The two types of private cloud are on-premises private cloud, which runs in your own data centre on hardware you own and operate, and hosted private cloud, which runs on dedicated infrastructure in a provider's data centre. Both serve one organisation only. The difference is where the hardware sits and who runs it.
Key takeaways
- NIST defines a private cloud as cloud infrastructure for the exclusive use of one organisation, which may sit on or off premises and be run by the organisation, a third party or both.
- On-premises private cloud gives the most control but needs capital investment, data-centre space and a team to run it.
- Hosted private cloud moves hardware and facilities to a provider while keeping the infrastructure dedicated to you.
- A virtual private cloud (such as Amazon VPC) is a logically isolated network inside a public cloud. It is often confused with private cloud but runs on shared infrastructure.
- On-premises extensions of public cloud, such as AWS Outposts and Azure Local, blur the line by bringing provider-managed services into your own site.
What is a private cloud?
A private cloud gives one organisation cloud-style self-service, pooling and automation on infrastructure that is not shared with other customers. The NIST definition of cloud computing (SP 800-145) describes it as infrastructure "provisioned for exclusive use by a single organization" that "may be owned, managed, and operated by the organization, a third party, or some combination of them, and it may exist on or off premises".
That last part is where the two types come from: on premises or off premises.
What is an on-premises private cloud?
An on-premises (internal) private cloud runs in your own data centre or server room. You buy the servers, storage and network, install a virtualisation and cloud management layer, and operate the whole stack.
Where it fits: strict data residency or sovereignty rules, low-latency links to factory or lab equipment, existing data-centre investments with years of life left, and workloads with steady, predictable demand.
Trade-offs: high upfront cost, hardware refresh cycles, capacity you must plan ahead, and the need for staff who can run virtualisation, storage, networking and security around the clock.
What is a hosted private cloud?
A hosted (external or managed) private cloud runs on hardware dedicated to you in a service provider's data centre. The provider supplies the facility, power, cooling and usually the hardware and its maintenance. Depending on the contract, the provider may also run the virtualisation layer and operating systems.
Where it fits: organisations that need dedicated infrastructure for compliance or licensing reasons but do not want to run a data centre, and companies leaving their own server rooms.
Trade-offs: less physical control, dependence on the provider's contract and exit terms, and typically less elastic capacity than public cloud, because hardware is still sized for you.
On-premises vs hosted private cloud: how do they compare?
| On-premises private cloud | Hosted private cloud | |
|---|---|---|
| Location | Your data centre | Provider's data centre |
| Hardware ownership | You | Usually the provider, dedicated to you |
| Cost model | Capital expense plus running costs | Monthly or contract fee |
| Control | Full, down to the hardware | High, within the contract |
| Staff needed | Facilities, hardware, virtualisation, security | Fewer; the provider covers facilities and often hardware |
| Scaling | Buy and install more hardware | Order more dedicated capacity from the provider |
| Typical driver | Sovereignty, latency, existing investment | Dedicated infrastructure without running a data centre |
Is a virtual private cloud a type of private cloud?
Not in the strict sense. With Amazon VPC, AWS describes it as launching resources "in a logically isolated virtual network that you've defined". The network is yours, but the underlying hardware is shared public cloud infrastructure. Azure Virtual Network and Google Cloud VPC work the same way.
For many organisations a well-configured VPC meets the isolation needs that once required a private cloud. Where dedicated hardware is required, for example for certain software licences, public clouds also offer single-tenant options such as EC2 Dedicated Hosts. Our article on whether AWS is a private or public cloud goes into this in more detail.
Where do AWS Outposts and Azure Local fit?
They are a hybrid between on-premises private cloud and public cloud. AWS Outposts places AWS-managed infrastructure in your own site, using the same APIs and tools as the AWS Region. Azure Local is Microsoft's solution that extends Azure capabilities to customer-owned environments, managed through Azure Arc. Both suit workloads that must stay on site for latency or data residency reasons but should be run like cloud services.
How do you choose between private, public and hybrid cloud?
Start with the constraints that cannot move, then weigh cost and effort.
- Regulation and data residency. Does any law or contract require dedicated hardware or a specific location? Often an EU public-cloud region with the right controls is enough.
- Latency and physical connections. Systems tied to machines on a factory floor may need to stay local.
- Demand pattern. Steady, predictable loads suit private cloud. Seasonal or spiky loads suit public cloud.
- Skills. Running a private cloud well takes a team. Be honest about whether you have one.
- Total cost. Compare hardware, licences, facilities, staff and refresh cycles against public cloud run costs with commitment discounts.
Many organisations end up with a mix: private infrastructure for a few constrained systems and public cloud for the rest. Our overview of public, private and hybrid cloud deployment models compares all three.
A real example: moving off on-premises virtualisation
Branäsgruppen, one of Sweden's largest ski resort groups, ran on an on-premises VMware ESXi platform. Its websites see extreme seasonal peaks, and scaling front-ends, middleware and databases had to be done by hand. Opsio replatformed the estate to AWS with auto-scaling and multi-AZ deployment. The Branäsgruppen case study reports a 40% improvement in average page responsiveness and a 40% reduction in total cost of ownership. For a business with demand this seasonal, fixed private capacity was the wrong fit.
How Opsio helps
Opsio designs, migrates and operates private and hybrid cloud environments, including connections between on-premises platforms and AWS or Azure, and can run them 24/7 under a managed service agreement.
Frequently asked questions
What are the 2 types of private cloud?
On-premises (internal) private cloud, hosted in your own data centre, and hosted (external) private cloud, run on dedicated infrastructure in a provider's data centre.
What is the difference between a private cloud and a public cloud?
A private cloud serves one organisation on infrastructure not shared with others. A public cloud such as AWS, Azure or Google Cloud serves many customers on shared infrastructure, with isolation provided by software.
Is a managed private cloud the same as a hosted private cloud?
Often, but not always. "Hosted" says where the hardware is. "Managed" says who operates it. A provider can manage a private cloud in your own data centre, or host one that you manage yourself.
Is private cloud more secure than public cloud?
Not automatically. Private cloud gives more physical control, but security depends on configuration, patching and monitoring. In both models, misconfiguration and stolen credentials are common causes of breaches, so the same basics apply.
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Written By
Country Manager, Sweden
Johan leads Opsio's Sweden operations, driving AI adoption, DevOps transformation, security strategy, and cloud solutioning for Nordic enterprises. With 12+ years in enterprise cloud infrastructure, he has delivered 200+ projects across AWS, Azure, and GCP — specialising in Well-Architected reviews, landing zone design, and multi-cloud strategy.
Editorial standards: This article was written by the cloud practitioner named in the byline above. We revise it when the technology or regulation it covers changes; the dates on this page show the latest update. Opsio maintains editorial independence.