Financial Services Institutions

SingTel IP VPN - FSI

Copyright 2008 SingTel. All rights reserved. Singapore Telecommunications Ltd 199201624D

SingTel IP VPN-FSI

Organisations in the financial services industry are most likely to derive significant business benefits from IP VPN deployments. Not only are financial services organisations information-intensive, their operations are also increasingly widely distributed with branches, agencies and remote offices. IP VPN with its inherent benefits can enable financial services institutions (FSI) to reduce their operational expenses while increasing network performance and the quality of service offered to both internal and external customers. This is achieved by the availability of secure and reliable data networking in the face of a changing industry landscape.

A safe and secure upgrade path is also assured. In addition, as the use of VoIP and video becomes more pervasive, the ability of MPLS IP VPN to prioritise these latencysensitive applications will deliver further benefits. Not only are collaborative tools (such as video conferencing and on-net meetings) increasingly being deployed within organisations, FSIs are also incorporating multimedia facilities to enhance their interactions with customers. In all these, network reliability and consistency will be crucial.

II. Defining IP VPN

Traditional WAN typically employs leased lines or dedicated circuits e.g. Frame Relay or ATM connections between multiple sites. If a company decides to expand its operations overseas or set up a remote office within the country, the WAN infrastructure would have to be extended accordingly. Upgrading or expanding a traditional WAN network would be more complicated as unique and distinct network links need to be provisioned. In contrast, an IP VPN solution inherently supports a multipoint-to-multipoint network topology, thus making the addition of new sites a less complicated affair. For small, remote offices or branches, broadband remote access with IPSec encryption can be supported as extensions to the main IP VPN network. This can be more cost effective compared to the procurement of expensive local lease circuits.

I. Introduction
An IP VPN network can be defined as an emulation of a private Wide Area Network (WAN) using IP facilities (including the public Internet and private IP backbone). IP VPNs offers a cost effective means for secure, encrypted or encapsulated data transmission. The ease of adding new sites, coupled with the ability to support voice and data applications on a single network, renders IP VPN more advantageous than traditional data networking technologies such as Frame Relay or ATM. Driven by a growing demand for flexibility and cost savings, IP VPN is already one of the fastest growing service segments in the telecommunications industry. IP VPN revenue registered a growth of 34.1 percent in 2004 in Asia Pacific, and this trend is projected to accelerate. IP VPN is often regarded as an outsourced solution for an organisations data transport requirements. Due to the fact that service providers have invested heavily in highquality IP VPN services, FSIs are rapidly becoming more at ease with the technology. Today, FSIs are already transmitting large amounts of sensitive data (e.g. financial transaction records, customer credit records and database back-ups) between branch and head offices on IP VPN networks. IP VPN networks are also being used to support diverse financial activities such as credit processing, securities transactions, settlements and payments. This paper outlines the value of IP VPN to FSI customers. For some organisations, lower cost and ease of deployment are sufficient motivations for them to embrace IP VPN.

In todays context, FSIs are not only seeking to leverage customer relationship management technology for its frontline service personnel, they are also striving to integrate customer and financial databases with a multitude of communication mediums (e.g., voice, e-mail, Internet, and video). To this end, FSIs have begun to look at IP contact centers as a key component to realise these goals. There are significant complementarities between IP contact centers and IP VPNs, not least being the commonality in underlying technology itself. In short, IP VPN is capable of supporting future business enhancements.

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Classification of IP VPN Based on Usage

