There is no technical reason for private cloud to exist.
[update: to clarify, that doesn't mean that I'm against private clouds or don't think they exist, because $, FUD and internal politics are a fact of life that constrain what can be done. Change also takes time and you have to "go to war with the army you have". However, this post is about what happens if your organization reallocates the $, isn't afraid, and has effectively no internal politics getting in the way.
This post was written in the middle of a debate on twitter between @adrianco @reillyusa @beaker and others including key insights from @swardley.
You should also read Christian Reilly's follow-up post "The Hollywood Culture" http://bit.ly/ePsisJ and many thanks to @bernardgolden for pointing out the excellent Business Week cover story on Cloud Computing http://ow.ly/4dm07 - after reading it I was amazed how well it aligned with what I write here - then I saw that it was by Ashlee Vance, one of the most clueful journalists around.
Netflix ITops Security Architect Bill Burns also wrote a very interesting post on the security challenges of cloud, we've been working together and he's on the interview team for the "Global Cloud Security Architect" I mention below.]
Too big for public cloud? You should *be* a public cloud.
Organizations who run infrastructure at the scale of tens to hundreds of thousands of instances have created cloud based models and opened them up to other organizations as public clouds. Amazon, Google, Microsoft are the clearest examples, they have expertise in software architecture, which is why they dominate the API definition. Telcos and hosting companies are adopting this model to provide additional public cloud capacity, using clones and variants of the API. Other organizations at this scale are already figuring out how to expose their capacity to their customers, partners and supply chain. The task you take on is to simultaneously hire the best people to run your cloud (competing with Amazon, Google etc.), and run it at low cost, which is why you need to be at huge scale and you need to decide that running infrastructure is a core competency of your business. Netflix is too small, doesn't regard infrastructure as core, and doesn't want to hire a bunch of ITops people.
It costs too much to port our apps? Your $ are mis-allocated.
What does it cost to build a private cloud, and how long does it take, and how many consultants and top tier ITops staff do you have to hire? Sounds like a nice empire building opportunity for the CIO. The alternative is to allocate that money to the development organization, hire more developers and rewrite your legacy apps to run on the public cloud, and give the development VP the budget to run public cloud directly. The payback is more incremental and manageable, but this is effectively a re-org of your business to move a large chunk of budget and headcount around. This is what happened at Netflix. It probably takes an act-of-CEO at most companies, the barriers are mostly political. Yes it will take time, but so will bringing up a private cloud.
Replace your apps with Saas offerings.
Many internal apps can be replaced by cloud services, we just outsourced our internal help desk and incident management software. No-one I know does payroll in-house. This is uncontroversial and is happening.
We can't put confidential data in a public cloud? This is just FUD.
The enterprise vendors are desperate to sell private clouds, so they are sowing this fear, uncertainty and doubt in their customer base to slow down adoption of public clouds. The reality is that many companies are already putting confidential data in public clouds. I asked the question "when will someone using PCI level 1 be in production on AWS" at a Cloud Connect panel, and was told that it is already being done, and Terremark pointed out that they host H&R Block's tax business. There are several models of public cloud with different SLA, cost and operational models that can support confidential data securely. There is also an argument that datacenter security is not as strong as people would like to think, and that the large cloud vendors can do a better job than most enterprises at keeping the infrastructure secure. At Netflix, we are about to transition to a global cloud based business, we are currently hiring a "Cloud Security Architect" who understands compliance rules like PCI (the credit card standard) on a global basis (we didn't need global expertise before). Part of their job is going to be to implement this.
There is no way my execs will sign off on this! Do they care about being competitive?
The biggest champion at Netflix for doing public cloud and doing it "properly" with an optimized architecture was our CEO Reed Hastings. He personally argued that we should try to do NoSQL rather than MySQL to push the envelope. Why? Because the bigger risk for Netflix was that we wouldn't scale and have the agility to compete. He was right, we have grown faster than our ability to build datacenters, and we have the agility we need to outrun our competition. Netflix has never had a CIO in the first place, we do have an excellent VP of operations though, and there is plenty to do running the CDN's and Saas vendors that support Enterprise IT.
Will private clouds be successful? I think there will be a few train wrecks.
The train wrecks will come as ITops discover that it's much harder and more expensive than they thought, and takes a lot longer than expected to build a private cloud. Meanwhile their developer organization won't be waiting for them, and will increasingly turn to public clouds to get their jobs done. We could argue about definitions but there are private clouds that are effectively the back ends for specialized large scale ecosystems like engineering companies that have to interface to the things that build stuff, or operate in places where there is no effective connection into the public clouds. For example, on board a ship that has limited external bandwidth, or to support a third world construction project. My take is that these will be indistinguishable from specialized Saas offerings within a supply chain ecosystem.
How not to build a public cloud - The Netflix Way
Re-org your company to give budget and headcount to the developers, let them run the public cloud operations
Ignore the FUD, best practices and patterns for compliance and security already exist and are audit-able
Get the CEO to give the CIO a different MBO, to shrink their datacenter.