Virtual Private Networks and security services are hot territory for service providers and will remain so going forward, according to an Infonetics Research report. Worldwide, VPN service revenue will hit $29.8 billion in 2009, and worldwide security service revenue will rise to $8.1 billion in 2009.

Where VPNs were once predominantly a CPE-based phenomenon, using IP-Sec based clients on PCs and servers, there is a strong move toward network-based products, which are making their own major shift to Multi Protocol Label Switched-based products, said Infonetics Senior Analyst Jeff Wilson. According to his research, 10 times as much money is spent on network-based services that is now spent on product-based offerings.

“You have a few different things going on,” he said. “One transition is from IP-Sec VPNs to MPLS VPNs at layer 2 or layer 3. Different service providers are doing this is different ways. You don’t see a coherent way that service providers brand MPLS – where it is branded it tends to be just IP or just VPNs.”

In some cases, primarily outside the U.S., the VPN offering may even be frame relay or private line based, Wilson said. Enterprise customers are turning to VPNs as their networks become complex and they are looking to have connectivity to more and more sites, for IP applications including VoIP.

At the same time, security is becoming a bigger issue, as the threats to data services continue to grow. Network-based security services now represent 22% of the security spending, he said. “The goal of many hacks these days is to generate revenue or steal valuable information; they have become more organized, better funded, better equipped, and more dangerous,” Wilson commented. “This drives organizations of all types to find ways to protect themselves against lost productivity, revenue, and assets due to hacking, and for many, that means turning to a service provider for help.”