Dedicated Access IP VPN Solution. A dedicated access IP VPN solution includes customer premise equipment (CPE)-based solution and network-based solution. It is used for site-to-site connectivity, which can include branch offices to main sites and main sites to other main sites. As a result of this solution, a FSI can choose to manage a CPE-based solution internally or enlist a service provider. An increasing number of service providers are offering these solutions, as they are logical extensions to the existing managed services portfolio. Site-to-site communication within the corporate Intranet (i.e., transfer of information within a single organisation) and Extranet (i.e. sharing of information between organisations) is established via dedicated access using the service providers various network Points of Presence (PoPs). Access IP VPN Solution: Access IP VPN solutions provide secure access typically for remote users, telecommuters, travelers and todays mobile workforce. It uses Internet as the mechanism for connectivity, and the secured access is typically achieved by loading an IPSec client-software onto the users PC or laptop, thus allowing the user to access resources within the corporate LAN via an encrypted connection. Otherwise, there is also an option of using SSL technology in which the user can connect to corporate resources via a web browser without the need of a client-software. Either option, remote access is increasingly being accepted as an extension to dedicated access IP VPN solutions. IP VPN solutions offered by service providers have the capability to support site-tosite communications and secure remote access. In this way, FSI customers can easily extend their global private networks to smaller offices using a variety of broadband access technologies including leased lines, DSL and Ethernet.

To address security issues over the Internet, public IP VPN solutions make use of two types of security standards, namely, IP Security (IPSec) and Secure Socket Layer (SSL). IPSec technology offers best effort remote access by encrypting traffic in a tunnel through the Internet, while SSL offers an ad-hoc method for mobile workers to gain best effort access to the enterprise network over the Internet using browser technology that provides a standard level of security. Both standards operate at the Application Layer in the standard OSI model. As operating costs over the Internet is low, many service providers are largely using public IP VPN technology, coupled with security protocols, for remote access solutions. Despite the cost advantages, public IP VPN technology (IPSec or SSL) has an inherent limitation. It is incapable of supporting real-time applications and is therefore suitable only for sites requiring messaging or data transfer. Private IP VPN: Private IP VPNs are built around dedicated IP backbones and wholly owned and managed network infrastructure. These are secure, high-performance network configurations typically employing Multi Protocol Label Switching (MPLS) technology to speed up and improve the switching of network traffic across various data protocols. MPLS is an open IP routing standard which enables service providers to prioritise data traffic and offer quality of service (QoS) guarantees. Data packets are labeled according to their priority and then routed along predetermined label-switched paths in the service providers private IP network. Thus, MPLS can guarantee minimal levels of latency, packet loss and jitter for real-time or mission critical applications. MPLS is now a de facto standard for IP routing. Leading services providers worldwide, including SingTel, are using this protocol. MPLS IP VPN permits FSIs to manage their data traffic by categorising applications into pre-specified classes of service (CoS). Typically, a service provider may have four to six distinct CoS. Service providers guarantee the performance of each CoS with service level guarantee (SLG). Besides the SLG, private IP VPN offers the security equivalent of Frame Relay and ATM. There is also the option

Classification of IP VPN Based on Supporting Technology

Public IP VPN: The public IP VPN, as the term suggests, leverages the ubiquitous Internet, thus making it the most economical option. However, without data encryption, it is a less secure solution, as data is transported over a public infrastructure. There is also no prioritisation for various data streams. In other words, data transport is a best effort service.

SingTel IP VPN-FSI

of applying an additional level of security by encrypting the data packets using IPSec. The trend is that FSI still encrypts data over private IPVPN, SingTel can support baby giant frames in our private IPVPN.

In the same study, revenue from IP VPN services is projected to exhibit strong growth momentum at 10.1% in 2007 across Asia Pacific. The compound annual growth rate (CAGR) during 2006 and 2010 is forecasted to be on firm footing at 9.1%.

Selection of Technology
With a wide range of IP VPN services available, an FSI is assured of a customised solution that fulfils its requirements. A combination of private and public IP VPN solutions may be required to cater for a variety of situations. Public IP VPN may be employed in smaller, satellite offices to connect them to regional or central offices. Encrypted DSL connections can provide secure access to the central private IP VPN network in instances where MPLS IP VPN access may be unavailable or impractical. A fully-meshed solution shown in Figure 1 below may be designed for FSIs to provide additional features and improved security at a lower cost.
Figure 1: The Technology Vs Usage Matrix

Figure 2: Asia-Pacific IP VPN Service Adoption

IP VPN Market Trends

IP VPN services are experiencing robust growth in Asia Pacific. Companies across all industries, including FSIs, are moving rapidly to leverage IP VPN technology to gain competitive advantage. This trend is verified by a study conducted by Frost & Sullivan, and the finding indicated that MPLS VPN is expected to increase from 44.4% in 2006 to 67.7% in 2010 in the domestic VPN market and from 61.4% in 2006 to 80.2% in 2010 in the international VPN market.

