What is private cloud?

Private cloud combines many of the benefits of cloud computing—including elasticity, scalability and ease of service delivery—with the access control, security and resource customization of on-premises infrastructure. 

Many companies opt for private cloud rather than public cloud, which provides computing services over infrastructure shared by multiple customers. They do so because private cloud offers a simpler—or at times, the only—way to meet regulatory compliance requirements. 

Others choose private cloud solutions because their workloads handle confidential documents, intellectual property, personally identifiable information (PII), medical records, financial data or other sensitive data.

By building private cloud architecture in line with cloud-native principles, organizations gain the flexibility to move workloads to a public cloud with ease. This flexibility is crucial in modern hybrid multicloud settings, which combine public and private cloud services from at least two cloud service vendors.

The demand for private cloud’s security and related compliance features is fueling market growth. In a report from Future Markets Insights, the global private cloud services market is expected to rise from a value of USD 124.6 billion in 2025 to USD 618.3 billion by 2035.¹

A private cloud is a single-tenant environment, meaning that all resources are accessible to a single customer. This restriction is referred to as isolated access.

Private clouds are typically hosted on-premises in the customer’s data center. But, private clouds can also be hosted on an independent cloud provider’s infrastructure or built on rented infrastructure housed in an off-site data center.

Management models also vary—the customer can manage everything itself or outsource partial or full management to a cloud service provider (CSP). CSPs include Amazon Web Services (AWS), Google Cloud, Microsoft Azure or IBM Cloud®. 

Single-tenant design aside, private cloud computing is built on the same technologies as other clouds, allowing customers to provision and configure virtual servers and computing resources on demand. These cloud technologies enable organizations to scale quickly and efficiently in response to usage spikes, implement redundancy for high availability and optimize overall resource use.

These technologies include:

• Virtualization
• Cloud management software
• Automation

Building a private cloud enables all enterprises—even those enterprises in highly regulated industries—to avail themselves of many of the benefits of cloud computing without sacrificing security, control or customization.

Specific advantages of private cloud include:

• Control: Private cloud provides full control over hardware and software choices. Private cloud customers are free to purchase the hardware and software they prefer rather than what is offered by the cloud service provider.
• Customization: Private cloud customers can configure servers any way they want and tailor software as needed with add-ons or custom development.
• Greater visibility: Because all workloads run behind the customers’ own firewall, a private cloud offers visibility into security and access controls.
• Enhanced security: Specific sectors (for example, government agencies, law enforcement) require greater protection against data breaches and cyberattacks. Private cloud features include firewalls, virtual private networks (VPNs), data encryption and application programming interface (API) keys.
• Regulatory compliance: Private cloud customers do not have to rely solely on the industry and regulatory compliance offered by the cloud service provider. This feature is essential for highly regulated sectors like insurance and finance, as it enables them to tailor their environments to their regulatory requirements.

The chief disadvantage of private cloud is its cost. Costs can include purchasing, installing and managing new hardware and software, which might involve hiring more IT staff.

Another disadvantage is limited flexibility. After an organization invests in hardware and software for its private cloud, adding capacity or new capabilities requires more purchases. Virtual private cloud and managed cloud services can lessen these disadvantages.

For a deeper dive, check out “The advantages and disadvantages of private cloud.”

Public cloud is a multi-tenant cloud environment, where the same computing resources are shared among multiple customers—sometimes hundreds or thousands of them.

In public cloud, an independent cloud services provider owns and maintains the infrastructure, and access to resources is offered on a subscription or pay-per-use basis.

The model is analogous to how we purchase utility services, such as access to a municipal water supply or electric power in our homes.

Public cloud does not offer the complete control and customized security of private cloud deployment, but provides significant benefits in exchange, including:

• Greater elasticity and scalability: In the public cloud, a customer can add capacity to handle unanticipated traffic surges without purchasing or installing new hardware.
• Lower cost of entry: Most customers can begin using public cloud services without having to add their own physical compute resources.
• Faster access to the latest technologies: Often, economies of scale enable cloud providers to offer the latest hardware and software faster than customers could if they had to purchase and install them themselves.

