Public Cloud vs. Private Cloud: Which One Is Better for Your Small Business?

When deciding between public and private clouds, small-business leaders must carefully assess their company’s IT needs alongside the consequences of choosing the wrong model. Selecting a private cloud when you don’t need one will increase IT expenses, and opting for a public cloud when you need a private cloud can put critical business data at risk.

Gartner’s VP Analyst Marco Meinardi [1] cautions that improper cloud choice can slow down cloud adoption, or worse, jeopardize the entire project. To help small-business IT leaders make the right choice, we’ve dissected both the cloud models—what they are, how they differ, and what you should know to select the right one.

A public cloud is an IT model where a cloud service provider offers on-demand computing resources, such as storage, applications, and computing power, that are shared by multiple companies. These resources are hosted on the cloud provider’s servers, and tenant companies pay either a monthly or pay-as-you-go fee to use the public cloud services.

Think of a public cloud as renting a storage facility with other businesses—you have your own secure space but share the overall infrastructure. This shared usage of resources reduces overall costs, offering an affordable option that fits the needs of most small businesses. 

This factor makes the public cloud a good fit for businesses with dynamic needs, such as startups experimenting with innovative projects or companies that need flexibility to test new platforms without a significant investment.

A private cloud is an IT model where a cloud service provider offers an exclusive, dedicated set of IT computing resources to a single organization. Private clouds are typically hosted on the customer’s on-premise data center.

Think of a private cloud as owning your own storage facility—managed either in-house or by a specialized cloud provider. Because you get access to dedicated resources, you bear the whole cost, resulting in a higher price tag. However, since only you use the resources, there’s greater security, control, and customization. 

This makes the private cloud ideal for businesses that deal with sensitive data such as intellectual property, personally identifiable information (PII), medical records, and financial data.

Let's delve into the key differences between the public cloud and private cloud to understand which model better aligns with your business needs and goals.

1. Cost differences

Public cloud and private cloud operate on different pricing models. Public cloud services typically work on a “pay-as-you-go” model with no upfront costs, which is ideal if you want a low upfront investment and flexible spending. Private cloud services, on the other hand, require a higher upfront investment in dedicated hardware, software, and related maintenance. 

If security and control over IT are essential for your small business, it’s worth investing in a private cloud. But remember, the public cloud computing model doesn’t demand a large hardware investment or have hefty operating costs.

Pay-as-you-go pricing model of Google’s public cloud storage platform [2]

2. Scalability differences

Public cloud infrastructure is highly scalable, allowing you to add more computing resources as demand increases. Therefore, these services can easily manage fluctuating workloads such as high website traffic or data processing during peak sales seasons. However, during these peak times, you might face some hiccups.

On the other, a private cloud, while scalable to a degree, is limited by the resources available within your own infrastructure. You’ll have to add more hardware to accommodate additional workloads. Despite this, a private cloud can deliver reliable performance tailored specifically for workloads such as running resource-intensive applications or conducting sensitive data analyses.

If your small business needs reliable performance for critical cloud-native apps, the private cloud is your best choice. For variable workloads, however, the public cloud offers an easier, quicker-to-market, and less risky alternative.

Analysis of cloud workload performance in Flexera’s cloud management platform (Source)

3. Usability differences

In terms of manageability, the public cloud is a hands-off solution. The public cloud service provider takes care of everything—from deployment of networks and upkeep of the data center to updates of systems—letting you focus on your core business operations. 

However, a private cloud requires either an in-house IT team to manage tasks such as maintenance, system upgrades, security patches, and middleware management, or coordination with a cloud service provider to collaborate on security protocols and schedule system upgrades. The high level of control a private cloud offers comes with increased responsibility for maintenance and operations management.

On the customization front, the public cloud offers standardized services and is somewhat restrictive. You may also experience vendor lock-in and become overly dependent on a single cloud service provider’s technologies, making it hard to switch providers in the future. But with a private cloud, the cloud environment can be customized more precisely to your small-business needs, offering greater flexibility and independence.

Microsoft takes complete responsibility of maintaining the cloud infrastructure in its public cloud model [3]

4. Security differences

When it comes to cloud security measures, both public and private models provide robust mechanisms to safeguard your data. In the public cloud, service providers employ multilayered security strategies, including encryption and network intrusion detection. However, in case of a breach, identifying and isolating the issue can be complex due to the shared infrastructure.

On the contrary, the private cloud model offers a dedicated infrastructure and advanced security measures, such as isolated networks and security information and event management (SIEM). You have complete control over your data security, and this arrangement lets you respond rapidly in case of a breach and allows for more precise identification of vulnerabilities. 

If high security is a priority for your small business to comply with industry standards and regulations, the private cloud’s security advantages would be ideal.

While the vast majority of small and growing businesses will find the public cloud deployment model sufficient, it’s important for key stakeholders to document the needs of your business. This ensures you not only select the correct deployment model but also the right cloud provider. Ask your stakeholders these five questions:

1. What is our primary goal for adopting cloud services, and how will it impact our current and future business operations?

If you’re looking to enhance collaboration, streamline workflows, or introduce remote working, the public cloud’s scalable and easy-to-access infrastructure might be your best bet. If, however, your goals involve harnessing large-scale data analytics or maintaining complex applications, the control and customization of a private cloud solution could prove advantageous.

2. How sensitive is the data we handle, and what are our specific security and compliance requirements?

If your business deals with sensitive customer data or intellectual property or is subject to stringent compliance regulations, a private cloud’s robust security features would be crucial. This is especially true if you operate in an industry such as healthcare or finance where regulatory requirements mandate a high level of data security, often achievable only through a private cloud setup.

However, if your data isn’t highly sensitive and your compliance requirements are standard, the security measures of most public cloud providers should suffice.

3. What level of control and customization do we need over our cloud infrastructure to achieve our desired outcomes?

If you want complete control over every aspect of your IT environment or need to make significant customizations for specific apps or workflows, opt for a private cloud. But a public cloud solution would serve you better if your needs are more general, such as document storage or standard app hosting.

4. How do we expect our business to scale over time?

If you expect rapid growth or unpredictable scaling needs, the public cloud’s easy scalability would be ideal. Conversely, if your growth is predictable and you want to maintain stringent control over resources, the private cloud platform is a better fit.

5. What is our budget for cloud services, and how can we balance costs with the benefits of each deployment model?

If budget is a major concern and your IT needs are not too complex, the cost-effective public cloud platform may be the way to go. But if you have the funds for an upfront investment and want a high return due to your specific IT needs, then a private cloud could offer long-term value.

Understanding the key differences between public and private clouds is essential for your cloud adoption strategy. Public clouds are cost-effective and scalable, and they offload management to the public cloud service provider, making them an ideal choice for startups and small businesses. 

On the other hand, private clouds provide a more secure, customizable environment that can meet specific technical needs, making them a worthy investment for businesses handling sensitive data.

The cornerstone of your decision should be your unique business needs. Reflecting on the five questions discussed earlier will guide you in aligning your cloud choice with your specific business goals, data sensitivity needs, budget, scalability requirements, and desired control levels.