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IP VPN versus Traditional WAN

Figure 3 below compares IP VPN with traditional WAN technologies. The advantages and growth drivers for each technology are summarised.

WAN Frame Relay

Advantages Inherently Secure Matured and Understood Technology Guaranteed QoS

Growth Drivers Hybrid Frame Relay/IP VPN Solutions Hub and Spoke Network Requirements Service Enhancements
Broadband Access

ATM

Inherently Secure Matured and Understood Technology Guaranteed QoS

Legacy Infrastructure Hub and Spoke Network Requirements High-speed Networking Lower Total Cost of Ownership (TCO) from an
Operational and Maintenance Perspective, and an Ability to Converge Voice and Data on a Single Network Platform

IP VPN

Value Added Services and Applications Inherent Security in Private IP VPN Security through IP Sec for Non MPLS-based
VPNs

Fully Meshed Topology Ease of Adding/Removing Site Service Outsourcing Different CoS to Cater to Varying Needs of
Business Applications

Partially/Fully-Meshed Network Requirements Access Ubiquity Extranet Value Proposition Faster Deployment

Baby Giant Frame Support

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III. The Changing FSI Landscape

One of the key requirements for FSIs are reliable and robust data communications. As FSIs have numerous mission-critical tasks, secure and reliable flow of consolidated information through the networks is of utmost importance. This requirement may stem from either internal or regulatory compliance. For example, the new Basel Capital Accord, or Basel II, includes operational risk together with credit and market risks for estimating capital requirements. For that reason, a robust and resilient network will serve as a strong foundation, since business continuity, security and data storage are considered as operational risks. In addition, it is also imperative for FSIs to revamp processes and leverage IP VPN technology to achieve profitable growth and adapt to the following trends: Globalisation: There is a clear trend towards cross border financial services. As barriers to competition in financial services continue to fall, multinational FSIs are moving into developing countries to capture previously untapped markets. With IP VPN, new offices can be easily set up and connected to the FSIs global network infrastructures. Mobile workers: Due to the global expansion of FSIs, an increasing number of FSI professionals are requiring the ability to access their corporate networks remotely, readily, reliably and securely for financial information. The sales and marketing departments are seen to benefit greatly from this capability. Furthermore, this capability is also central to business continuity planning, where an employee can still work and access information from a recovery site under emergency conditions.

institutions that emerged from this legislation are able to offer a wide range of financial services to customers. This in turn increases the need for operational efficiency. As the customer relationship becomes more extensive, there is an urgent need to integrate various databases and communications medium (voice, video, or e-mail) to enhance the customer interface. To this effect, FSIs are looking at IP contact center solutions and an IP VPN infrastructure will complement this very well. The scalability of IP VPN will also enable FSIs to easily handle the anticipated increase in communications, data retrieval and access to financial information. Outsourcing: Driven by the promise of huge cost savings as well as the consolidation of competencies, FSIs such as ABN Amro, Deutsche Bank, HSBC, Standard Chartered, American Express, Citigroup, JP Morgan Chase and Merrill Lynch have outsourced at least part of their business processes to low-cost locations such as India. However, this has raised concerns about data integrity and security, in addition to business continuity issues. In view of this, the International Organization of Securities Commission (IOSCO) has come up with a framework dictating the key principles that FSIs with outsourced operations are required to abide by. These include stringent requirements on security of customer-related data during transfer to these offshore facilities, as well as real-time access to books and records whenever required by regulatory boards or auditors. The deployment of IP VPN solutions is certainly not inconsistent with this framework as the solution is secure and able to support access from external parties. The robustness and any-to-any connectivity offered by IP VPNs also serve to mitigate network-related business continuity issues.
Figure 4: The Changing FSI Landscape