For a closer look at public cloud, see the following video.

A hybrid cloud integrates on-premises, public and private cloud environments. In this model, the two cloud platforms combine into a single, flexible infrastructure, enabling the enterprise to choose the optimal cloud environment for each application or workload. 

To make the best use of this type of cloud computing, an enterprise must rely on technologies and orchestration tools that enable seamless migration across both environments. This approach ensures that performance, cost, compliance and security requirements are met effectively.

A hybrid cloud strategy can enable an ideal division of labor. An enterprise can keep sensitive data and applications that can’t easily be migrated to the cloud in its on-premises data center. At the same time, it can use the public cloud for access to software as a service (SaaS) applications and any additional platform, storage or compute capacity it might need.

According to the 2022 IBM Transformation Index: State of Cloud, more than 77% of business and IT professionals have adopted a hybrid cloud approach. 

For more in-depth information, check out “Public cloud versus private cloud versus hybrid cloud.”

There are four basic types of private cloud infrastructure:

• On-premises private cloud
• Virtual private cloud
• Hosted private cloud
• Managed private cloud

With an on-premises private cloud, an organization is in charge of everything, from purchasing software and hardware to ensuring the operations of its data center and carrying out all necessary security measures.

On-premises private cloud requires significant upfront capital expenditures, ongoing operational costs and complex management.

A virtual private cloud (VPC) is a service from a public cloud provider that creates a private cloud-like environment on public cloud infrastructure.

In a VPC, virtual network functions and security features enable a customer to define and control a logically isolated space in the public cloud. This space mimics the private cloud’s enhanced security within a multi-tenant environment.

VPC customers can benefit from the public cloud’s resource availability, scalability, flexibility and cost-effectiveness, all while retaining much of the security and greater control of private cloud. Usually, a VPC is less expensive to build and simpler to manage than an on-premises private cloud.

In hosted private clouds (also called private cloud hosting), the cloud service provider owns and controls various assets (for example, cloud storage maintenance, cloud security tools).

Hosted private clouds use bare-metal servers as dedicated servers and are operated off-premises on servers maintained by the CSP.

This model differs from a VPC in that a managed private cloud is a single-tenant environment. Responsibility for managing and maintaining the infrastructure is outsourced to a third-party provider. The physical hardware of a managed private cloud usually resides in the service provider’s data center.

However, vendors also offer management services for infrastructure located in an enterprise’s own data center. Managed private clouds offer greater customization than a multi-tenant environment and incorporate the usual security benefits of a private cloud, but they are more expensive than public cloud or VPC options.

Also known as internal cloud or internal storage, private cloud storage uses cloud service delivery models to provide storage to an enterprise. Data is stored within the data center on a dedicated infrastructure, but access is delivered to business units—and possibly partner organizations—as a service.

This approach allows the enterprise to leverage some of cloud computing’s benefits—such as elasticity and rapid provisioning—while retaining a single-tenant architecture.

Beyond data privacy and control, here are some of the most popular ways that organizations rely on private cloud to support their business initiatives. For a deeper look, check out “Private cloud use cases: 6 ways private cloud brings value to enterprise business.”

• Application modernization
• Hybrid multicloud strategy
• Edge computing
• AI-driven security

Private cloud supports application modernization by providing the infrastructure and flexibility to upgrade the platforms and architectures of legacy applications.

This support enables users to adopt cloud-native application architectures and practices, such as DevOps, containerization and microservices, while maintaining control over their environment.

Private cloud plays a critical role in a hybrid multicloud strategy, enabling organizations to control and achieve agility by choosing the best cloud environment for each workload.

This includes deciding how to leverage the best service offerings, such as IaaS, PaaS and SaaS, as well as other cloud services.

Organizations can also tap into private cloud infrastructure at the edge to process sensitive data locally.

This capability allows industries such as finance and healthcare to make real-time, data-driven decisions while maintaining compliance with privacy regulations.

Today, companies are leveraging artificial intelligence (AI) in private cloud environments.

Use cases include security operations, where AI models can strengthen defenses by analyzing historical data and identifying patterns and anomalies. These models can also detect threats in real time.