FedEx and fax machines always have been reliable ways to transmit important information between the headquarters of Anchor Pharmacies Inc. (www.anchorrx.com) and the 15 or so retail pharmacies it manages in Maryland, Ohio and Virginia. But these methods weren't really efficient.
So during its first 18 months in existence, the Hampstead, Md.-based company developed proprietary software that allowed the headquarters to dial into each of the stores to download sales reports and other information. While that made exchanging information more efficient, Anchor was saddled with long-distance charges and occasional difficulties dialing in. And there were the technology management headaches for Anchor's three-man IT department and the pharmacists who were trying to deal with the computers and software at the remote locations.
In the course of pitching its long-distance service plans, Broadwing Inc. (www.broadwing.com) told Anchor of an IP-based VPN service called eClass that it was developing. It seemed to be just what the doctor ordered.
"We see VPN as being the answer to a number of communications issues," says P. Alan Armentrout, director of IT for Anchor. "We had to exchange so much information that faxing became passé. We needed a way to communicate and streamline operations."
Between March and mid-July, Anchor participated in beta trials of Broadwing's IP VPN, a CPE-based solution for which Broadwing installs and configures all the equipment at the pharmacies and is responsible for maintenance.
"We've taken away the barriers to entry by outsourcing management of technology," says Armentrout. "We get out of the day-to-day management of CPE."
Broadwing's IP VPN offering allows Anchor to communicate with its stores electronically. The Anchor intranet that runs over eClass ports carries policy and procedure information, sales reports and employee newsletters. Anchor also transmits file transfer protocol (FTP) files chock full of transactional data back and forth between headquarters and the pharmacies. The intranet also handles intracompany and external e-mail.
While the initial savings may pay only for the investment in the technology Anchor had to buy to actually deploy the VPN services, Armentrout sees the addition of enhanced services facilitated by the VPN as offering the biggest potential cost reductions.
"There are a couple of other applications we're looking at putting on once we get out of beta stages," says Armentrout. "If we put other offerings on, the savings will be exponential."
For example, Anchor eventually plans to take software that must be site-licensed for each of the individual pharmacies and put it onto the intranet. "It's kind of like an internal ASP," says Armentrout, noting that the company will save $6,000 to $10,000 per site just on software licensing.
"VPNs have created a new business model," says Maaz Sheikh, enterprise VPN product manager at Concentric Network Corp. (www.concentric.com). "It used to be that companies had to connect through private lines, but that was way too expensive for small businesses."
But now VPNs are allowing small companies to have ubiquitous connectivity to branch offices and business partners, just like their Fortune 500 brethren. For instance, all of Anchor's pharmacies have 56kbps dial-up connections to headquarters. Some locations will eventually transition to frame relay, but the majority of the stores are too far from the CO to justify installing that type of connection, says Armentrout.
Small businesses like Anchor aren't the only ones to realize that VPNs are a way to facilitate communications internally as well as with business partners, suppliers and customers--and save a little money to boot.
Perhaps one of the highest profile examples of the power of VPNs is the February announcement from General Motors Corp. (www.gm.com), Ford Motor Co. (www.ford.com) and DaimlerChrysler (www.daimlerchrysler.com) of plans to create a business-to-business supplier exchange through a single global web portal. The virtual marketplace will be open to all auto manufacturers around the world and be accessible through whatever access technologies end users employ.
The exchange will allow auto companies a secure place to do catalog purchasing, bidding and price quotes, online sourcing and auctions. Supply chain management functions, such as capacity planning, demand forecasting, production planning, financial services, payment and logistics also will be available, say the three companies.
The New Corporate Network
Even though VPNs have been around for years, today's IP-based VPNs will be the networking method of choice for businesses in the future.
"VPNs will be the foundation of corporate networks in three to five years," says Jeff Wilson, director of access for Infonetics Research Inc. (www.infonetics.com), a San Jose, Calif.-based market research and consulting firm. "People won't say 'VPN' anymore. VPNs will be the network."
Infonetics recently published a study entitled "User Plans for VPN Products and Services in the U.S. 2000." More than 73 percent of the companies included in the survey said they plan to implement IP VPNs for remote access this year. The study also reports that 64 percent of the companies surveyed are planning site-to-site VPNs, while 27 percent are developing extranets in which they could have secure communications with their partners, suppliers and customers.
Most of the near-term uses of VPNs are for communications, but these VPNs also will facilitate the development of services yet to be imagined.
"IP-based VPNs are the foundation that all other applications are built on," says Hank Allard, principal of Edge Media (www.emedgemedia.com), a marketing and technology consulting firm.
Because they rely on virtually ubiquitous public networks, IP VPNs are easier and quicker to deploy than frame relay or ATM-based VPNs, which require direct connections to private networks to transport the traffic. And IP VPNs provide security features, giving corporate IT managers the necessary level of comfort when it comes to remote access for road warriors or protected exchanges of information between offices in the United States or internationally.