Financial superstores: FSI players today are moving away from traditional, stand-alone service offerings e.g. insurance, retail banking and commercial banking to becoming full service financial institutions, capable of offering customers single interface to a wide range of services across multiple geographies. In 1999, the Gramm-Leach-Bliley Act had repealed the GlassSteagall Act and allowed investment and commercial banks in the USA to consolidate. The new financial services

SingTel IP VPN-FSI

Benefits of IP VPN Implementation

In todays competitive global financial services environment, the last thing FSIs would want to do is compromise on deliveries and deadlines. In the face of a changing industry landscape, a well-designed IP VPN network can help FSIs bridge distance, people and business goals: Expand geographical coverage. As FSIs expand their operations worldwide, real-time and secure consolidation of financial information between far-flung offices and the central offices is imperative. The relevant information management system needs to provide for easy and secure access to information anytime, anywhere, both for employees and customers. This is critical for an industry that has become truly global and operates in a 24x7 mode. As more FSIs extend their reach and become multinational, the cost of fixed point-to-point connectivity can multiply rapidly. Most IP VPN solutions support global networking and enable small remote offices, mobile workers and external parties to access corporate resources. IP VPN can work with almost every kind of network access technologies, from telephone dial-up and xDSL2 to leased-line access. With more and more users accessing the Internet from branch locations, sending and downloading large files via e-mail, FTP or the Internet, some FSIs smaller or remote offices have procured their own dedicated Internet connections. Some FSIs even require the hosting of Internet-accessible applications at the branch offices, so that they can have immediate control over the applications. An IP VPN solution can meet these requirements by seamlessly providing distributed Internet access at each location or network-based Internet access via high-bandwidth connections at each site, with Internet gateways in the MPLS core. Achieve high performance and scalability. Within the FSI community, scalability and adaptability must be inherent in the IT infrastructure and be in place before a solution is implemented. FSIs represent some of the largest employers in the world, with top institutions supporting partners and customers in over 100 countries. As IT organisations implement utility computing, they

must ensure that the necessary computing resources and bandwidth are sufficient to meet the usage demand. Poor network performance translates to lost dollars. Downtime and high network latency can lead to lost revenue opportunities, dissatisfied customers and unproductive employees. To support the increase in data traffic arising from new applications such as ebanking, FSIs can either adopt a traditional WAN solution or deploy a fully-meshed IP VPN network. The former typically results in the deployment of a hierarchical network topology which gives rise to expensive and time-consuming network expansion efforts. On the other hand, it is possible to set up a fully-meshed IP VPN network at relatively affordable costs without compromising the overall network performance. Enjoy comprehensive and effective security. Due to stringent legal/security requirements, and high demand for availability, FSIs are regarding encryption and redundancy as absolute necessities to their operations. MPLS technology can provide the same levels of privacy as Frame Relay and ATM, with the flexibility of IP operating at Layer 3. Therefore, MPLS-enabled IP VPNs can be regarded as Layer 3 ATM or Frame Relay, and they are as secure as native Frame Relay. An additional layer of security can be provided by adding encryption. FSI must choose a service provider that supports the enlarged frame size as a result of additional encryption. Lowering TCO. While much has been said about the cost benefits of IP VPN services, the key point to consider is the reduced TCO in terms of operating costs, management costs, single network benefits, network scalability and outsourcing benefits. Banks, in particular, face a number of issues. Firstly, if a bank wishes to participate in the global market, it needs a compatible, global network. Secondly, the bank going global will have to take into account cost management issues. It will have already invested heavily in its home networks and the scaling of its local network infrastructure to include global locations may incur an astronomical expense.

SingTel IP VPN-FSI

The above are specific areas where the IP VPN service provider can create value for FSIs. An IP VPN service provider offers compelling benefits to FSIs through the following: Economies of scale by virtue of having a single access circuit (LLC) and equipment (CPE) for voice and data traffic Mesh network capability that translates into a quick and cost effective means to extend the existing WAN network to encompass new office sites.

better network resilience to its customers. Such network resiliency option is much sought after by the FSIs across the world. On the other hand, to address the domestic IP VPN needs, FSIs can opt for SingTels Meg@POP, which is SingTels owned private Gigabit IP backbone, for the ideal equivalent domestic solution to connect multiple branches locally.

