As cloud computing continues to transform the enterprise workplace, private cloud infrastructure is evolving in lockstep, helping organizations in industries like healthcare, government and finance customize control over their data to meet compliance, privacy, security and other business needs. 

According to a report from Future Market Insights (link resides outside ibm.com), the global private cloud services market is forecast to grow to USD 405.30 billion by 2033, up from USD 92.64 billion in 2023. 

What is a private cloud?

A private cloud is a single-tenant cloud computing model in which all of the hardware and software resources are dedicated exclusively to—and accessible only by—a single organization.

Private cloud combines the primary benefits of cloud computing (e.g., on-demand compute resources, elasticity, scalability) with the access control, security and resource customization of on-premises infrastructure through a self-service portal or interface.

In a private cloud, a single organization is typically responsible for all private infrastructure, whether hosted in-house within a company’s physical location, in an off-site data center on infrastructure owned or rented by a third party, or on a public cloud service provider’s infrastructure. Moreover, while an organization may choose to run and manage a private cloud themselves, they frequently outsource partial or full management to a third-party provider. All the major public cloud providers (e.g., Amazon Web Services (AWS), Google Cloud, IBM Cloud, Microsoft Azure) and technology companies like VMware and Red Hat offer private cloud platforms and solutions.  

Enterprise organizations in industries that need to meet strict regulatory compliance standards or comply with data sovereignty laws (manufacturing, energy, oil and gas) frequently choose private cloud environments when they need to meet strict regulatory standards. A private cloud also provides an ideal setting for companies with workloads that deal with confidential documents, intellectual property, personally identifiable information (PII), medical records, financial data or other sensitive data.

Private cloud vs. public cloud vs. hybrid cloud 

Before we delve further into private cloud, it’s worth reviewing the three main types of cloud computing models—private, public and hybrid.

In a public cloud, a third-party service provides computing resources (e.g., ready-to-use software applications, virtual machines (VMs), enterprise-grade infrastructures and development platforms) available to users over the public internet on a pay-per-use or subscription-based pricing model. In contrast to the single-tenant architecture of a private cloud, a public cloud adheres to a multi-tenant architecture where end-users share a pool of virtual resources that are automatically provisioned for and allocated to individual tenants through a self-service API interface.  

A hybrid cloud unifies public cloud, private cloud and traditional on-premises to create a single, flexible and cost-efficient IT infrastructure. According to the IBM Transformation Index: State of Cloud, more than 77% of business and IT professionals have adopted a hybrid cloud approach, which combines automation, artificial intelligence (AI) and other cutting-edge technologies to centralize control and visibility, creating a single pane of glass that optimizes cost, performance, compliance and security across all environments.

Today, most enterprise organizations combine hybrid cloud with multicloud, which refers to using different services from multiple cloud service providers. A multicloud setting helps clients avoid vendor lock-in and allows them to run the most optimal computing environment for each workload. 

For a deeper dive, check out our blog post, “Public cloud vs. private cloud vs. hybrid cloud: What’s the difference?“

Private cloud service models

All three cloud deployment models support the following four primary cloud services:

• Infrastructure-as-a-service (IaaS) delivers on-demand compute, network and data storage resources over the internet and on a pay-per-usage basis. IaaS allows organizations to scale and shrink resources as needed, reducing the need for high, up-front capital expenditures associated with traditional IT infrastructure.
• Platform-as-a-service (PaaS) offers organizations a complete cloud platform (e.g., hardware, software and infrastructure) for developing, running and managing applications—minus the cost, complexity and inflexibility of building and maintaining that platform on-premises (also referred to as “on-prem”).
• Software-as-a-Service (SaaS) allows users to connect to and use cloud-based apps (e.g., Zoom, Adobe, Salesforce). A SaaS provider operates, manages and maintains the software and the infrastructure running that software. SaaS is the most common public cloud computing service.
• Serverless enables developers to build and run cloud-native applications without having to provision or manage servers or backend infrastructure. Serverless simplifies development and supports DevOps practices by allowing developers to spend less time defining the infrastructure required to integrate, test, deliver and deploy code builds into production.

Private cloud architecture

Private clouds share the same underlying technology as public cloud and hybrid cloud models, including the following:

• Virtualization: Foundational to cloud computing, virtualization uses software to create an abstraction layer over computer hardware, enabling the division of a single computer’s hardware components (e.g., processors, memory and storage) into multiple virtual machines (VMs). Each VM runs its own operating system (OS) and behaves like an independent computer, even though it runs on just a portion of the underlying computer hardware. By maximizing the utilization of hardware, virtualization allows hardware to be shared efficiently across multiple users and applications, providing the scalability, agility and elasticity of the cloud. 
• Managed software: Management console software gives administrators full control over the infrastructure and applications running in a private cloud setting, allowing them to optimize security, availability and resource utilization.
• Automation: Cloud automation tools run on top of virtual environments and speed tasks (e.g., server provisioning, integrations), reducing the manual work associated with provisioning, configuring or managing cloud environments and making self-service resource delivery possible. Automation also underpins other essential cloud functions, including automatic scaling, containerized orchestration with tools like Docker and Kubernetes, and DevOps workflows.
• Cloud-native applications: Cloud-native refers to a software approach for building and deploying microservices (also called microservices architecture) in which a single application comprises many smaller, loosely coupled and independently deployable components or services. These modern tools allow teams to update applications quickly and frequently to meet the demands of modern business by improving customer experiences.

