Calculating Return On Investment
For Remote Access VPNs - continued

Scenario 2:
Mid-size Enterprise with 800# / international remote access
This customer has 400 employees: 200 that require access from home (mix of local and toll calls, 20 hours/month/employee), and 200 that require access from the road (800# and international calls averaging 30 cents/minute, 5 hours/month/employee). There are currently three branch offices connected by Frame Relay to corporate headquarters, and each office now operates its own modem pool. Assume the customer wants to install ISP-managed CPE and DSL Internet access at all four offices, in preparation for building a site-to-site VPN. The monthly price tag for in-house remote access was $37K. A remote access VPN service at $50/month/employee will run $21K, a savings of 43%. Initial investment of $50K can be recovered in three months, and will have laid the groundwork for a site-to-site VPN.

	In-House RAS	Outsourced VPN
Total Users	400	400
Local Usage (Hrs/Month)	2,000	2,000
Long-Distance Usage (Hrs/Month)	2,000	2,000
800# / International Usage (Hrs/Month)	1,000	1,000
Monthly Telco Charges	$30,000	$0
User Internet Access ($20/month)	$0	$8,000
Backbone Internet Access (T1)	$0	$1,000
Monthly Connectivity Fees	$0	$9,000
RAS Equipment Maintenance 1	$800	$0
In-House User Support Staff  2	$5,000	$0
RAS Equipment Depreciation  3	$1,111	$0
VPN Remote Access (+$40/user)	$0	$12,000
Monthly Infrastructure Cost	$6,911	$12,000
Total Monthly Cost	$36,911	$21,000
Savings per Month	—	$15,911 (43%)
Months to Recover Investment  4	—	3+

1. Current RAS equipment maintenance 16 hours/month @ $50/hour
2. Current user support 15 minutes/user/month @ $50/hour
3. 4 * 50-port RAS Servers were purchased for $40K, fully depreciated over 36 months
4. VPN Startup Fees = 4 * $10K CPE, plus $10K for client installation (total: $50K)

Summing up
Clearly, there are many variables involved in any such calculation, not the least of which is the monthly charge for VPN remote access service. But even if you quibble with individual parameter values, these example calculations are useful to illustrate a few general conclusions.

• Monthly telco charges dominate remote access costs and account for nearly all of the margin that lies between baseline Internet access fees and the premium that can be charged for VPN services.

• Up-front customer investment can be recovered quickly in many cases, leaving room to purchase CPE under installation fees. Recurring charges must include maintenance and depreciation for "managed CPE" owned and operated by the ISP. Alternatively, customers can own or manage their CPE, but this may dilute the perceived benefits of VPN outsourcing.

• Remote access user support costs can be significant. Support isn't reduced by introducing a VPN, but it can be outsourced. These examples include outsourced support in the monthly user fee, but a separate support contract might be negotiated instead -- or the customer might retain in-house "help desk" staff, relying on the ISP for second-tier support.

• Deploying VPN services may or may not require change to the customer's backbone network: for example, to increase capacity of site-to-site connections or to add Internet access at branch offices. Such changes represent additional sales opportunities and should not be overlooked.

On-line VPN "cost calculators" can be found at many equipment supplier and service provider web sites. I recommend experimenting with several. Here are two links to get you started:

Concentric VPN Seminar Cost Savings
Shiva Remote Access Analysis Tool

Whether you use an on-line calculator or your own home-grown spreadsheet, the ability to project customer savings and return-on-investment is must-have marketing tool for any ISP in the VPN market.

—End

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