A private cloud is a virtual solution that offers the benefits of public clouds, such as scalability and self-service, along with the added control and customization provided by dedicated resources, including compute, storage, and networking. According to a report by Dell EMC, enterprises can also save up to 40% on their IT costs by deploying a private cloud solution compared to traditional on-premises infrastructure.

Private cloud is a cloud computing model where infrastructure and resources are dedicated exclusively to a single organization. A private cloud can be on-site or off-site and self-managed or managed. In any case, it must be an isolated, proprietary environment that organizations can directly control.

Dgtl Infra discusses private cloud and how it differs from public and hybrid cloud, as well as legacy, on-premise deployments. Additionally, this article explores different private cloud deployment models, including their advantages, disadvantages, and use cases. Finally, Dgtl Infra reviews private cloud offerings from major providers.

What is Private Cloud?

Cloud computing is an integral component of any digital transformation. However, cloud environments are typically associated with multi-tenancy, resource-sharing, and lack of visibility and control. Privacy, business governance, and regulatory compliance requirements may compel organizations to stay on-premises. For such businesses, private cloud bridges the gap between flexibility and control.

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A private cloud is a single-tenant computing environment built on cloud-native principles. It allows organizations to leverage several cloud benefits, like on-demand self-service and automation, without entirely giving up the security and control of an on-premise data center.

Private cloud is usually built following most of the cloud principles, except multi-tenancy. Organizations can choose and implement different private cloud deployment models, depending on how and where they want to host their private cloud and who manages it. There are four basic private cloud models to choose from:

  1. Internal Private Cloud: Deployed on-premises. The user organization owns the infrastructure but can outsource its management and maintenance to an external provider
  2. Hosted Private Cloud: Deployed by a provider, on-premises or off-site, in a colocation data center. The user organization can lease or own the infrastructure and can choose to self-manage or outsource to the provider
  3. Virtual Private Cloud (VPC): Logically isolated, private environment inside a public cloud. Here, the public cloud provider owns and manages the infrastructure
  4. Managed Private Cloud: Organization owns the infrastructure, whether on-premises or off-site, but delegates management to external private cloud service providers

Organizations can also choose from three management models: self-managed, partially managed, and managed.

How Does Private Cloud Work?

Depending on how it is deployed, a private cloud may or may not be connected to the internet.

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Organizations can connect to an on-site private cloud through their internal networks, just like they access traditional data centers. While those hosting a private cloud off-site, can establish connectivity via the public internet over a secure virtual private network (VPN) connection or through a private Ethernet or fiber connection.

Comparison of Private Cloud with Other Cloud Models

Below is a comparison of private cloud with other cloud models and on-premise deployments:

1. Private Cloud vs On-Premise Data Center

Unlike legacy data centers, a private cloud is primarily built following cloud principles and technologies, like virtualization, containers, and microservices. A private cloud utilizes virtualization to decouple all IT resources from underlying hardware.

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IT resources are pooled together and can be provisioned across users and applications as-and-when-needed for optimal resource utilization. Administrators can monitor and control IT resources through a centralized management console.

In contrast, hardware constraints in legacy on-premise data centers do not allow consolidation or re-allocation of resources from underutilized hardware.

READ MORE: On-Premise to Cloud Migration – a Journey to AWS and Azure

2. Private Cloud vs Public Cloud and Hybrid Cloud

A public cloud is vendor-owned, multi-tenant compute, storage, and networking infrastructure that organizations can lease and access on-demand. Examples of public cloud service providers (CSPs) include: Amazon Web Services (AWS), Microsoft Azure, and Google Cloud.

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A private cloud, on the other hand, is a single-tenant environment in which infrastructure and resources are exclusively dedicated to a single-user organization. Leading cloud vendors also have their own private cloud offerings. Private cloud providers include Hewlett Packard Enterprise (HPE), IBM Cloud, and VMware.

Many organizations support some combination of legacy on-premise data centers, public cloud, and private cloud. Such mixed environments are known as hybrid cloud.

A hybrid cloud allows organizations to integrate various environments and establish interoperability between them. For example, some organizations adopt a hybrid IT model to run certain workloads in a private cloud for security and compliance reasons while leveraging public cloud for less sensitive applications to benefit from its scalability and lower costs.

READ MORE: Top 10 Hybrid Cloud Providers in 2024 – Leading Solutions

Virtual Private Cloud (VPC)

A virtual private cloud (VPC) is a customizable, logically isolated IT environment within a public cloud. The underlying infrastructure is owned and maintained by the cloud vendor, but the vendor reserves a portion of its compute, storage, and networking resources, including private IP addresses, for a single organization’s private use.

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A VPC combines all the public cloud benefits, such as scalability, cost-effectiveness, and ease of management, with the data and resource isolation of a private cloud. This isolation is achieved through a private IP subnet and encrypted communication channel for each organization.

Organizations can access VPC resources through a dedicated connection or a secure VPN connection. Examples of virtual private cloud services include Amazon Virtual Private Cloud (VPC) and IBM Cloud Virtual Private Cloud (VPC).