V. Applications
IP VPN technology can provide FSIs with a clear competitive advantage. In order to identify and understand that advantage, Frost & Sullivan analysed a few FSIs that have deployed SingTels ConnectPlus IP VPN service. Opportunities to leverage IP VPN were also examined. The following case studies highlight how FSIs can benefit from SingTels ConnectPlus IP VPN. Case Study 1: Delivering Greater IT Capacity A Global Credit Card Company Issues

IV. SingTels ConnectPlus and Meg@POP IP VPN

Asset-heavy service providers have an edge in the IP VPN segment because of the higher degree of service assurance they can provide. Nevertheless, an increasing number of FSI customers have coverage requirements that few service providers can effectively meet with their own network footprints. SingTel launched its ConnectPlus IP VPN service in April 1998 in anticipation of the evolution of IP technology into a de facto standard for business communications. Its ConnectPlus IP VPN delivers the necessary integrated communication capabilities for FSIs to operate reliably and securely, and at the same time delivers QoS that can drive successful business growth. SingTels ConnectPlus IP VPN operates on a private and managed IP infrastructure built with dedicated links to, at present, 19 countries. With the extensive coverage, FSIs can choose to construct their global private networks with SingTels ConnectPlus IP VPN supported by ISDN, leased lines or broadband lines to provide access for remotely-located users or mobile workers. SingTels ConnectPlus IPVPN is also integrated with its Satellite network creating a Global IP WAN that offers seamless Broadband IP access from anywhere in the world. This integration enables SingTel to offer a quick operational recovery to businesses in the event of a disruption caused by any disaster or emergency offer

Growing network requirements increasing strain on existing IT infrastructure as the company is handling an enormous amount of financial transactions that are reaching 10,000 transactions per second globally.

Solution

Upgraded its telecommunications network that interconnects 13 offices and supports over 450 staff in Asia Pacific.

Benefit

Higher bandwidth available using a voice and data over IP network. The same resources can now obtain three to four times more capacity and greater efficiency.

The Issues A global credit card company manages a network control centre in Singapore that supports data communications and data monitoring for its offices in Asia Pacific. Its four data centres located in Tokyo, London, San Francisco, and Washington are interconnected

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to support key payment functions such as clearing and settlement. From processing over 4,000 transactions per second during peak hours at present, traffic load is moving towards 10,000 transactions per second globally as customer base grows. In Asia-Pacific alone, the companys network processed over US$500 billion worth of card sales volume in 2005. The Solution and Benefits To manage rising demands on the network, the company upgraded its telecommunications network which interconnects 13 offices and supports over 450 staff in Asia Pacific. Key applications include internal voice, video and data transmission supporting its corporate e-mail system, Web-based services, as well as human resource and financial systems. Instead of leased circuits, it opted for a cost-effective and efficient solution using SingTels ConnectPlus IP VPN. With higher bandwidth available with the use of ConnectPlus voice and data service over an IP network, the company is now able to re-channel the same resources to achieve three- to four-fold its original capacity, yielding much greater efficiency. Five countries Australia, Hong Kong, Japan, Philippines and Singapore are already connected to this IP VPN network and seven more China, India, Indonesia, Korea, Malaysia, Taiwan and Thailand are in the pipeline for the IP VPN expansion. Case Study 2: Connecting Global Operations Economically A Global Bank - Private equity and investment division Issues Replace existing ISDN and private line in conference rooms and video conferencing rooms to a video conferencing infrastructure with a secure, low cost, high performance desktop video solution for both employees and extranet partners. Solution Outsourced its IP VPN network with secure managed desktop video functions. Benefit Reduced overall video costs by 40 percent while increasing bandwidth. A higher level of service quality was also achieved

