Calculating Return On Investment
For Remote Access VPNs

Sure, everyone 'knows' that VPNs save money on remote connectivity, but what's the potential margin for ISPs offering outsourced VPN services? Here are some hard numbers.

Lisa Phifer
VP Core Competence, Inc.
[November 2, 1999]

The most compelling business driver fostering deployment of virtual private networks is their ability to cut the cost of remote access. In this month's column, we take a closer look at remote access VPN costs and offer a detailed analysis to back up this popular claim.

Tried, true, and costly
Traditionally, enterprises operate private dial modem pools that connect travelers and teleworkers to the corporate network over standard telco dial-up. After initial investment in RAS infrastructure, recurring costs begin to mount as road warriors quickly rack up long distance toll charges and hotel telephone access fees. To control and monitor these fees, companies with large, distributed workforces may utilize 800# access. While accounting becomes simpler for the road warrior, 800# remote access is far from "toll free"--charges are simply paid by corporate, now with an 800 service premium. Add RAS maintenance, equipment depreciation, and help desk support. As user population and connect time increases, the recurring cost of traditional remote access becomes staggering.

Replacing private dial modem pools with "all you can eat" Internet access seems like an obvious winner--but what about security? Many enterprises are concerned about the risk of disclosing proprietary data when sending it over the public Internet. And every enterprise worries about preventing unauthorized access by outsiders: Firewalls are designed to repel traffic originating from the public Internet, but somehow we need to selectively let our own remote users through. Virtual private network products provide the answer by allowing authenticated, encrypted secure remote access across the public Internet. ISPs can capitalize on this technology innovation by marketing outsourced remote access VPN services.

Real numbers
Enterprise customers may be attracted by the promise of VPNs, but to close the deal, ISPs need cold, hard facts: How long will it take your customer to recoup up-front costs, and what is their projected return-on-investment? Actual numbers vary, depending upon the customer's current situation. Significant cost factors include:

• Current and projected remote user population
• Number of simultaneous users on-line
• Llocal, domestic long distance, international long distance, and 800# hours/month/user
• Existing investment in RAS equipment and network infrastructure
• Corporate network topology and bandwidth consumption

Let's demonstrate remote access VPN cost savings with a pair of customer scenarios.

Scenario 1:
Small business with domestic roaming sales force
This customer has 100 employees: 30 require off-hours access from home (local calls @ 10 hours/month/employee), and 70 require access from the road (toll calls @ 10 cents/minute, 30 hours/month/employee). Half of this workforce is on-line at any time, and all existing remote access terminates at a single corporate site with a T1 that has spare capacity. Ignore the up-front cost of RAS equipment: the customer has already made this investment. But quantify recurring maintenance, depreciation, and support costs as shown below. The monthly price tag for traditional in-house remote access? $15K. Now substitute an outsourced remote access VPN at $60/month/employee, including Internet access, user support, and CPE management. Monthly fee for this VPN service: $9K, a savings of 54%. An installation fee of 10K would be recovered by the second month.

 

	In-House RAS	Outsourced VPN
Total Users	100	100
Local Usage (Hrs/Month)	300	300
Long-Distance Usage (Hrs/Month)	2,100	2,100
800# / International Usage (Hrs/Month)	0	0
Monthly Telco Charges	$12,600	$0
User Internet Access ($20/month)	$0	$2,000
Backbone Internet Access (T1)	$1,000	$1,000
Monthly Connectivity Fees	$1,000	$3,000
RAS Equipment Maintenance 1	$200	$0
In-House User Support Staff  2	$1,250	$0
RAS Equipment Depreciation  3	$278	$0
VPN Remote Access (+$40/user)	$0	$4,000
Monthly Infrastructure Cost	$1,728	$4,000
Total Monthly Cost	$15,328	$7,000
Savings per Month	—	$8,328  (54%)
Months to Recover Investment  4	—	< 2

1. Current RAS equipment maintenance 4 hours/month @ $50/hour, to be outsourced to ISP
2. Current user support 15 minutes/user/month @ $50/hour, to be outsourced to ISP
3. 50-port RAS Server was purchased for $10K, fully depreciated over 36 months
4. VPN Startup Fees = $10K (includes central site CPE installation and client setup)

Go to Scenario 2: Mid-size Enterprise with 800# / international remote access