Is it time to privatize the cloud?

Sure thing, the talking king heads of cloud have been preaching for a long time how public clouds will take over the world and become the new utility behemoths. The big (or early) ones – AWS, Azure, Google – have certainly seen rapid growth and this growth will likely continue for a long period of time. But, is the future all public cloud or does the private cloud have any chance to exist?

To answer this question, there are several dimensions to be considered. To start with, is the question of privacy of information. Even if a company may choose to go for a model of remote delivery of software (think Office 365), rules or just company policy will often require that sensitive data will be kept within the legal and physical control of the data owner (i.e., never made available to the cloud service provider). Recent news and the legal framework under which many major cloud service providers operate make this issue even more stringent and important and many companies will be legally bound to keep their data within their infrastructure – especially if operating in sensitive areas such as communications, financial system or government which make up a sizable chunk of the potential cloud clientele. In short, even if you discard the cost associated with shoveling a lot of data around, data privacy will be a serious catalyst for not embracing fully public cloud solutions.

The second aspect has to do with scale and simple economics. When your installation is small, operational costs will dominate and using a public cloud is the more sensible choice. As your business scales, at one point internalizing your infrastructure is simply more cost efficient, as many case studies with AWS will show you (think Netflix). Public cloud is a bit like a kickstarter thing to get rolling; once your business is ready for prime time, using a bank is a more sensible choice.

The third aspect has to do with the segmentation of the cloud market in terms of unique requirements. While initially a cloud service was just a uniform service, as the market is maturing more stringent and differentiated requirements come to the front. Whether it is real-time performance, availability, security or something else, segmentation is a fact of life – as illustrated by AWS’ differentiated offering. However with segmentation come additional costs and downsizing of individual segments where economies of scale will have to take a back seat.

Putting it all together – while public cloud providers have done a decent job kickstarting the industry, it’s time to re-focus on private cloud deployments. Public cloud will continue to grow, but private cloud demand – volume wise – will grow faster and will be a more differentiated market. How should big public cloud companies respond?

To stay relevant, they need to expand their customer base to those who would never use their public cloud offering. How? The answer is simple: privatize their cloud stack and sell it to those planning to build private clouds. Couple it with devops services and they can replicate their success at a totally different level. Compatibility with their public cloud will be a huge asset.

Are they ready?

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