantified the impact their behavior changes would have on the existing forecast for service providers' virtual managed services (VMS). Finally, we drilled down specifically into Cloud VPN service and its impact -and thus that of NFV and SDN - on the overall VPN market.

We have put the global results into a whitepaper. In addition, we have produced a whitepaper for each region to share its nuances, opportunities, and implications that we uncovered.

Better customer experience and personalization are driving innovation in consumer markets. We learned from the study that businesses are willing to change service providers to get those benefits, and they will also expand their use services that offer them. Service providers who can deliver those benefits can grow their market share. NFV and SDN open the way to self-service portals that put the customer in control. Once orders are placed, business customers can start using their services faster because provisioning can be automated. Just as important, services can scale up or down to match customer demand, saving both the provider and the customer money.

The impact on the VPN market specifically will create a$7.6 billion opportunity for service providers. Some customers will switch from MPLS VPN to simpler, more flexible Cloud VPN services. Others will increase their use of Cloud VPN because it is easier to consume and that will attract new customers, as well.

Download the global cloud VPN white paper to get more details. Also, review our latest MOI-Monetization and Optimization Forecast and a recent MOI webinar to get more information. In subsequent blogs, we will follow this global Cloud VPN view with the regional analysis and forecast as well as the larger ICT opportunity for SPs beyond VPN services. If you would like to get access to the detailed regional data and white papers, please contact your Cisco account manager.