Public cloud or private cloud?

Enterprise IT executives are struggling to answer the question: Do we go with a private cloud solution or a public cloud solution to meet business demands? Or do we start with public and then switch to private once we catch up?Or do we do hybrid?And if we do hybrid, what goes where and why?

Start-up and expansion stage software companies in the cloud computing market are asking themselves what these IT executives will ultimately decide. Or rather, what portion of IT executives will decide what, and what market opportunities will surface from providing or enabling private, public, and hybrid clouds?

Venture capital investment funds are trying to answer these questions as well, as are large tech companies deciding on their business growth strategies and acquiring expansion stage companies in the cloud market.

Here’s what I’ve heard so far:

• Very large organizations are the only ones for whom it makes economic sense to build a true private cloud.For example, just this week it was announced that IBM is building a private cloud for NATO. NATO is a very large organization, and so for them this makes sense. A number of studies have concluded this by running the numbers, including this one, Microsoft’s recent white paper, and internal studies by large enterprises that are not public. 
• While compliance and security issues are holding enterprises back from public cloud providers today, the providers and the vendors servicing them will overcome these issues (for instance, Amazon recently achieved PCI Level 1 compliance).
• Enterprise compliance departments will become more used to the idea of sensitive data in public cloud computing environments, especially as they become more compliant and secure.
• Building private clouds is difficult. Turning on a public cloud instance from a 3rd party provider is easy. Even the large enterprises who intend to ultimately rely on a private cloud are likely to start with some sort of a public cloud deployment. 

Net net, this implies that the public cloud market will be much larger than the private cloud market over time. This post on 2011 cloud predictions captures this sentiment nicely.It notes:

• “You will build a private cloud, and it will fail”
• “Hosted private clouds will outnumber internal clouds 3:1.”
• “Cloud security will be proven, but not by the providers alone.” 

That said, both cloud markets will be sufficiently large enough to support a number of competing vendors. The public cloud market is just likely to tolerate more.