Difference Between Private Cloud and Virtual Private Cloud (VPC)

A private cloud is typically hosted on infrastructure that is exclusively dedicated to the user organization. Whereas a virtual private cloud (VPC) is just a logical separation of IT resources within a multi-tenant, public cloud infrastructure. Essentially, VPC is a private cloud in a public cloud environment.

Example of a Private Cloud

An example of a private cloud is VMware Private Cloud, which allows organizations to aggregate compute, storage, and networking resources from the underlying infrastructure, pool them into a single resource, and dynamically distribute them among virtual machines (VMs) running applications and workloads across the organization. This way, organizations can leverage flexibility and resource optimization while still utilizing their existing dedicated infrastructure.

Why Use Private Cloud?

Organizations rely on private cloud for two major reasons: i) to leverage their existing IT investments or ii) to achieve regulatory compliance. Below are the advantages and disadvantages of deploying a private cloud:

Advantages of Private Cloud

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1. Long-Term Cost Savings

Public cloud vendors charge customers on a pay-per-use basis, which can lead to unpredictable monthly costs. Storage, usage, and service costs can keep adding up as business and demand increases.

With private cloud, organizations have full visibility and control over their IT expenditure. It may be expensive to set up at the outset, but the initial capital expenditure pays off in the long-term, especially for large enterprises, since costs remain constant and predictable regardless of resources consumed.

2. Better Performance

Private clouds guarantee better and predictable performance for resource-intensive and latency-sensitive workloads. This is because private clouds are often hosted internally and accessed over high-performance, low-latency internal networks or remotely via reliable private connections.

Additionally, private cloud resources are dedicated exclusively to a single organization. Therefore, private cloud performance is not subject to unpredictability due to unreliable internet connections or another organization’s resource consumption.

3. Hardware and Software Customization

Public cloud vendors design their architecture to meet the needs of all their customers, instead of tailoring their services for individual customer needs. Organizations that need specialty hardware or non-standard software configurations may not find viable public cloud alternatives.

Private cloud allows organizations to choose the most suitable hardware and software for their needs and customize their environments for proprietary applications and workloads.

4. Regulatory Compliance

Businesses dealing with sensitive customer data, such as health records and payment card information, may be subjected to data residency requirements and regulations that mandate data be stored on private infrastructure, which is inaccessible to any third-party. Organizations can design and control their private cloud to achieve regulatory compliance and meet data storage requirements.

5. Cloud Migration

A private cloud implementation is sometimes an organization’s first step toward cloud adoption. By designing data, applications, and workloads following cloud-native principles, organizations can extend their private environments to public clouds when needed, to form a flexible hybrid cloud set up.

Disadvantages of Private Cloud

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1. High Upfront Costs

Unless an organization has already invested in underlying infrastructure, the capital expenditure costs of purchasing hardware and software and hiring cloud architects to set up an internal private cloud make it unaffordable for smaller organizations with limited IT budgets. Hosted and virtual private clouds (VPCs) can somewhat mitigate these high costs, still, private cloud deployments are significantly more expensive than public cloud.

2. Limited Scalability

Private cloud lacks the scalability and elasticity of the public cloud, which offers virtually unlimited resources on-demand. Private cloud resources are scalable only as long as the user organization has the supporting infrastructure. Beyond that, organizations need to acquire more hardware, which may remain underutilized when demand decreases.

3. IT Staff Requirements

Organizations are responsible for architecting their private cloud environments for maximum capacity utilization. Inefficient deployments result in under-utilized capacity and reduced return on investment (ROI). Private cloud requires organizations to invest in additional IT staff and a cloud operations team for monitoring and managing private cloud resources.

Is Private Cloud the Most Secure?

It is a misconception that private cloud is more secure than other cloud models. Organizations have more control over private cloud deployments, configuring and securing them as they want. However, private cloud security largely depends on the organization deploying it.

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Overall, organizations need to invest heavily in security tools and technologies, like firewalls, anti-malware, cybersecurity awareness training, system upgrades, periodic penetration testing, and internal security teams to combat the multivariate security threats.

On the other hand, public clouds have access to the latest security technologies, threat intelligence, and in-house security talent, which may be inaccessible to most individual organizations.

Ultimately, none of the cloud models are innately more or less secure than the others. Cloud security, in fact, depends on how securely an organization or a cloud service provider (CSP) deploys and manages the environment.

Private Cloud Use Cases

Organizations with significant capital investments in data centers and supporting infrastructure, as well as those requiring data governance and control to achieve regulatory compliance, rely on the private cloud. They can choose from several private cloud deployment and management models, which eventually determine who runs their private cloud.

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When Should Private Cloud be Used?

