Cloud Provider Commentary

Mar 5 2013   11:47AM GMT

Market for ‘hosted private cloud’ services to surpass $24B in 2016

Jessica Scarpati Jessica Scarpati Profile: Jessica Scarpati

I admit that when I first heard about “hosted private cloud” (sometimes called “virtual private cloud”) a few years ago, I was deeply skeptical. Some providers were just re-branding their dedicated managed hosting offerings and slapping a cloud label on them. I recall one person who worked for cloud provider telling me that there was no difference between the two. Really?

Cover cloud long enough and chances are you’ll become this guy.

The marketing around these services also struck me as a little odd. They would be billed as having “true enterprise-grade security,” which always seemed to send the message that their public cloud services were… what? Not secure? Marginally secure? Amateur hour?

But legitimate “hosted private cloud” offerings finally found a home in the market, embodying all of the other characteristics of a cloud service except multi-tenancy. Here’s how market research firm IDC explains what hosted private cloud really means:

At the highest level, there are two types of deployment models for cloud services: public and private. Public cloud services are designed for a market and are open to a largely unrestricted universe of potential users who share the services. Private cloud services are designed for a single enterprise and have user-defined and controlled restrictions on access and level of resource dedication.

Hosted private cloud is a composite view of two private cloud services deployment models, both of which offer customers and providers very different choices about resource dedication, tenancy cost, user access/control of the computing asset, and real and perceived security structures in place. The two HPC deployment models are:

  • Dedicated Private Cloud: This model offers dedicated 1:1 physical compute and storage resources focused on the needs of one enterprise or extended enterprise. This model offers the greatest customer control over their contracted resource. Examples of dedicated private cloud service offerings include Amazon EC2 Dedicated Instances, IBM SmartCloud Enterprise, Savvis Symphony Dedicated, and Rackspace Cloud: Private Edition.
  • Virtual Private Cloud: This model is an adjunct of public cloud services with shared virtualized resources and a range of customer control and security options distinct from most public cloud services. Examples of virtual private cloud service offerings include Amazon Virtual Private Cloud (VPC), IBM SmartCloud Enterprise Plus, Savvis Symphony VPDC/Open, and Rackspace RackConnect.

Now, IDC forecasts that worldwide revenue for hosted private cloud services will surpass $24 billion in 2016, anticipating that the virtual private cloud approach will be the predominant model. IDC also expects the overall hosted private cloud market to experience a compound annual growth rate of more than 50% between 2012 and 2016.

Here’s some more interesting analysis from its press release:

[T]he majority of dedicated private cloud buyers will be those companies with existing IS outsourcing or hosted infrastructure services contracts. Potential buyers of dedicated private cloud services will place a premium on off-loading the asset management burden and on operational reliability, over and above other cloud features such as scalability, granular billing, and customer self-service.

When dedicated private cloud grows, the winners are likely to be large incumbent packaged software providers and equipment providers, global systems integrators, professional services firms, and telecommunications service providers. These providers are working mightily to build single-vendor stacks, providing all the underlying components from bare metal to “trusted partner applications.” But if virtual private cloud becomes the dominant provider-based model, as IDC expects, it will be more like a public cloud model with mostly standardized, virtually dedicated assets, which means a vastly different set of vendors will benefit.

“Not even the largest technology incumbents can sustain IT market leadership without achieving leadership in cloud services. Quite simply, vendor failure in cloud services will mean stagnation,” added [Robert] Mahowald[, Research Vice President, SaaS and Cloud Services]. “Vendors need to be doing everything they can – today – to develop a full range of competitive cloud offerings and operating models optimized around those offerings.”

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  • Jessica Scarpati
    [...] Market for 'hosted private cloud' services to surpass $24B in 2016TechTargetI admit that when I first heard about “hosted private cloud” (sometimes called “virtual private cloud”) a few years ago, I was deeply skeptical. Some providers were just re-branding their dedicated managed hosting offerings and slapping a cloud label …Private Clouds Growing at a 50 Percent Clip, IDC SaysIT Jungle [...]
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