Public Cloud, NOT Private Cloud

Public Cloud, NOT Private Cloud

Moving physical hardware and software to a private cloud is often the first step in delivering IT-as-a-service. In fact, private cloud means corporate applications and datacenter resources are delivered as services to users from behind the company’s firewall. Many IT leaders believe that private clouds address the top concerns of public clouds – that is, data control, enterprise security and regulatory compliance issues. However, public cloud companies like AWS, Google and Microsoft have effectively addressed these concerns with their offerings. The key difference then is that the private cloud does not contain the inherent benefits of the public cloud. For infrastructure, these benefits include:

1. Dramatically Increase Speed and Agility – Provision hundreds or thousands of new servers in minutes with self-service versus it taking 6-20 weeks to provision new servers on-premises.

2. Go Global in Minutes – Run applications and servers in global regions to create better experiences and lower latency for customers.

3. Lower Variable Expenses than Companies Can Do Themselves – Most vendors use the economies of scale to pass on savings to customers in the form of low prices.

4. Stop Spending Money on “Undifferentiated Heavy Lifting” – Take scarce resources (engineering) and focus them on high-value activities, NOT un-differentiated activities (infrastructure).

5. Trade Capital Expenses for Variable Expenses – Instead of laying out capital for on-premises software and physical datacenters, get started for $0 and pay as you go.

6. You Do Not Need to Guess Capacity – Match capacity to customer demand without wasting capital or resources by automatically scaling services up and down.

None of the benefits above exist in the private cloud. So, why are companies still positioning it? Companies like AWS are providing IaaS via a high volume, low margin business model, which is very disruptive to the status quo. Old guard companies like IBM and HP have been used to realizing 60%-80% margins over the last 20 years (high margin, low volume). These companies continue to position the private cloud to defend their existing businesses. The trend is that in five, 10 or 20 years, very few companies will own corporate datacenters. Because of the limitations of the private cloud, it is safe to bet that old guard companies will continue to lose market share.

All contents copyright © 2013, Josh Lowry. All rights reserved.

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