Where’s The Value In Private Clouds?

One of the most confusing aspects of the rapidly evolving cloud marketplace is the definition and value of private clouds. The term has more than one connotation. As a consequence, measuring the business benefits of this method of deploying the cloud can be challenging.

The confusion arises from the fact that private clouds can be deployed either by an enterprise behind their firewall or by a service provider via a remote, hosted service. In either case, the objective is to utilize a virtualized computing, networking, and storage architecture built on physically isolated, dedicated hardware for the purpose of single organization. The reason for this deployment method is often to safeguard sensitive data or to permit a greater level of management control, or both.

What’s behind the appeal of private cloud

Many enterprises believe that they must redesign their legacy data centers in order to create private clouds that can satisfy their end-users and executives’ escalating business demands and effectively compete with a growing number of public cloud providers. A recent Everest Group survey report entitled Enterprise Cloud Adoption Survey 2013 found 70 percent of the survey respondents want to run their financial applications and ERP systems in a private cloud.

This approach can take a significant investment in new systems and software, and still fall short of expectations because delivering cloud services entails more than just offering virtualized computing, networking, and storage services.

According to the U.S. National Institute for Standards and Technology (NIST), a cloud computing operating environment must meet the following criteria:

  • On-demand, self-service for users
  • Broad network access
  • Shared resource pool
  • Ability to elastically scale resources
  • Having measured service
Building a true cloud environment isn’t easy

Most of today’s enterprise private clouds don’t meet these criteria. They may have virtualized environments, but the in-house IT department isn’t able to offer the five primary benefits of a true cloud environment. This issue is important because corporate end-users and independent business units are increasingly willing to shop around for third-party cloud services and have become accustomed to taking advantage of the benefits of true cloud services from external service providers. Therefore, in-house IT departments are facing greater competition from proven cloud providers and are unlikely to match their capabilities.

According to the December 2012 IDC Worldwide Hosted Private Cloud Services 2012-2016 Forecast: New Models for Delivering Infrastructure Services, (doc #238689) International Data Corporation (IDC) expects worldwide spending on hosted private cloud (HPC) services to surpass $24 billion in 2016, representing a compound annual growth rate (CAGR) of more than 50 percent from 2012 to 2016. IDC believes private cloud deployments will be the most common operational model for enterprises that are seeking to take advantage of the time-to-market and cost advantages of cloud computing.

However, few in-house IT organizations have demonstrated that they have the skills and experience to be a true internal service provider. To fulfill this role, they need to design their IT operations to be more responsive to their end-users and business units’ needs. They must also implement automated systems that can administer their operations in a cost-effective fashion. And, they must deploy management capabilities that enable them to monitor, measure and manage their services in a flexible fashion.

Given the inherent shortcomings of many enterprise IT organizations, it is imperative that they consider third-party alternatives. The ideal private cloud service should include the following offerings:

  • Integrated hardware and software optimized for cloud
  • Dedicated infrastructure deployment
  • Flexible monitoring & management alternatives
  • On-demand availability
A closer look at the technical and business benefits

The private cloud service provider should be able to scale its computing resources up and down as needed to handle an enterprise’s fluctuating loads and seasonal capacity requirements. The private cloud service provider should also offer maximum security, privacy, and performance.

But most importantly, a private cloud provider should offer enterprise class customer support, a customizable portal, clearly defined SLAs, extensive reporting capabilities, flexible pricing models, and extensive professional service skills.

The technical benefits of adopting a private cloud service should include:

1. Performance

  • Greater bandwidth/lower latency
  • Consistent experience worldwide
  • Acceleration and optimization

2.  Reliability

  • Redundant, scalable architectures
  • 99.999% or greater data center availability
  • 24/7 operations support

3.  Security

  • Integrated, multilayer security
  • Intrusion detection & prevention
  • Network-resident DDoS protection

4.  Control

  • Wider networking choices
  • Open APIs
  • Various billing options

The business benefits of deploying a private cloud solution should include:

  • Accelerated speed to market of turnkey solutions, pre-designed to meet enterprise-specific application demands.
  • Reduced capital expenditures
  • Lowered total-cost-of-ownership (TCO)
  • Improved systems availability
  • More highly-scalable platforms to meet escalating demands
  • Integration with other public & private cloud resources

Ultimately, a private cloud service should provide an enterprise with greater visibility and control via a wider array of monitoring, management, and support options with service level agreements (SLAs) designed to meet their unique needs.

What advantages do you see for having a private cloud solution? Has your company considered developing its own cloud?



Jeff Kaplan is the Managing Director of THINKstrategies, a strategic consulting firm focused entirely on the business implications of the transition of the technology industry from a product-centric to services-driven solution model. AT&T has sponsored this blog post.

Jeff Kaplan Managing Director THINKstrategies Inc. About Jeff