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What is a Private Cloud?

• Cameron Hashemi-Pour,
• Stephen J. Bigelow, Senior Technology Editor
• Ben Lutkevich, Site Editor

Published: Jan 31, 2025

Private cloud is a type of cloud computing that delivers advantages similar to public cloud, including scalability and self-service, but through a proprietary architecture. A private cloud, also known as an internal or corporate cloud, is dedicated to the needs and goals of a single organization, whereas public cloud services deliver services to multiple organizations.

Private clouds are often deployed when public clouds are deemed inappropriate or inadequate for the needs of a business. For example, a public cloud might not provide the level of service availability or uptime that an organization needs.

In other cases, the risk of hosting a mission-critical workload in the public cloud might exceed an organization's risk tolerance. Security or regulatory compliance concerns related to the use of a multi-tenant environment also spur private cloud adoption. In these cases, an enterprise might invest in a private cloud to realize the benefits of cloud computing while maintaining complete control and ownership of its environment.

A private cloud is a single-tenant computing infrastructure and environment, meaning the organization using it -- the tenant -- doesn't share resources with other users. An organization can host and manage private cloud resources in a variety of ways.

The private cloud might be based on resources and infrastructure already present in an organization's on-premises data center. Conversely, it might be implemented on new or separate infrastructure, which is provided by the organization or a third-party organization. In some cases, the private cloud is a single-tenant environment enabled solely by virtualization software. In any case, the private cloud and its resources are dedicated to a single user or tenant.

The private cloud is one of three general models for cloud deployment in an organization; the other two are public and hybrid cloud models. There's also multi-cloud, which is any combination of the three. All three models share common elements of cloud infrastructure. For example, all clouds need an operating system to function. However, the various types of software -- including virtualization and container software -- stacked on top of the operating system determine how the cloud functions and distinguish the three main models.

A private cloud architecture is similar to other types of clouds, but it's used specifically for provisioning or isolating resources in private hardware environments. Private cloud features include the following:

• Dedicated hardware resources. Dedicated hardware ensures full security and isolation of a private cloud, and these resources work in addition to the broader security measures applied to a full cloud infrastructure or data center.
• Virtualization. This is important to cloud tech in general, as multiple instances of computing, storage, memory and networking resources based on the same underlying physical hardware are used by multiple users at once.
• Automation. Tasks involved in setting up private cloud infrastructures, which administrators would have to perform manually, are often automated with modern private cloud technology to simplify and speed up processes.
• Management software tools. Managers and administrators overseeing private clouds need centralized control, which they get through this software. These tools let them optimize security and give employees the permissions they need to access and use different resources.

A public cloud involves an independent third-party provider, such as Amazon Web Services (AWS) or Microsoft Azure, owning and maintaining compute resources that customers can access over the internet. Public cloud users share these resources in a model known as a multi-tenant environment. For example, public could users can provision virtual machine (VM) instances that share the same physical server, and they can create storage volumes that coexist on the same storage subsystem.

The private cloud fundamentally removes the sharing aspect of cloud computing, instead dedicating infrastructure and services to a single user. This is most easily and effectively accomplished by a business building its own private cloud. The goal is to provide the business with cloud-like flexibility, scalability and self-service while ensuring that only the business can use those private cloud resources.

However, public clouds have advantages. A public cloud is cost-effective because computing is provisioned as a utility, where customers only pay for the resources they use. Public cloud is also simpler to implement because the provider is responsible for most of the infrastructure.

Organizations that implement a private cloud are responsible for all of the ownership and management responsibilities present in a traditional data center design, such as power, cooling and hardware costs. Private clouds also face practical limitations in scalability and services because a single business might not have the finances or technical expertise to implement a full-featured cloud for private use.

A hybrid cloud is a model in which a private cloud connects with public cloud infrastructure, enabling an organization to orchestrate workloads -- seamlessly, ideally -- across the two environments. In this model, the public cloud becomes an extension of the private cloud to form a single, uniform cloud. A hybrid cloud deployment requires a high level of compatibility between the underlying software and services that the public and private clouds use.

This model can provide a business with greater flexibility than a private or public cloud because it lets workloads move between private and public clouds as computing needs and costs change.

A hybrid cloud is suitable for businesses with highly dynamic workloads, as well as businesses that deal in big data processing. In both scenarios, the business can split the workloads between the clouds for efficiency, dedicating host-sensitive workloads to the private cloud and more demanding, less specific distributed computing tasks to the public cloud.

While the hybrid model is more flexible, it sacrifices the total control of the private cloud and the simplicity and convenience of the public cloud.

Private clouds can differ in how they're hosted and managed, providing different functions depending on the needs of the enterprise:

• Virtual. A virtual private cloud (VPC) is a walled-off environment within a public cloud that enables an organization to run its workloads in logical isolation from every other user of the public cloud. Even though other organizations share the server, the virtual logic ensures that the VPC user's computing resources are private. Organizations can use a VPC to enable hybrid cloud deployment.
• Hosted. In a hosted private cloud computing environment, the servers aren't shared with other organizations. The service provider configures the network, maintains the hardware and upgrades the software, but a single organization occupies the server.
• Managed. This environment is a hosted environment in which the provider manages every aspect of the cloud for the organization, including deploying additional services such as identity management and storage. This option is appropriate for organizations that don't have staff equipped to manage private cloud environments alone.

