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Computerworld - GRAPEVINE, Texas -- A Birmingham, Mich.-based financial services firm that manages some $13 billion in assets, is turning to a private cloud after determining that public cloud technologies aren't yet ready to meet its needs.

Jeffrey Lass, network operations and virtualization engineer at the company, which he asked not be identified,, said that public clouds aren't yet a good option because of regulatory issues around the control of data, a lack adequate service level agreements with cloud providers, and an absence of standard agreements that "allow freedom of movement between providers."

Lass also cited a lack of IT control when a company relies on public cloud services. "We really don't want to be in a position to have to shrug and say 'I don't know' when a system is running slowly," he said at the Storage Networking World conference here this week.

The company decided to create "a private cloud that has many of the same characteristics of a public cloud but with much higher control, security and availability," said Lass.

Research firm IDC projects that the cloud computing market will grow from $23 billion today to about $55 billion in 2014, but much of the growth so far has been in new hosted services, said IDC analyst Richard Villars. Most enterprises aren't yet replacing existing applications with cloud-based offerings, he said.

Villars did note that only a small fraction of spending on cloud systems is for private cloud development.

He said the primary issue IT managers face in creating a private cloud is whether to invest in needed converged infrastructure so that all the IT assets -- such as storage, servers and networks -- are treated as a common resource pool that can be metered and managed in coordinated fashion.

The cost of such an infrastructure is substantial and may be the top obstacle to creating private clouds, according to an IDC survey of users earlier this year. IT departments have money for servers and storage, but not converged infrastructures, said Villars.

At the same time, public cloud computing remains a difficult sell, particularly in regulated industries. It's true that many companies are using hosted services and some infrastructure services, such as testing and development. But it's still a challenge for cloud vendors to convince enterprise IT managers to broadly expand use of cloud technologies.

John McGee, a data center manager for regional hospital system, said he's attending Storage Networking World to learn more about the cloud environment. At this point, though, "we're not thrilled about [public clouds]," he said.

McGee said his IT environment is still "one throat to choke, mine."

The financial services firm move to a private cloud is a result of years of work with virtualization technologies, a move to collocation facility, and a hardware refresh. He described that new system as a hybrid approach.

"Ideally, a hybrid solution that can scale to [accommodate] high demand, that's secure, that's reliably delivered and can be seamlessly provided by multiple hosters, allowing customers to utilize and switch among the providers," said Lass. "This rigidity, we feel, reinforces our choice of on-premises hosting," he said.

Patrick Thibodeau covers SaaS and enterprise applications, outsourcing, government IT policies, data centers and IT workforce issues for Computerworld. Follow Patrick on Twitter at @DCgov, or subscribe to Patrick's RSS feed . His e-mail address is pthibodeau@computerworld.com.

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