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.”

Yes, yes, we know. Lies, damned lies and statistics. Still, this recent forecast from IDC (specifically, from its Asia/Pacific research division) caught my attention, as I’ve heard various analysts rattle off similar predictions here and there:

After five years of cloud hype, real examples of its business benefits are starting to present themselves. Cloud services and technologies are no longer simply used to replace aging or costly on-premises infrastructure and the scene will continue to evolve in the next few years.

However, in terms of the number of vendors in the market, IDC is of the view that about 30% of suppliers currently in the cloud market will be out of business by 2015 as it is a relatively new market with many players entering and leaving the playing field. Therefore, it is imperative for CIOs to ensure due diligence when selecting a cloud service provider.

It probably comes as no surprise that such a young market will experience some consolidation, but one out of three? Yikes.

I checked in with the analyst behind this research, Chris Morris — vice president of for Asia/Pacific cloud services and computing research and director of IDC’s regional services research — to see if this consolidation will be global or specific to APAC. Here are his thoughts:

You will find that this will be a universal phenomenon in the cloud business. Competition is very strong with the current market actually being relatively small. For a new start-up, generating cash-flow to support their start-up and R&D costs can be slow, especially in emerging markets where there is a more cautious approach to public cloud. For an existing ISV with existing revenue streams from traditional licenses, making the transition from license-based business models to a subscription-based can also be difficult, as they essentially have to cannibalize their own business to make the move.

So some will falter and fall from business causes, while others — those who pick a business niche based on either industry vertical or horizontal business process — will be ripe for acquisition by the likes of IBM, Oracle, SAP et al.

But those 30% which fall from view will likely be replaced by at least that many new entrants. So for the CIO and any vendor managing an ecosystem of partners, managing the market churn will be onerous.

Cloud providers, consider yourself on notice.

Image courtesy of ajc.com.

Although the cloud still has its skeptics, some new research from International Data Corporation (IDC) suggests their influence is going to dwindle — and fast.

Global spending on public cloud IT services is expected to exceed $40 billion by the end of this year, IDC reports. By 2016, cloud spending will approach $100 billion.

Over this four-year period, that represents a 26.4% compound annual growth rate. That’s five times as fast as the IT industry overall, according to IDC.

Which cloud services are going to be the hottest markets? IDC says Software as a Service (SaaS) will “claim the largest share” of cloud services spending over the next five years. Interestingly, however, cloud storage and Platform as a Service (PaaS) will grow faster.

This probably comes as no surprise to cloud providers. Infrastructure as a Service (IaaS) is on track to become commoditized (if it hasn’t already), and cloud providers are recognizing that selling SaaS and PaaS will be more profitable over the long term.

From a geographic perspective, the United States will occupy the largest share of the cloud market, IDC reported. Following closely behind the U.S. are Western Europe and the Asia-Pacific region (minus Japan). But the fastest-growth area for cloud spending? Emerging markets, whose “collective share [will] nearly double by 2016 when it will account for almost 30% of net-new public IT cloud services spending growth,” according to IDC.