There’s a reason why the buzz around cloud computing  never seems to die down: Concrete results are replacing the initial hype. Take, for example, Cisco Systems, whose size and success were not enough to shield its internal IT operations from one of the biggest headaches faced by IT managers everywhere.
Citing his company’s own experience and corroborating industry studies, Tony West, Cisco vice president and chief technology officer, points out that approximately 70 percent of IT spending goes to just maintaining the existing data center environment. Finding the time and allocating the resources for new initiatives that further the organization’s overall success get the leftovers, to the frustration of IT and enterprise managers alike.
But thanks to an ambitious private cloud project that began a couple of years ago, Cisco is bucking this budgetary tradition. Reduced managerial overhead and other private cloud benefits have shrunk costs for routine maintenance to less than 50 percent of Cisco’s total IT budget, which represents companywide savings of hundreds of millions of dollars.
Along with Cisco, many organizations are benefiting from private clouds. They are discovering that for security and compliance, the private cloud trumps the public cloud every time. What’s more, dollars can be saved. As outlined in a 2011 study by the Aberdeen Group, the private cloud saves a total of 12 percent combined annual costs over public clouds, on a per-application basis.
Budget considerations are an important driver for private clouds, but they are not the only ones. “With this services orientation, I can go to a service catalog and dial up capacity,” says Anil Desai, a consultant who specializes in cloud computing and virtualization technology.
A cloud’s ability to deliver services on demand means IT shops can meet the needs of organization managers more quickly than when new hardware must be purchased, tested and implemented. The traditional process can take weeks or months, while a well-functioning cloud can deliver additional capacity in minutes.
Private clouds also create a solid technical foundation for the so-called “post-PC era,”  where desktop computers are no longer the dominant end-user platform but are part of the mix that also includes thin clients, tablets and smartphones. Vital applications and data reside in the cloud, waiting to flow to any of these devices.
The enterprise can also use the self-healing nature of private clouds to bolster business continuity. For example, if a virtual machine crashes while running on a blade server in the private cloud, automated management controls can quickly move the VM to a healthy hardware device.
“If I’m an IT manager, I’m not spending my days thinking about storage systems or hard drives or CPUs or memory,” Desai says. “Instead, I have this big IT pool that can dynamically allocate resources on its own, without me having to sit there and reconfigure things.”
To understand the quick-win potential of private clouds, it is important to see how they fit within the larger cloud landscape. First, consider what defines a cloud. At the top of the list are shared pools of computing resources. So instead of individual departments or workgroups running a dedicated collection of servers, storage systems and applications, each entity taps into a central storehouse that may be used by multiple other “customers.”
Cloud insiders call this multitenancy, and the model may serve users within the same organization or include outsiders, depending on the particular cloud strategy being deployed. IT managers can rapidly provision the resources in this storehouse, so users receive IT capabilities to address their prevailing needs.
Also known as rapid provisioning, this capability should appear to cloud consumers to be essentially unlimited and accessible from any device with a network or web connection. Many clouds also use metering of resource usage, which becomes the basis for determining how customers will be charged for cloud services.
A number of cloud variations are born from these core capabilities. Most similar to a traditional IT operation is the private cloud, which resides in-house or perhaps is hosted by a third-party provider for the exclusive use of one customer.
This model is appealing because organizations do not share servers, databases, storage resources and applications with outsiders. This fact, for some cloud skeptics, alleviates the security fears associated with other cloud options.
But private clouds are not perfect. Management and maintenance demands on internal IT staff remain high, and businesses may need upfront capital investments to launch the cloud. Although there is greater scalability available within a private cloud than in a legacy environment, capacities are not theoretically limitless, as with some alternatives.
Public clouds also offer an alternative to in-house options. Third-party service providers maintain their cloud infrastructures for multiple users on a self-service, on-demand basis. Using a public cloud has significant appeal because it requires little to no infrastructure investment by the user organization and enables unprecedented levels of scalability.
And because each tenant shares the costs of the pooled resources, the cost to the individual customer may be lower than for in-house services. But many organizations still balk at the compliance, privacy, security and data availability associated with public services.
One compromise approach is the community cloud, where organizations with similar needs and security requirements share a common resource. Community clouds do not offer the exclusivity of private clouds or the full cost savings of public options, but they may strike an acceptable balance for some customers.
Others may opt for a hybrid cloud, which mixes and matches private and public clouds. In the most common scenario, an organization maintains a private cloud but has a contract in place that enables users to break out into a public cloud to obtain additional resources to meet unusual demands.
Deciding which cloud deployment method is best depends on a wide array of factors, including cost, internal control, performance needs, scalability requirements, security regulations and other considerations.
With this groundwork in place, organizations are ready to begin transitioning to a private cloud. Formal return on investment studies, service-level statistics and end-user surveys will eventually determine how well the strategy is working.
But an early indicator will be the attitudes of people in the IT department. “When they are no longer worried about what is going on with individual servers in the data center, they will be better able to deal with new business initiatives,” Desai says. “That’s when you know your private cloud is successful.”