Building a Better Virtual Private Net

Virtela's service promises to reduce the hassle, cost of creating and running VPNs

Virtual private networks (VPN) are difficult to do right, so users tend to look for an experienced vendor that will be around for the long term. That could make it hard for a start-up offering VPN services. But Virtela Communications Inc. faces few of the challenges that hamstring most start-ups. In addition to attracting some of the biggest names in information security as investors, Virtela brings a seasoned management team and offers a unique approach to providing VPN services.

Vab Goel, the company's chairman and CEO and a former executive at Denver-based Qwest Communications International Inc., says Virtela is building one of the world's largest IP networks, with more than 10,000 access points worldwide. Along the way, the Greenwood Village, Colo.-based company has focused on performance through optimized routing services and on keeping costs down by leasing existing wholesale network capacity.

The goal is to enable users to "experience the public network with the reliability, performance and security of the dedicated private network," says Goel.

Direct Access

The firm's centralized approach to VPN services gives customers direct access to network statistics, service order entry, integrated billing, trouble reporting and online support, user and role administration, client management and a single point of contact for support, according to Goel. Virtela also offers videoconferencing and voice over IP services as part of its VPN offering.

Early users have responded positively to the service. AnalytX Inc. needed a secure, cost-effective way to connect employees at six offices around the world. The software development company briefly considered doing the project in-house, but it instead chose Virtela's service because of the vendor's centralized approach to providing service and support, says Mark Dellasanta, regional director at AnalytX in Boston.

Dellasanta, who is planning to add the VirtelaVoice videoconferencing service on top of his VPN, says he's pleased with Virtela so far.

"They have been nothing but professional, organized and efficient throughout our entire process," he says.

Wireless service provider Winphoria Networks Inc. needed a cost-effective way to give remote research and development staff in India and Spain access to sensitive corporate resources, such as e-mail and intranet applications, at its headquarters in Tewksbury, Mass.

Traditional wide-area network circuits, such as frame relay, would have been too costly, says David Heafey, IT director at Winphoria. "Virtela was able to stage and ship VPN appliances to these locations very quickly," he says. "They spend the necessary time upfront to design a VPN infrastructure that fits the requirements of the customer."

Heafey says he has experienced no unplanned downtime since starting the service and that "performance is always within a couple of percentage points of my contracted bandwidth."

Virtela's ability to tackle global VPN projects while maintaining a customer-centric approach makes the company unique among start-ups, according to Zeus Kerravala, an analyst at The Yankee Group in Boston. "They approach each engagement almost as a consultant would, where they do a network audit and review of business processes," he says.

Although Virtela has done a good job of using bandwidth from other providers, "IT managers are now starting to look at the financial strength of the service providers, and using [a start-up] might seem more risky than it did before," Kerravala says. Although Virtela is financially strong, "clearly, their No. 1 focus right now should be to get some marquee client wins," he says.

That point isn't lost on Goel. "We know that more money doesn't guarantee success," he says. "You build a business that scales with the customers."

The Buzz: State of the Market

IP VPNs on The Upswing

IP-based VPNs are on a roll. About 75% of large U.S. organizations have either already deployed an IP-based VPN or plan to deploy one within the next two years, according to Cahners In-Stat Group in Newton, Mass.

IP-based VPN services are replacing Asynchronous Transfer Mode/frame- relay data VPN services because they cost less and provide faster provisioning of service, improved security and greater ubiquity of service, says Cahners analyst Henry Goldberg.

Virtela faces competition from VPN hardware and software providers, such as Cisco Systems Inc., and service providers, such as Reston, Va.-based XO Communications Inc.

What sets Virtela apart is its consulting approach to VPN sales, and the reliability and performance that a provider with multiple backbone networks can offer, says Zeus Kerravala, an analyst at The Yankee Group.

"They sell backbone connectivity using a multitude of carriers," Kerravala says. "However, if you go with a single carrier, you may not always get optimum routing. That does provide Virtela an advantage."

Virtela's direct competitors include the following companies:

Savvis Communications Corp.

Herndon, Va.

Rather than relying on the public Internet to provide VPN connectivity, Savvis uses private leased lines and says they offer a higher level of security. All routing and firewall operations are on the Savvis network, eliminating the need for the customer to provide a supplemental security infrastructure.

Internap Network Services Corp.


Like Virtela, Internap offers its VPN service on top of existing carrier networks. Internap has access-point facilities in eight cities and, like Virtela, offers intelligent routing-optimization technology.


Virtela Communications Inc.

5680 Greenwood Plaza Blvd.

Suite 200

Greenwood Village, Colo. 80111

(720) 475-4000

Vab Goel, chairman and CEO at Virtela Communications Inc.
Virtela's goal is to let users experience the public network with the relia-bility of the dedicated private network, says Vab Goel, chairman and CEO of Virtela Communications Inc.

Niche: Low-cost, global IP-based VPN services

Company officers:

• Vab Goel, chairman and CEO

• Ted Studwell, vice president of engineering and strategy

• Mark Hansard, vice president of systems and security

• Jian Li, vice president of technology and operations


• April 2000: Company founded.

• October 2000: First customers signed on.

• April 2001: Received $35 million in funding.

• October 2001: Service officially launched.

Employees: 75

Burn money: $75 million from Norwest Venture Partners, New Enterprise Associates, Palomar Ventures and others

Pricing: VPN service starts at $300 per month, per site; $25 per dial up connection and $100 per broadband connection. VirtelaVideo videoconferencing service and VirtelaVoice voice over IP service are included with Virtela VPN.

Customers: Winphoria Networks, AnalytX, AT&T Wireless Services Inc. and others

Red flags for IT:

• Virtela still lacks large, corporate accounts for references.

• The start-up faces increasing competition from other service providers.

Copyright © 2002 IDG Communications, Inc.

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