CIO — If you've been reading this series, you now have a better understanding of the much-discussed term "private cloud." In the previous two parts of this series, I described the features and service capabilities of private clouds. In particular, I noted that the move to private cloud computing requires the separation of infrastructure provisioning and business application resource consumption. In essence, a private cloud requires that resource requests and provisioning must interact as service requests and responses in an automated environment, avoiding any manual intervention.

Now I want to focus on benefits and challenges of a private cloud implementation. This week, I will discuss the "pros" of private clouds; next week, I will turn to the "cons."

Obviously, there's a lot of excitement about cloud computing. Many organizations are considering private clouds as the primary method to achieve cloud computing benefits. As an aside, private clouds are also sometimes known as internal, although a strong case can be made that the benefits of an internal cloud can also be obtained through a cloud provider, akin to a hosting service.

Since I've covered the overall benefits of cloud computing before, I won't repeat them here. There are many of them, which is why so many IT organizations are interested in the topic. Assuming you want to implement cloud computing and achieve those benefits, why does a private cloud make sense? The main advantages:

1. A private cloud leverages existing infrastructure

With some incremental investment, a company's existing data center can be made cloud-capable. Almost every organization has large amounts of installed equipment, much of it of recent vintage. Many of these organizations also have recently gone through significant data center upgrades or expansions. Turning to external cloud providers would require scrapping the installed base of equipment, necessitating a write-off—no music to the CFO's ears.

Instead, existing infrastructure can be used as the foundation of a new cloud computing capability. This is smart, finance-wise—and IT-wise. The CIO avoids presenting senior management with a message of "You know all that investment we made over the past two years? Well, the latest thing in IT, cloud computing, requires us to trash it and start over with someone else's infrastructure." Instead, he or she can say "You know all of that investment we made recently? I know you'll be glad to hear that it will help us move to the next level of IT support of our business goals—quick response to computing demands and easy scalability to meet changing business conditions." I don't know about you, but I'd much rather have that second type of conversation!

Most of the major vendors are coming out with add-on bits of kit that can be integrated into existing IT infrastructures to support automated provisioning and dynamic reassignment of resources. With some amount of incremental investment, a data center can be moved from efficient (high utilization) to agile (quick flexibility in face of changing demand profiles).

2. IT has no profit motive

External cloud providers have to turn a profit—and that profit comes from margin tacked onto basic costs. Internal IT, by contrast, focuses on providing efficient service in a cost-effective manner. By definition, running as a cost center bypasses the margin (i.e., cost) associated with profit. A private cloud offers the opportunity to achieve agility at a low price.

A more troubling prospect is the fact that so many IT organizations have been burned by previous outsourcing arrangements. You think the arrangements will be so much less expensive, but then it turns into a nightmare of change orders (more money), poor responsiveness (outsource provider cuts cost-heavy services to the bone), and lousy service (the carefully crafted SLA becomes a "target, not a commitment."). Internal IT is dedicated to one thing: business unit satisfaction. So keeping things inside and avoiding the need to turn a profit allows the overall company to benefit from cloud computing at the lowest possible price.

3. IT knows your business

Working with business groups builds IT tacit knowledge, which means IT has a rich context of understanding subtle elements of the way the overall business operates. Keeping the cloud private enables business units to harvest that tacit knowledge to get better systems and to increase end customer satisfaction. Marrying cloud computing with internal IT marries the best of both worlds. Furthermore, keeping IT functionality within the company enables personnel transfers back and forth between IT and business units, further enriching tacit knowledge. By contrast, arms-length service providers don't really understand your business, no matter what they say—and anyway, with lots and lots of customers, the attention external providers offer is split. Which brings us to the next "pro" for private clouds.

4. Ability to react more quickly to changing business conditions

Let's say something big changes in your business—not an individual application needing 500% more compute resources; after all, that's a problem cloud computing is supposed to solve. No, something really big—say your company buys another that is nearly as large. You need a ton of work to get ready.

An external cloud provider is going to work to contract, whereas people associated with a private cloud are more loyal to the company and will move heaven and earth to support the extra work. If the crunch comes, who would you rather rely on: an internal group, or an external provider?

5. An SLA that means something

I already noted that too many outsourcer SLAs are worth exactly the paper they're written on, which is to say, very, very little. External cloud providers offer no or restricted SLAs. Internal groups offer SLAs and, if the SLA isn't met, you have some influence over the group—you can always threaten to fire the CIO. By contrast, if an external cloud provider falls short on the SLA, you'll get a sympathetic meeting and an offer of a cut-price refund.

6. Privacy

Data privacy is a nightmare. Companies face large numbers of complex, poorly understood, and inconsistently enforced data privacy laws and regulations. Putting external cloud computing into the mix threatens to take a challenging situation and make it even more challenging. Many companies, when faced with adding additional complexity to existing privacy requirements, will punt on using an external cloud provider. Keeping the cloud private bypasses any potential problems posed by external cloud providers and makes cloud computing easier to accomplish.

7. IT staff motivation

Nothing is more demoralizing than watching your employer outsource some juicy new technology while asking you to patch a decrepit old application long past its prime. And for sure, if new cloud initiatives are placed with external providers, employees will quickly see that the way to gain new cutting-edge skills is to go to work for a cloud computing company. Keeping your cloud initiatives in-house will raise overall employee satisfaction, since it shows that long-term career growth is possible.

8. Incremental change

Rather than transforming the way IT is done in an instant, moving to a private cloud eases the transition. Putting private cloud computing in place enables the IT organization to begin reaping the benefits of the cloud without overturning every existing process. It's better to take a number of small steps rather than stumble trying to take a giant leap.

It's easy to recognize that the question about whether to do cloud computing is easy —it's a big yes. However, the decision about whether to implement a private cloud or use a public cloud is much more difficult. Many factors play into the decision. In this piece I've outlined some of the strongest reasons why companies should consider whether a private cloud makes more sense as an initial way to get started with the cloud. Next week, I'll look at the other side of the coin: why moving to a public cloud makes more sense—in the short and the long run.

Bernard Golden is CEO of consulting firm HyperStratus, which specializes in virtualization, cloud computing and related issues. He is also the author of "Virtualization for Dummies," the best-selling book on virtualization to date.

Cloud Computing Seminars HyperStratus is offering three one-day seminars. The topics are:
1. Cloud fundamentals: key technologies, market landscape, adoption drivers, benefits and risks, creating an action plan
2. Cloud applications: selecting cloud-appropriate applications, application architectures, lifecycle management, hands-on exercises
3. Cloud deployment: private vs. public options, creating a private cloud, key technologies, system management
The seminars can be delivered individually or in combination. For more information, see http://www.hyperstratus.com/pages/training.htm

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