Common use cases for private cloud deployments include digital transformation, customization requirements, regulatory compliance, and low-latency requirements:

  1. Digital Transformation: Organizations with existing data centers can choose to re-architect or re-design their applications and workloads to become cloud-ready without actually migrating them to third-party cloud environments
  2. Customization Requirements: Organizations running applications or workloads that require specific hardware and configurations that public cloud vendors do not support can customize their cloud environments in a private cloud set up
  3. Regulatory Compliance: Organizations subject to strict data governance and regulatory compliance requirements can host and govern their data in an exclusive and private cloud storage environment
  4. Low-Latency Requirements: An internal private cloud removes latency related to physical distance and unreliable network connections, making it the most suitable for latency-sensitive workloads

Private Cloud Providers

Private cloud platforms are cloud providers’ private cloud solutions and services that organizations can utilize, instead of setting-up and managing their private cloud environments entirely on their own.

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Below are the top private cloud providers and a description of their offerings:

Microsoft Azure

Microsoft’s Azure Stack Hub allows organizations to deliver Azure services in private data centers to build a private cloud environment. Organizations may choose to connect their Azure Stack on-premise workloads to Azure in the cloud or maintain a disconnected, private environment. Also, Azure offers Azure ExpressRoute for establishing private, fiber connections between on-premise private cloud and Azure cloud environments.

READ MORE: Azure ExpressRoute – Benefits, Pricing, Providers, Locations


VMware Private Cloud is a service that allows organizations to virtualize and distribute their data center resources (compute, storage, and networking) among virtual machines (VMs) running enterprise workloads. Importantly, VMware supports virtual, hosted, and managed private cloud models. VMware’s products for private cloud include:

  • VMware Cloud Foundation: Integrated software stack for turn-key private cloud solutions
  • VMware Aria (vRealize Cloud Management): Platform for managing private and hybrid cloud deployments

IBM Cloud

IBM offers turn-key private cloud products and services, including:

  • IBM Cloud Pak System: Turn-key private cloud solution, including hardware and software needed to set up, operate, and manage a private cloud
  • IBM Cloud Private: Application platform that allows organizations to develop and run cloud-native applications in a private cloud
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Oracle Cloud

Oracle Private Cloud Appliance is an integrated hardware appliance that comes configured out-of-the-box. It is a complete, scalable data center with full-stack hardware and virtualization technology. In addition, Oracle also offers integration and managed cloud services.

Amazon Web Services (AWS)

Amazon Virtual Private Cloud (VPC) is an Amazon Web Services (AWS) offering for an isolated virtual networking environment. Organizations can set up Amazon VPC via the AWS service console and create private instances of AWS resources, such as Amazon Elastic Compute Cloud (Amazon EC2) for provisioning compute and storage, as well as Amazon Relational Database Service (RDS) for running databases.

Additionally, other AWS resources that complement Amazon VPC include:

  • AWS PrivateLink: For creating private connections between VPCs and AWS or on-premise services
  • AWS Transit Gateway: For connecting VPCs, internal networks, and users all through a central hub, to avoid complex peer-to-peer connections
  • AWS Client VPN: For providing secure access to Amazon VPCs and AWS resources to users from anywhere

Google Cloud

Google Cloud offers a virtual private cloud solution, known as Google Cloud Virtual Private Cloud (VPC). Overall, Google Cloud VPC’s features include a VPN for connecting internal networks to Google Cloud, private access to Google services like storage and analytics, and VPC Service Controls for enforcing security policies and controls.

READ MORE: Top 10 Cloud Service Providers Globally

Frequently Asked Questions

What is Private Cloud vs Public Cloud?

Private cloud refers to a cloud computing environment dedicated exclusively to a single organization, providing greater control, customization, and security. Public cloud, on the other hand, is a multi-tenant environment where computing resources are owned and operated by a third-party provider and shared among multiple organizations over the internet. For example, a company may choose to use a private cloud for sensitive data and critical applications, while utilizing public cloud services like Amazon Web Services (AWS) or Microsoft Azure for less sensitive workloads and scalability.

What is Private Cloud Storage?

Private cloud storage is a cloud computing model that provides an organization with a dedicated, secure, and scalable storage infrastructure. It allows the organization to store, manage, and access data in a virtualized environment hosted on-premises or in a third-party data center, offering complete control and customization over the storage resources. For example, a healthcare organization might implement private cloud storage to securely store and manage patient records, medical images, and other sensitive data while ensuring compliance with HIPAA regulations.

Does a Private Cloud Need Internet Access?

A private cloud does not necessarily require internet access to function, as it operates within a company’s own data center and network infrastructure. However, internet connectivity can be beneficial for remote access, data backup, and integration with external services. For example, a private cloud used for internal file sharing and collaboration may not need internet access, but one used for customer-facing applications or remote employee access would likely require a secure internet connection.

Mary Zhang covers Data Centers for Dgtl Infra, including Equinix (NASDAQ: EQIX), Digital Realty (NYSE: DLR), CyrusOne, CoreSite Realty, QTS Realty, Switch Inc, Iron Mountain (NYSE: IRM), Cyxtera (NASDAQ: CYXT), and many more. Within Data Centers, Mary focuses on the sub-sectors of hyperscale, enterprise / colocation, cloud service providers, and edge computing. Mary has over 5 years of experience in research and writing for Data Centers.


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