Private or Public Cloud?

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Enterprise IT executives are having difficulty answering the question: Do we go with a private cloud solution or a public cloud solution to meet business demands?  Or do we start with public and then switch to private when we catch up?  Or do  we do hybrid?  And if we do hybrid, what goes where and why?

Start-up and expansion stage software companies in the cloud computing market are asking themselves what these IT executives will ultimately decide.  Or rather, what percentage of IT executives will decide what, and what market opportunities will surface from providing or enabling public, private and hybrid clouds?

Venture capital investment funds are attempting to answer these questions as well, as are massive tech companies deciding on their business growth strategies and acquiring expansion stage companies in the cloud market.

Here’s what I’ve noticed so far:

• Very large companies are the only ones for whom it makes economic sense to construct a genuine private cloud.  For example, just this week it was announced that IBM is building a private cloud for NATO.  NATO is an incredibly huge organization, and so for them this makes sense.  A number of studies have deduced this by running the numbers, which includes this one, Microsoft’s current white paper, and internal studies by big enterprises that are not public.
• While security and compliance concerns are keeping enterprises back from current public cloud providers, the providers and the vendors servicing them will conquer these issues (for instance, Amazon just achieved PCI Level 1 compliance).
• Enterprise compliance departments will grow to be more accustomed to the idea of sensitive data in public cloud computing environments, particularly as they become more compliant and secure.
• Building private clouds is difficult.   It is easy to turn on a public cloud instance from a 3rd party provider.   Even the big conglomerates who plan to eventually rely on a private cloud are most likely to start out with some sort of a public cloud deployment.

Net net, this suggests that the public cloud market will become much bigger than the private cloud market over time.  The post on the cloud predictions of 2011 captures this sentiment well.  It states :

• “You will build a private cloud, and it will fail”
• “Hosted private clouds will outnumber internal clouds 3:1.”
• “Cloud security will be proven, but not by the providers alone.”

Therefore, both cloud markets will be adequately large enough to help a large amount of competing vendors.  However, the public cloud market is most likely to tolerate a lot more.

Igor Altman is a Senior Associate at OpenView Venture Partners.

Related articles

• Cloud computing is dead. (compositecode.com)
• Big Biz keep Cloud thoughts private (go.theregister.com)
• Focus of Cloud Implementation Depends on the Implementer (devcentral.f5.com)

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