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Public Clouds Vs. Private Clouds: Where Are The Opportunities?

As solution providers grapple with cloud computing, they must decide whether to offer private clouds or public clouds and determine which will generate the most revenue.

One debate rocking the cloud computing industry is whether public clouds or private clouds will be the dominant technology, and which will generate the most revenue for solution providers.

The recent divide between public and private clouds was sparked by industry experts suggesting that private clouds -- clouds behind the corporate firewall accessible only by people within that organization -- will fade over time and are nothing more than a stop-gap before taking it to the public cloud. Public clouds, like those offered by Amazon, Google and others, on the other hand, are clouds accessible by everyone from anywhere. The difference between private and public clouds is similar to the difference between the corporate LAN and the public Internet.

One argument against private clouds is the cost. While users have more perceived control, they pay a higher price, somewhat defeating the potential cost savings that drives companies to the cloud in the first place -- the promise of reduced capital expenditures and a monthly operational expense.

For solution providers, however, private clouds could drive more revenue than their public brethren, but some predict public clouds will be more ubiquitous in the future. This creates an interesting conundrum for solution providers: Where do they focus their attention to generate the most revenue?

"Private clouds will make the most money and drive the most revenue," said Vanessa Alvarez, a Frost & Sullivan analyst who examines cloud computing.

Alvarez broke it down like this: Public clouds are like typical utilities; users are guaranteed a certain level of service, but the playing field is more level, meaning if there's an outage, the users are subjected to the same outage as others using the same cloud. Private clouds, however, are more comparable to solar or wind power in that users have more control, more features and functions, but they pay a premium for the additional perception of security, manageability and reliability.

"Public clouds can offer some level of security and reliability, but private gives you that comfy feeling," she said.

Chris Pyle, president and CEO of Champion Solutions Group and Champion Cloud Services, said a lot of organizations are currently putting in private clouds and, for VARs, that drives a more traditional business model. VARs make money selling private clouds through discovery, assessments, software and hardware sales, implementation and the support that follows. Hooking clients into the public cloud, however, may not drive as much up-front revenue.

"You're not selling hardware, you're not selling software licenses," Pyle said.

Champion vice president of virtualization and cloud computing Kevin Vogl added that public clouds, however, enable solution providers to sell migration services and professional services to drive revenue.

"In the short term, if you're selling hardware, you're making more money," but he said the monthly annuity payments afforded by the public cloud model evens it out.

Basically, he said, there is money to be made in both public and private depending on the business model you have in place to support it.

Eric Berridge, co-founder of New York City-based solution provider Bluewolf, however, said private clouds can in essence defeat the purpose of cloud computing.

"I honestly don't see companies building technically what's called a private cloud," he said. "The rise of a private cloud is acknowledging that all of the integration work that's gone on for years with SOA and everything else has failed."

Next: What About Hybrid Clouds?

Berridge said the bigger opportunities depend on the services offered, but noted that traditional hardware and software VARs will find opportunities in private clouds that require infrastructure resources while public clouds is more of a business-process sell.

Ed Laczynski, CTO of LTech, a Bridgewater, N.J.-based cloud technology integrator and Google and Amazon cloud partner, said the public cloud currently offers VARs the strongest sales potential.

"There's a tremendous opportunity for the channel to leverage public clouds," he said. "The private cloud opportunities are in much larger enterprises."

He said public clouds offer the cost savings promised by adopting a cloud model, while private, or on-premise, clouds still carry the hardware and software capital expenses of legacy applications and equipment.

Laczynski added that public clouds are not a panacea; there are costs involved, just not as significant as building and managing a private cloud. And while some clients may worry about the level of control and security offered by public clouds, Laczynski said public clouds have evolved enough that they are on par with private clouds.

"Do you really have that safety that you think you have with a private cloud?" Laczynski asked, adding that private clouds can generate a strong up-front sale, but they have a lot of moving parts: power, infrastructure, hardware, software and others create more points of failure and potentially more holes to exploit. "Is it safer to keep your money in the mattress or in the bank?"

Because there are strong cases for selling both into private and public cloud environments, some solution providers and industry watchers suggest that hybrid clouds that combine elements of both the public and private arenas will offer the biggest opportunities. Through hybrid offerings, cloud VARs and vendors can enable integration between public providers like Amazon's Elastic Cloud (EC2) or Google with on-premise private cloud infrastructures.

"It's really the only world right now," Champion's Pyle said.

Michael Fraser, director of Las Vegas-based cloud platform vendor gCLOUD3, agreed that hybrid clouds are where solution providers will find success as the cloud computing market starts to gel.

"They still get to utilize a private cloud, but get the benefits of using some applications in the public cloud," he said, adding that companies are still trying to figure out exactly which path to take and wade through the marketing speak to get to the real value. "People really don't understand the difference between public and private clouds."

Rick McEachern, chairman, executive vice president and co-founder of LongJump, a Sunnyvale, Calif.-based cloud platform vendor, said VARs currently have to cater to what their clients need and want. While some companies may be apprehensive about using public clouds, that fear will dwindle over time.

"Ten years from now they'll realize it's fine out there," he said.

Still, McEachern said, both public and private clouds offer money-making opportunities, and it comes down to the business model and how they want to take solutions to market. Either way, with the amount of hype around the cloud and a lot of interest among clients, there will be enough cloud computing money to go around.

"If you're a VAR or systems integrator and you have the ability to do integration work, there's a lot of money to be made," McEachern said. "I think there's money to be made everywhere."

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