IP VPNs drive change in the Indian networking market

The old order changeth, ringing in the new. And, the more efficient. The networking market is no different. Networks, so fundamental to business operations today, can be vital in dealing with today's fast changing market. Companies are looking to scale up rapidly, get more and more offices, partners and distribution centres connected so that investments in ERP, SCM and other enterprise applications can be fully leveraged.

Often, existing networks have hindered growth. After years of dealing with the inflexibility and rising costs of legacy networks such as those based on leased lines and satellite technology, corporates are increasingly turning to IP based virtual private networks (IP VPNs). A 2001 survey by Gartner Group reveals that:

• 90% of US companies with more than 500 employees and 2 sites use IP VPNs to connect their employees.
• Over 75% use IP VPNs to provide access to their traveling employees.
• About 50% use IP VPNs to provide network access to their customers and partners.

Closer home too, IP VPNs are making rapid forays pointing to a major technology shift. A 2001 research report by Frost & Sullivan estimates the Indian VPN market currently at USD 30 million to cross the USD 100 million mark by 2004 and grow to USD 180 million by 2008.

So what drives this shift? To begin with, IP VPNs are as secure, more scalable, flexible and faster to deploy compared to legacy private line or satellite-based networks. And, their total cost of ownership (TCO) can be as much as 50% lower than private networks.

The case of CUMI

Amongst the earliest adopters of VPN technology in the Indian market is Carborundum Universal (CUMI) - a leading manufacturer of abrasives, grinding wheels and refractories. Headquartered in Chennai, CUMI has manufacturing, R&D and sales operations across India.

CUMI's products are essentially consumables in manufacturing and metalworking industries with turnaround times for order fulfillment being typically a matter of days, often hours. Explains Mr. S.M. Michael, Sr. Manager I.T, "While each branch office had its own software for stock keeping, accounting information and other critical MIS data, this information would typically take a few days to reach CUMI's management team at Chennai. And that wasn't good enough…"CUMI decided that an ERP system would address this nagging issue of lack of real-time information. The ERP system would however need to be complimented with a WAN (wide area network) connectivity across all branch offices, plants and warehouses to be truly effective. "We needed the ERP to be backed up with a high-reliability network connectivity across all locations" explains Michael. The WAN technology options before CUMI were several. Recalls Michael, "A leased line based network was considered along with VSAT and VPN solutions".

Building a leased line network was the conventional option, though fraught with complexity as CUMI learnt. "Managing leased line subscriptions was going to be too much of a hassle." recounts Michael. "Moreover, leased line based networks would be inflexible, scaling up or down would be a problem and implementation time would be high. Plus costs could go out of hand. After some intial thought, we simply decided that building and managing our own network wasn't the way to go" elaborates Michael. Once CUMI decided to outsource their network, the choice boiled down to between either a VSAT network or a VPN. While total cost of ownership was a prime issue, a critical determinant for the WAN installation was reach. "Sify's VPN solution was overall a more attractive choice since their network had a superior reach. The other vendors couldn't provide us connectivity to our Ludhiana branch" says Michael, explaining CUMI's decision to go with a VPN. With the VPN/ ERP combine in place, CUMI saw immediate results. Elaborates Michael, "Our sales efficiency has increased by leaps and overall efficiency has surged ahead. The new system has helped us consolidate our branch wide information. We now have ready access to inventory status at any given warehouse".

CUMI estimates that availability of real-time information across the company has brought down cost of sale by a whopping 60% and manpower costs by about 33%. Fantastic returns those. CUMI's is a case that typically illustrates how VPNs are impacting businesses and helping leverage enterprise applications such as ERP for real world benefits.