/>
X

VoIP is Key to Capturing Government and Education Managed IP VPN Business

As shown in Exhibit 1, the Yankee Group’s 2004 Enterprise Communications Spending (ECS) Survey found 93 percent of government and 88 percent of education respondents currently use IP VPNs. However, 82 percent of the respondents within these two markets do not buy their IP VPNs from service providers, they have installed and manage it themselves.
zd-defaultauthor-david-parks.jpg
Written by David Parks on

As shown in Exhibit 1, the Yankee Group’s 2004 Enterprise Communications Spending (ECS) Survey found 93 percent of government and 88 percent of education respondents currently use IP VPNs. However, 82 percent of the respondents within these two markets do not buy their IP VPNs from service providers, they have installed and manage it themselves.

These findings present a market opportunity for providers of IP VPN services. However, providers face the challenge of motivating the education and government verticals to move away from a do-it-yourself model. VoIP is the answer to this challenge.

When asked an open-ended question about their top budgeted network or telecommunications projects for 2004, 19 percent of the government respondents and 33 percent of the education respondents responded VoIP. Combined, 24 of respondents in the education and government market will make VoIP the most popular budgeted project in 2004.

Further, 26 percent of the government and 15 percent of the education respondents said IP VPN expansion and enhancements were also a top budgeted project making it the second most popular category in 2004 for these two combined sectors. Exhibit 2 demonstrates these results as well as some of the other more popular projects budgeted for 2004.

Herein lies the opportunity for provider-managed IP VPN solutions. When a company deploys VoIP over an Internet-based do-it-yourself IP VPN (such as the one 82 percent of these education and government organizations currently have), it is likely to experience performance and quality of service issues. Like any other real-time application, VoIP requires only moderate bandwidth but is sensitive to jitter, which is not covered by an Internet SLA.

When deployed over a traditional WAN infrastructure, VoIP infuses a new set of complexities and requirements on a network. For example, traditional WAN services such as frame relay are not economical solutions for peer-to-peer applications such as VoIP, which require any-to-any connectivity. In addition, the performance of other mission-critical business applications running on those networks can be compromised by contention from VoIP because they lack traffic prioritization and class of service capabilities.

Conclusion
Knowing that VoIP is at the top of many government and education IT organization’s 2004 lists, service providers have an opportunity to position managed IP VPN solutions as a more effective alternative to the do-it-yourself model that is so popular with these two markets.

The upside revenue potential within these markets for provider managed IP VPNs is significant. On average, the government and education respondents in the ECS survey said that 14 percent of their telecom, data, and IP services budget is allocated to Internet access, another 11 percent is for frame relay and/or ATM services, and finally 5 percent is for their IP VPN. When combined, these three services equate to 30 percent of an average government or educational organization’s telecom, data, and IP services budget.

A provider-managed IP VPN service could capture a large portion of this spending by serving as a single solution to address these three networking requirements. Service providers looking to sell IP VPNs to the government and education sectors should leverage VoIP as the tip of the spear in penetrating these markets.

Carrier Recommendations

  • Leverage VoIP offerings and experience to get the attention of government and education prospects. Demonstrate value by helping them address network design considerations such as call processing distribution, remote survivability, PSTN connections, access links, and traffic patterns associated with a VoIP deployment. This will in turn facilitate discussions about your managed services capabilities allowing you to approach them with an IP VPN solution that includes VoIP and other applications.
  • Security is a top hurdle in selling a managed vs. do-it-yourself IP VPN solution to the government. Emphasize your private IP network infrastructure to allay security concerns associated with public IP networks. In addition, provide hybrid offerings that include support for CPE-based and network-based capabilities in a single IP VPN solution. This provides an end-to-end encryption option for sites with heightened security demand and a network-based security option for sites with average security requirements all over a single solution.
  • Cost and return on investment is a top hurdle in selling to the education sector. Market the simplified routing and network integration capabilities of a managed IP VPN service to overcome these issues. Provide case studies pertinent to education customers that depict the operational savings of a provider-managed vs. in-house IP VPN.
The Yankee Group originally published this article on 16 April 2004.


Related

Apple politely explains why iPhone cases are a waste of money
Apple iPhone 13 Pro Max

Apple politely explains why iPhone cases are a waste of money

Apple
The 8 best iPhone models of 2022
iphone-12-models.png

The 8 best iPhone models of 2022

iPhone
Delta Air Lines just made a callous admission that customers may find galling
screen-shot-2022-07-18-at-5-18-46-pm.png

Delta Air Lines just made a callous admission that customers may find galling

Business