The above list categorizes different types of private clouds by the way they're hosted and to what extent the provider manages them. Infrastructure is also a way to categorize different types of private clouds:

• Software-only. The vendor provides only the software necessary for the private cloud environment, which runs on an organization's preexisting hardware. A software-only option, such as OpenStack, is often used in highly virtualized environments.
• Software and hardware. Some vendors sell private clouds as an all-in-one bundle of hardware and software. It's generally a simple cloud platform that exists on the user's premises and might or might not be provider-managed environments. Examples include HPE GreenLake and Azure Stack.

The main benefit of a private cloud is that users don't share resources. Because of its proprietary nature, a private model is best for businesses with dynamic or unpredictable computing needs that require direct control over their environments. This model helps users meet security, business governance and regulatory compliance requirements.

When an organization properly architects and implements a private cloud, it can provide most of the same benefits found in public clouds. These include user self-service and scalability, as well as the ability to provision and configure VMs and change or optimize computing resources on demand. An organization can also implement chargeback or showback tools to track computing use and ensure business units pay only for the resources or services they use.

In addition to those core benefits inherent to both cloud deployment models, private clouds offer the following advantages:

• Increased security of an isolated network.
• Increased performance due to resources being solely dedicated to one organization.
• Increased capability for customization, such as specialized services or applications that suit the company.

Private clouds typically come with challenges and aren't perfect for every cloud implementation. These challenges include the following:

• Complexity. Private cloud technologies, such as increased automation and user self-service, result in considerable complexity. These technologies typically require an IT team to rearchitect some of its data center infrastructure and adopt additional software layers and management tools. As a result, an organization might have to adjust or even increase its IT staff.
• Expenses. When a business owns its private cloud, it usually bears the acquisition, deployment, support and maintenance costs. Hosted private clouds, while not outright owned by the user, can also be costly. The service provider takes care of basic network maintenance and configuration management in a hosted deployment, which means the user needs to subscribe and pay regularly for that offered service. This can end up being more expensive than the upfront cost of complete ownership in the long run. It also sacrifices some control over maintenance that complete ownership guarantees.
• Unreliability. Although users will still be operating in a single-tenant environment, providers are likely serving multiple clients and promising them each a catered, custom environment. If an incident occurs on the provider's end -- an improperly maintained or overburdened server, for example -- users might face the same problems that the public cloud presents: unreliability and lack of control.

Practical uses of private clouds are often found in industries that manage sensitive customer or patient data. In these cases, a business can host a private cloud in an on-premises data center or buy a private cloud service from major providers, such as AWS or Microsoft. Industries that rely on private clouds to maintain their data privacy and security include healthcare, finance and the government or public sector.

For example, banks are highly regulated and must comply with various laws when managing sensitive data. A private cloud secures customers' financial data, ensuring compliance with regulations that exist in the areas they operate. Some government agencies also require secure environments to manage data pertaining to private citizens, making private clouds a viable option.

A private cloud is commonly deployed on-premises in much the same way a business would build and operate its own traditional data center. However, an increasing number of vendors offer private cloud services that can bolster or even replace on-premises infrastructure.

Some of the key players in the private cloud market, according to Market Research Future, include the following:

• AWS. Amazon Virtual Private Cloud lets users launch AWS resources in an isolated virtual network, either on-premises or through a remote managed provider, to create a private instance of public AWS resources.
• Cisco. The vendor provides private cloud security offerings, including Cisco Firepower and Cisco Secure Workload, plus other tools for optimization, container management and application performance management.
• Dell. In addition to cloud management and cloud security software, Dell EMC offers VPC services through its Apex Private and Hybrid Cloud.
• HPE. The vendor's GreenLake offering provides a set of cloud services compatible with OpenStack, SAP, VMware and other components.
• IBM. IBM offers private cloud hardware along with its cloud security, management and orchestration tools. IBM owns Red Hat, along with its private cloud capabilities.
• Microsoft. Azure Stack helps build and run apps across data centers and edge locations, including remote offices and even the public cloud.
• Oracle. Private Cloud Appliance by Oracle enables compute and storage capabilities optimized for private cloud deployment.
• Rackspace Technology. Rackspace offers both public and private cloud approaches that can be customized for different use cases, such as data center consolidation or expansion.

Operating a private cloud on-premises is generally more expensive upfront than using a public cloud for computing as a utility. This is because of the back-end maintenance expenses that come with owning a private infrastructure and the capital expense of implementing one. However, a managed private cloud can mitigate those costs and, in some cases, even be cheaper than a standard public cloud implementation.

Vendors offer a few different pricing models for managed private clouds. The pricing model and price itself varies depending on the private cloud hardware and software offered and the level of management the vendor provides. Often the pricing is based on packages of hardware, software and services used in private cloud deployments. For example, VMware prices its virtualization platform vSphere using a yearly subscription and support model, with one annual price for vSphere Standard and a higher annual price for a production-level subscription, vSphere Foundation.

Rackspace, in partnership with HPE, offers a pay-as-you-go model for its private cloud, charging users on a service-to-service basis. The popularity of this pricing model is growing because of the rapid expansion in the cloud-based infrastructure market. This is driving the need for a more flexible and efficient pricing model.

Pricing models for managed private cloud deployments can get complicated. Many vendors don't offer a straightforward private cloud package. Instead, they sell a spectrum of different hardware, software and services that customers can use to deploy a private cloud. Often, the pricing for these products isn't clear on vendor websites, and buyers are prompted to speak with a salesperson. This is likely because private clouds -- and managed clouds, especially -- need to be tailored to an organization's needs. Buyers must understand which business processes require flexible and scalable cloud infrastructure to make informed choices when purchasing products.

As cloud computing advances, enterprises must understand cloud security management and its challenges. Learn how enterprises should tackle cloud security management.

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