Private Cloud Is Your Answer? Think Again!

To the astute, many enterprises are jumping on the bandwagon to build Private Cloud. You may question, why would an enterprise invest in a private cloud when the fields of public cloud offerings are expanding? In essence: flexibility and security.

Public clouds offer an ease of access and financial incentives that are compelling. But the private clouds can address the combined desire for greater flexibility in defining cloud services along with a need for physically control information resources. However, do keep in mind that advantages to be gained with private cloud will be limited by its scale and by how the enterprise manages it.

The best way to understand this paradox is to take the business perspective. What are the business benefits behind the move to the Cloud (Private or Public), and how can you achieve them?

  • Capital expense to operational expense – instead of having to invest in hardware and software, you can pay-as-you-go for what you need as an operational expense. Except, of course, with private Clouds, where you have to build out the entire data center infrastructure yourself. If anything, private Clouds increase capital expenditures.
  • Cloud increases server utilization while dealing with spikes in demand – instead of setting up a data center full of servers that run idle most of the time on the off chance you need them to deal with the Gangnam Style YouTube downloads or Justin Bieber tweet, the Cloud improves utilization while its elasticity deals with those annoying spikes. Except, of course, in private Clouds, unless your organization is so huge that multiple divisions look to your Cloud to handle many different spikes in demand, which you fervently pray arrive at different times.
  • Cloud keeps infrastructure costs very low for new projects, since they don’t have much traffic yet – again, works much better in a public Cloud model. How many such projects do you expect to have at any one time? If the number isn’t in the hundreds or thousands, then private Cloud is massive overkill for this purpose.
  • The elasticity benefit of the Cloud gives us the illusion of infinite capacity – infinite capacity is all fine and good, but it’s an illusion. And illusions work fine until, well, until they don’t. Elasticity provides the illusion of infinite capacity as long as there is always sufficient capacity to meet additional demand for Cloud resources. You’ll never consume all the capacity of a public Cloud (or at least you won`t before Private Cloud does), but your Private Cloud is another matter entirely. It’s only so big. If one of your developers has the bright idea to provision a thousand virtual machine instances or a petabyte of storage for that Big Data project, and your private Cloud doesn’t have the physical capacity to do so, then sayonara to your illusion.
  • There is already a significant investment in our existing data center, so converting it to a private Cloud will save us money while enabling us to obtain the benefits of the Cloudin your dreams. One essential requirement for building an effective private Cloud is rigorous homogeneity. You want all your physical servers, network equipment, virtualization technology, storage, etc. to be completely identical across every rack. Look at your existing, pre-Cloud data center. I bet that homogeneity isn’t even on your radar.
  • Whatever cost efficiencies the public Cloud providers can achieve we can also achieve in our private Cloud – this argument doesn’t hold water either. Not only to the leading public Clouds—Amazon, Microsoft Azure, Rackspace, etc.—have enormous economies of scale, but they’re also operating on razor-thin margins. Furthermore, if they can wring more efficiency out of the model, they’ll lower their prices. They’re taking this “price war” approach to their margins for all the regular business school reasons: to keep smaller players from being competitive, and to push their larger competitors out of the business. It doesn’t matter how big your private Cloud is, it simply cannot compete on price.

Perhaps you would say that you’re in a regulated industry or you have stringent regulatory requirements about data protection or data movement that the public Cloud providers can’t adequately address. The only way you can move to the Cloud at all is to go for private Cloud.

Not so fast. While it’s true that regulatory compliance business drivers and limitations are becoming an increasingly important part of the Cloud story, any regulatory drawbacks to using public Clouds are essentially temporary, as the market responds to this demand. A new class of public Cloud provider, what is shaping up to be the “Enterprise Public Cloud Provider” marketplace, is on the rise. The players in this space are putting together offerings that include rigorous auditing, more transparent and stringent service-level agreements, and overall better visibility for enterprise customers with regulatory concerns. E.g. Amazon has rolled out dedicated Elastic Compute Cloud (EC2) to cater to the stringent compliance demands of regulated industries.

While you may not be able to get solutions from the big players that meet your regulatory needs today, you can be sure it won’t take the “ Enterprise Public Cloud Provider” long to figure out how to compete in even the most regulated industries. In a few years, if you look back on your decision to build a private Cloud on the basis of regulatory compliance, you’ll likely feel quite foolish as your competitors who waited, will soon have fully compliant public alternatives, while you’re stuck paying the bills on your private Cloud initiative that will have become an expensive money pit.

So, should any organization build a private Cloud? Perhaps, but only the very largest enterprises, (or Governments due to national security reasons etc) and only when those organizations can figure out how to get most or all of their business units to share those private Clouds. If your enterprise is large enough to achieve similar economies of scale to the public providers, then—and only then—will a private option be a viable business alternative.