Private Cloud: is it worth the effort?

There is a lot of discussion in the big companies out there of the benefits of creating their own private clouds using their own server farms and whether it is worthwhile versus the full move to use external shared Public Cloud environments. Of course, SMEs don’t have this dilemma, they do not own as much hardware, and generally do not have the internal expertise to even consider a private version, so just use externally available services with no other option. Cheaper, more scalable, more efficient – let us watch some of the leading medium-sized firms leverage the technology to jump ahead of their bigger, less nimble peers.

So why even consider a Private Cloud? As I mentioned in a previous blog entry, it is the same business decision firms face when considering offshoring, with respect to captive offshore solutions, versus outsourced offshore solutions. It is also like the decision companies made whether to keep their services in house, ring fence them in an IT subsidiary, or purchase them in the free market. All of these dilemmas come with the boring-but-essential weighing of pros, cons, costs and benefits.

Ultimately, it is the fear of losing data security and control that is pushing the private cloud concepts, combined, dare I say, with a certain amount of job protection within the IT teams. As a result, it is no surprise that the concepts of private clouds are emerging, mainly in the highly regulated parts of the financial sector, but I also know of similar debate in the crunching of retail data emerging from store cards and other sectors. In these firms, there is a huge fear of putting their data out to providers, even with security safe guards and data compliance controls. The firms naturally do not want the regulatory and/or reputational risk of some form of client data exposure. Hence the idea of using their internal hardware farms which may be substantial, (banks may have more than 10000, some ten times that), to reap some of the benefits of the technology advances without the risk of letting data outside their corporate networks.  Not that data inside these networks is entirely safe from exposure!

The Private Cloud clearly gives companies comfort on their data security, but what is lost? Built correctly, their systems can scavenge CPU power that is unused today within their server environments to maximise the use of their internal capacity, an obvious one-off benefit, but the costs of upsizing or downsizing after that are just not feasible without enormous investment. Using the Public Cloud, you get what you want on demand, need less pay less, need more pay more, but it is there, instantly. The second issue is unit cost, again there maybe a one off benefit from improved efficient usage of current environments but without the economies of scale of the massive environments in the public domain internal unit costs are guaranteed to exceed the external unit prices.   So we return the to cost benefit that must be done to make the decision.  If the one off benefits of installation of the private cloud are lees than the one off saving then fine, but it must be worthwhile to consider the external opportunities too.

Even assuming that the cost benefit makes sense the problem remains on internal clouds of who pays …but that will be the subject of another blog post so watch this space….