Within days of WorldCom announcing the addition of real-time performance reporting and traffic management capabilities to its two-year-old VPN service last week, Sprint revealed plans to launch three services, including one designed to help users transition from frame relay circuits to IP VPNs.
Both companies are aware that users who have tightened up their IT budgets because of the sluggish economy are unlikely to disconnect their frame-relay or Asynchronous Transfer Mode networks and move completely over to IP-based services at this time, said Current Analysis analyst Max Smetannikov.
"WorldCom and Sprint are both developing in-between IP products for intermediate steps by customers. Both are adapting to a new economic environment with incremental spending and slow migration."
Corporate spending on voice services is down, and investments in data services are generally flat, said IDC analyst Steve Harris, although he added that IP-based VPNs are one of the few bright spots for network operators.
"Companies are clamouring for IP VPNs, and half of US companies have one in place." Harris noted that IP VPNs can help IT managers increase network security, simplify administration and reduce costs, compared with more traditional network alternatives.
Still, carriers such as WorldCom and Sprint make up a relatively small part of the IP VPN market. Harris said network-based services make up about a tenth of the market, with annual spending at nearly $700m. By comparison, $8.4bn is spent annually for IP VPN equipment installed at customer sites.
Sprint will introduce frame-relay, private line packet-data and virtual LAN services built around its SprintLink native IP network. All of the services will be made available immediately. Company officials said frame-relay packets will run securely over SprintLink, making it possible for customers to still use their existing equipment.
Pete Parish, director of product marketing at Sprint, said the new approach should enable customers to save up to 20% compared with frame-relay fees, including the cost of permanent virtual circuits and port fees.
Harris said the new ability for users to monitor WorldCom's network performance could help the struggling company increase its business, since many network managers "don't trust the carriers" to meet agreed-upon service levels.