Various analysts estimate that the collective market for VPN services could total $9 billion in 2001, doubling to $18 billion by 2004.
Service providers are keeping their eyes on that financial prize. In recent months, several new IP VPN offerings--including network-based services and managed CPE solutions--have been introduced.
Broadwing's eClass, which became generally available June 1, can be used as a platform to deliver voice, video and data seamlessly.
With the network-native IP VPN service, it doesn't matter what CPE the customer is using, says Tony Tomae, vice president of data and Internet services at Broadwing. The network-based solution provides businesses with a web tool to manage their network, view performance, check and create open tickets.
Most important when offering a variety of services over VPN is prioritization. That means traffic such as voice and video that could be compromised by latency issues can be transmitted without the quality suffering.
That's exactly how one Broadwing customer is using eClass.
When VoIP provider QuantumCast.Net Inc. (www.qcip.net) was founded, CEO John Dill II knew that his business would not be successful unless he found a way to ensure that voice traffic over IP would meet the accepted PSTN standards.
What impressed Dill most about Broadwing's service was the voice prioritization, the application of packet typing and a guarantee of no more than 75 milliseconds of latency.
"We went to all the big carriers asking them to provide that," says Dill. "Finally, Broadwing said they could do it."
By press time, QuantumCast.Net had completed its initial tests of the eClass QoS, and according to Dill, it was a complete success. "We put voice calls on all circuits and it showed no degradation," he says. "Then we pressured that with IP traffic and found no degradation of voice traffic."
The beta tests included inbound traffic from Chicago and western Michigan, where QuantumCast.net is headquartered, as well as outbound traffic to any location. About 75 customers were expected to be testing the system through July.
Once any kinks are worked out, QuantumCast.Net will offer least-cost routed long-distance services to customers. The company is in the process of establishing network cross-connect switches to pass voice traffic between IP networks and the PSTN, says Dill. Eventually the company will build out a total of 360 gateways across the United States, giving about 90 percent of the population the ability to reach its gateways through a local phone call.
Broadwing isn't the only IP network provider that is taking a dip in the VPN pool.
Later this summer, Qwest Communications International Inc. (www.qwest.com) will launch its Qwest VPN service, which will feature QoS, SLAs and network-based firewalls.
"Qwest is extremely aggressive when it comes to SLAs," says Scott Cassell, Qwest's director of VPN marketing. For its backbone and VPN services, Qwest guarantees no more than a 65 millisecond delay, 100 percent throughput and zero packet loss, he notes.
Incumbent telco BellSouth Corp. (www.bellsouth.com), too, recently announced its managed VPN service. The telco first began offering IP VPNs about two years ago with its network-based dial-up product. The most recent expansion is a managed CPE-based offering that provides secure remote access and managed branch-to-branch connections.
"Attitudes about putting data over the Internet have changed," says Bob Preston, director of IP network product development at BellSouth.
It took corporations some time to get used to the idea that their sensitive data is being transmitted over IP networks, and in many cases the Internet. But once security was assured and cost savings calculated, businesses decided to give VPNs a whirl.
"Many companies feel like they'd be relinquishing control of their WAN infrastructure," says Cassell.
But that doesn't necessarily have to be the case.
Like Broadwing, Qwest and other VPN providers have web-based interfaces that allow users to control their networks, manage QoS, monitor trouble tickets and view bills. Qwest's web-based interface, called Qwest Control, is actually used across all of its various product lines.
"We empower companies by giving them management tools to remotely configure their VPNs," says Cassell. "We give them the ability to make changes--such as class of service (CoS)--dynamically. So, if a company is having a videoconference from the CEO and they don't want to put the quality of that video at risk, they'll be able to prioritize traffic dynamically."
Prioritization of traffic, security and monitoring of QoS are some of the features that will allow VPNs to be the foundation for more enhanced services.
The most dramatic impact VPNs will have is on the enablement of hosted applications, such as what Anchor plans to do, or those offered by specialized ASPs. "VPNs become the infrastructure over the Internet that allows ASPs to flourish," says Mark Showalter, vice president of marketing and product management at CoSine Communications (www.cosinecom.com), which supplies products designed for the VPN market. "VPNs are setting the stage for content and applications to be hosted on the web, and the quick delivery of them."
Another industry segment that will be a benefactor of VPNs is business-to-business e-commerce. While many ASPs are currently using VPNs to deliver their applications, the widespread use of VPNs in extranets for business-to-business (B2B) e-commerce still has a ways to go.
"The B2B market is big and interesting, but it's very complicated and expensive to set up private networks with partners and suppliers. If a small company wanted to do this it would be prohibitively expensive," says Infonetics' Wilson. "VPNs have changed that. But the time line is a little longer. Companies need to make sure their products are interoperable and have to agree on a security method."