Private cloud types

There are four main types of private cloud infrastructure.

On-premises private cloud

An on-premises cloud is hosted on-site and managed by an organization’s IT team. While an on-premises cloud provides high control over security, it can be costly to maintain as it requires upfront and recurring capital expenditures.

Virtual private cloud

A virtual private cloud (VPC) is a public cloud service capability that creates a private cloud-like environment on public cloud infrastructure. All resources (e.g., compute, storage, CPU and networking capacity) are abstracted from the physical hardware and shared among virtual machines (VMs) or containers. A VPC allows clients to define and control isolated virtual networks and then deploy those cloud resources into those networks.

Hosted private cloud

Hosted private clouds are run off-prem on a cloud service provider’s servers. Unlike a VPC, where organizations share servers with other customers, a hosted private cloud uses servers designated for a single organization’s exclusive use or-prem or in a remote data center.

Managed private cloud

A managed private cloud is a single-tenant environment where the responsibility for managing and maintaining the cloud’s infrastructure is outsourced to a third-party service provider. Physical hardware (e.g., cooling systems, bare metal servers, storage devices, networking equipment) is often housed in the cloud service provider’s data center, or these infrastructure components can reside an enterprise’s own data center. Beyond hosting and management platforms, CSPs offer many other private tools and solutions, including monitoring and reporting, private cloud storage, disaster recovery (DR) and more.

Benefits of a private cloud

A private cloud computing environment offers the following distinct benefits: 

• More control over resources: Private clouds give companies more control over their IT resources with configurations maintained by internal IT team members. Moreover, this level of control enhances the flexibility needed to scale resources up or down as needed. 
• Customization: Private cloud deployment allows organizations to customize servers and software based on security, compliance and performance needs.
• High security: Certain industries, like insurance, are more prone to data breaches and cyberattacks. A private cloud offers greater visibility and access control by storing sensitive data and applications behind private firewalls. Other customized cloud security measures that help limit the attack surface include virtual private networks (VPNs), data encryption and API keys.
• Predictable costs: While a public cloud is based on a pay-per-use model, unforeseen costs and wasted spending related to unplanned traffic spikes or idle workloads can occur. Private cloud settings can be very cost-effective as they allow organizations to exercise more control over the resources based on their business needs.
• Low latency: A private cloud offers reduced latency as resources are all based in an on-premises data center or in a managed private cloud, where resources are utilized only by one customer.
• Performance optimization: Because it provides enhanced control, a private cloud enables an organization to adjust its infrastructure to ensure high performance and run optimal workloads.

Top six private cloud use cases  

Here are six ways organizations use a private cloud to support ongoing digital transformation and create business value.

1. Data privacy and compliance requirements

Because of their limited access, private clouds are excellent environments for businesses with data protection, compliance or regulatory concerns. For instance, all US healthcare companies must adhere to the HIPAA Privacy Rule, the federal law that requires the creation of national standards to protect sensitive patient health information from being disclosed. A private cloud allows healthcare organizations to utilize administrative and physical controls designed to store and safeguard protected health information (PHI).

2. Private cloud storage

Private cloud storage enables companies like finance institutions to protect sensitive data and control who has access to that data.  For instance, only those administrators or team members who have been granted permission can interact with customer data through a private connection like a virtual private network (VPN).

3. Application modernization

Many companies use private clouds to modernize legacy applications as part of their application modernization journey. Private clouds can be customized to handle sensitive workloads, creating a smooth and secure transition to the cloud. 

4. Hybrid multicloud strategy

Private cloud plays a crucial part in a hybrid multicloud environment, which gives organizations the control and agility to choose the best cloud environment for each workload. For instance, with a hybrid cloud strategy, a bank can store sensitive customer information in a private cloud and use a public cloud to develop and test new applications, like a loyalty program for its mobile platform.

5. Edge computing

Edge computing is a decentralized approach that brings storage and computing power closer to where data is created. For instance, healthcare organizations can leverage IoT and other edge devices to conduct remote patient monitoring. Private cloud infrastructure can be deployed at the edge, where sensitive data can then be processed locally. This capability allows healthcare practitioners to make data-driven decisions in real-time while adhering to patient privacy rules. 

6. Generative AI

Today, companies are beginning to leverage generative AI capabilities across cloud settings, including private cloud. For instance, generative AI models can strengthen security by analyzing historical data and identifying patterns and anomalies in private cloud infrastructure that reveal threats in real-time. 

Private cloud solutions with IBM

As a leader in hybrid cloud solutions, IBM helps clients customize the best private cloud environment to meet their needs. For instance, IBM Cloud® Virtual Server for VPC offers fast-provisioning compute capacity with the highest network speeds and most secure, software-defined networking resources available on the IBM Cloud.