The market for managed IP virtual private network (VPN) services in western European grew 23% in 2004, but the “hyper-growth phase” will end in 2006, new figures suggest.
Analyst firm IDC said the market was worth £2.4bn in 2004 and will grow to £3.2bn in 2009, with over 80% of this growth taking place in 2005 and 2006.
Although total spending by customers on IP VPN services from network service providers is still increasing rapidly, in 2006 the growth will slow to 8% and in 2007 it will decrease further to just 3%, IDC added.
IDC said slower growth would be the result of price erosion, market saturation, spending shifts towards IP VPN applications rather than services, and the growing adoption of ethernet-based VPN connectivity in the Wan.
"Last year was another high-growth year for IP VPN services, with DSL-based services and the mid-market segment being the hot areas. But providers now need a proposition much broader than just 'IP VPN’," said IDC analyst James Eibisch.
"Applications and value-added services such as voice/video, storage, mobile integration, and professional services will provide long-term market growth."