The Issues The private equity and investment division of a global bank offers a full range of investment products for FSIs in over 17 countries. The company required a solution connecting 28 international locations for the creation of a secure desktop video extranet between sites. This objective is to enable instantaneous and secure desktop video conversations between itself and its parent company, as well as partners who are located across geographically dispersed trading desks. The existing conference room infrastructure utilised ISDN and leased lines that were significantly hampered by several factors: Prohibitively expensive to use on an ongoing basis Not universally available to the rank and file employees Connect times for isdn were excessive Regular dropped conference calls Solution was not scalable to more users and locations A reliable, always-on and cost-effective video transport is therefore on the topmost of the companys agenda. The existing ISDN/leased line solution was unable to meet the requirements of offering: End-to-end wan management outsourcing Access to video performance reporting Guaranteed network performance and reliability via SLGs An express deployment cycle with no service interruption The Solution and Benefits The division went on to deploy and outsource its IP VPN with secure managed desktop video solutions. SingTels ConnectPlus video WAN solutions was able to help the division reduced its overall video infrastructure costs by 40 percent per annum while increasing its bandwidth and offering significant redundancy and performance improvements. Actual savings could be higher in view of flat usage charges. The reduced cost and flexibility allowed desk-top video to be available to a larger pool of employees. Always on connections also enabled instantaneous conferences between individuals, while the built-in redundancy prevented any dropped conference calls.

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VI. The Next Step FSIs are experiencing challenges in the form of changing industry paradigms, increased competition, rapid globalization and tougher regulatory measures. In this dynamic environment, the effective and efficient management of sensitive financial information has become critically important for the FSIs. An effective and efficient network that is able to guarantee secure and real-time access to this information is fundamental to helping the FSIs meet these challenges.

Find the right service provider. Finding the right service provider for the network is of critical importance. It is vital to engage a service provider who understands and meets both technical requirements and business imperatives. The right service provider should have a global capability coupled with an understanding of the FSIs business and overall needs. This needs to be supplemented with a complete IP service offering and an IP roadmap. Ideally, the service provider should have: Business and financial stability

The two case studies above attempt to summarize the approaches FSIs have been taking, and will continue to take, to reap the advantages of IP VPN technology. IP VPN has proven to be an important solution for FSIs seeking to improve information flow and to strengthen their overall information infrastructure. With this in mind, Frost & Sullivan offers the following recommendations to FSIs which are considering IP VPN solutions to fulfill their information requirements:

provides assurance of business continuity ability to invest in innovation and service enhancements Broad range of services provides maximum flexibility to meet specific needs provides not just competing but also complementing solutions facilitates solution migration Wide coverage and reach

Act now or risk being left behind. At the very least, FSIs should initiate in depth discourse with key IP VPN service providers to better understand the benefits, costs and resources involved in deploying IP VPN.

undisrupted services globally extensive working relationships with telecom partners worldwide Proven track record

Take a holistic approach to implementing IP VPN. Make sure that the project is linked to overall business strategy, processes and the supply chain. FSIs need to define and quantify the business value; returns on investment and productivity improvements to justify the migration towards IP VPN, These considerations will also inform the migration approach phased or big-bang. Consider managed services. By taking advantage of managed IP VPN services, FSIs can focus on their core business and outsource network management to the service provider. This reduces investment risk and avoids the need to hire and train internal staff to catch up on ever changing technology. The managed services option is a way to convert capital expenditure to operating expenditure, and it also serves to deliver distinct cost savings and operational advantages.

sound implementation experience reputable client portfolio World-class facilities and support robust/state-of-the-art infrastructure comprehensive and stringent service levels VII. Conclusion Winning new customers and retaining existing ones present a tough challenge for FSIs that seek revenue growth. These companies must find ways to cost-effectively provide increasingly higher service levels necessary to drive customer satisfaction and loyalty. Central to this initiative is a robust, reliable and resilient network that can support the various applications, databases and processes running within the organization. The network should also be able to support the FSIs future business strategies be it geographic expansion or service addition. FSIs should consider adopting an IP VPN solution today to future-proof their operations.

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APR 2008