"The Right Stuff"

By Blaise Zerega, Red Herring, February 1999.

Key Concepts

§ Virtual Private Networks (VPNs) are leading the charge into the next e-commerce frontier.

§ VPNs are corporate extranets where a company's office, suppliers, and customers communicate via the public internet. VPNs transport transactions data and facilitate complex content updates that are key to e-commerce.

§ Network Alchemy has developed technologies that enabled VPNs to address the concerns of reliability, security, and scalability that have stalled VPN development.

§ Frost & Sullivan, a research consultancy, predicts that the U.S. VPN market was worth $3.5 billion in 1998 and will grow to $18.7 billion by 2004.

Benefits of VPNs. VPNs allow companies to ensure quality of service (QOS) for their partners and business customers, with guarantees that rival those of proprietary electronic data interchange (EDI) systems. "VPN's will speed up the just-in-time business by providing the necessary information that allows companies to make buying decisions quickly, " says Greg Howard, an analyst with Infonetics Research. VPNs are very economical because they allow companies to cut out a lot of costs by eliminating long-distance telephone charges by allowing customers to use local ISPs for access. The main benefit of VPNs is the ability for employees to access their network remotely, for simple things like filing expense reports or sales information. The largest VPN in existence today is the Automotive Network Exchange, which is used by the big three automakers and their suppliers for online procurement. The biggest benefit they expressed was the VPNs cut down cost of sales and lower the overhead of order processing and procurement.

Configuration of Network Alchemy's VPN. Network Alchemy's system configuration is different from any VPNs in the market today. It uses three VPN servers, bundled with client and network management software that can support small-office network traffic at 10mps, 10,000 concurrent sessions at 100mps, or 20,000 concurrent sessions at 200mps. The main element of the configuration that allows Network Alchemy's VPN to excel is their "cryptographic clustering", a technique that groups the VPN servers into a cluster, ensuring a high service quality because no single point of failure can crash the system. This is their strong selling point because companies' main worry about VPNs is their reliability. Network Alchemy likely customers will be service providers and other large corporations.

Management Implications. As the business world becomes more global and driven towards e-commerce, it is essential to have a strong network of communications. VPNs are going to affect the future of business-to-business e-commerce. If a large company has not already considered a VPN, they should definitely be looking into it.