Virtual Private Cloud: What is it and how does it work?

Cloud computing has revolutionised both public and corporate technology, along with virtualisation. More and more businesses and consumers wonder aloud about whether they should be using VPNs for web browsing security, or if cloud environments are more or less risky for storing their data. Businesses without dedicated IT departments may also struggle to identify the individual services within cloud computing — IaaS, SaaS, PaaS. Understanding the workings of virtualisation and cloud computing has, at the same time, become more urgent for a great deal of companies in the wake of the shift to hybrid or remote working. 


As more cloud capabilities have become available, businesses and organisations are the key beneficiaries of the increased scalability and reduced costs that virtualisation and cloud infrastructures offer. Otherwise known as virtual private clouds, VPC is one of the fastest-growing resource sharing computing technologies on the market, and is forecasted to reach a total value of USD 190.4bn by 2027.


Businesses that are not IT-savvy will have a limited awareness of the finer or even broad detail of how this works, even as this presents a missed opportunity for optimising their day-to-day operations. This article explores the essentials of virtual private clouds, how they differ from public and private cloud environments, and how they can help modern businesses.


What is a Virtual Private Cloud?

A VPC is a secure, isolated private cloud that exists within a public cloud. It permits users to run code, store data and host websites, among other functions. However, it is hosted remotely by a public IaaS (infrastructure as a service) provider. This differentiates a VPC from other private clouds. A virtual private cloud, while only accessible to some users, exists within a virtual hosted service that is provided by a public cloud platform.


To understand the digital mechanisms of VPCs, it is important to grasp the fundamentals of virtualisation in cloud computing so we can better understand its application to private and public clouds.


Virtualisation in Cloud Computing

Virtualisation technology creates a virtual instance of a server, operating system (OS) or other computing device. The most commonplace use is through virtualisation software, which extends the hardware of a physical server or network to generate and support a virtual version of these systems. This emulation of a computer system architecture is also called a virtual machine.


Virtual clouds are one example of these virtual instances of computer systems. In cloud computing, users share computing resources, whether that’s in a public or private cloud environment. Virtual clouds are virtualised environments that allow multiple OSs and applications to operate on the same hardware simultaneously. Organisations and individuals can use a partitioned version of the service, scalable according to their need. Servers or storage usually dependent on data centres are available without the need for corresponding physical infrastructure.


What’s the difference between Private Cloud and Virtual Private Cloud?

A private cloud is a product of infrastructure entirely dedicated to a single organisation, normally a business or institution e.g. a hospital or school intranet. Private clouds are supported by a combination of software and hardware owned by the organisation in question: they purchase cloud infrastructure, execute software installation and use their internal IT team to manage the private cloud system.


A VPC, however, lets an organisation create its own private environment that mirrors a private cloud, only operating using shared public cloud infrastructure. This may seem like a contradiction, however, because virtualisation both relies on shared infrastructure and permits the segregation of shared resources, it can provide a layer of isolation via an IP (Internet Protocol) subnet or virtual local area network (VLAN). 


While both are similar, in some ways a VPC is easier to operate since the responsibility of managing the layout, infrastructure and software installation belongs to the cloud provider. A VPC will also be managed by an independent IT team outside the user organisation.


How is a VPC isolated within a public cloud?

Virtual private cloud computing involves isolating resources that exist within the public cloud through software technologies:


A sub-network or ‘subnet’ is a piece of a larger IP network that is subdivided into its own area, otherwise known as logical isolation. The IP is how computers communicate data to each other over the internet. This is partitioned depending on what the network administrator intends to use it for, but if devices are all connected within the subnet, they can communicate directly. However, any devices outside must use a router for access.


Subnets work to reduce network traffic, while providing additional security layers to all devices and data using the network, as all incoming data must be transferred through a router with firewall capabilities. Local traffic is contained within the subnet to minimise any exposure to corruption and viruses from the wider network or internet.


A LAN (local area network) connects computers within a limited area — for instance a household, school or office building, without using the internet. A VLAN is a type of subnet: it works by logically isolating a collection of devices or network nodes (collectively referred to as a broadcast domain) within a virtual network at the data link layer, a separate part of the open systems interconnection (OSI) model. In this way, a VLAN permits multiple LANs to communicate through a wireless internet connection. 


 Any virtualised computing involves a system of applications being facilitated on virtualised hardware. However, a Virtual Private Network (VPN), while often hosted on a virtual private cloud, is used to manage the accessibility of public resources for users in a private environment. They encrypt data in a secure internet connection, protecting users from security breaches and providing an additional layer of internet privacy. Traffic can then pass through publicly shared infrastructure, but it is scrambled and thus invisible. 


What are the benefits of a Virtual Private Cloud?


Since the virtual private cloud is an isolated network, user data and applications have exclusive access to resources — they are not shared with other cloud users. With an isolated cloud, a customer or organisation can completely control access to, and the use of, resources and systems. This provides a layer of security at both instance and subnet level. For commercial users, this benefit can be emphasised by giving customers the sense that their data is carefully protected.


Virtual private clouds allow a user organisation to deploy cloud resources as and when they are needed. These resources are also more scalable and therefore more dynamic. Compared to a dedicated private cloud, a VPC permits greater usability for customers as the cloud provider is responsible for maintenance, rather than an in-house team. Organisations may use VPCs as load balancers that prioritise the traffic of target applications within the network, and as a result remove potential obstacles to their proper functioning.


A virtual private cloud provides redundancy and fault-tolerant availability zones. These are the isolated data centres within specific areas of where public cloud services operate. Fault tolerant and redundant architecture allows a system to remain operational and incur no downtime or data loss in the event of a disruption to the cloud environment. 


VPC users can also benefit from the cost-effectiveness of working in a public cloud — namely, they do not incur the expenses of hardware installation and long-term maintenance that purchasing and using a dedicated private cloud involves. This can be highly valuable for organisations who can channel effort and budgets into meeting other business aims and allowing their IT departments more breathing space.


What are the drawbacks of using a Virtual Private Cloud?


The infrastructure of a virtual private cloud does come with certain disadvantages. For instance, if an organisation does not own the cloud infrastructure from top to bottom, it will not have the full capability of customisations available to fully private clouds. A dedicated private cloud infrastructure will have zero restrictions on total application workloads, as it is custom-built to suit the purposes of the user organisation’s servers. 


Private clouds can be modified to add bespoke applications to operate within the user system, which is more challenging to do in a hosted VPC environment. This is especially true for highly regulated businesses that have multiple compliance requirements, such as those in the financial or healthcare sector, and therefore may have limitations placed on the types of applications and data they can situate in a VPC environment. VPCs possess multiple resources used for managing and maintaining infrastructure, but this benefit too is mostly isolated to small and medium-sized enterprises as opposed to larger organisations.



A virtual private cloud offers key advantages to an organisation or individual — but this depends on the specific requirements of the user in question. Virtual networks can leverage greater scalability, security and availability, and users can develop and manage bespoke network components, from IP addresses to subnets. 

It is hard to argue against the reality that a dedicated private cloud will offer users more resounding control over their computing resources, for instance, with a self-service portal for authorised employee access. For agility and ease-of-use, a virtual private cloud may be the most reliable choice for a business that sees the added layer of security as non-negotiable — for instance, if it regularly communicates with other private networks.


For more insight into which environment is best suited to your organisation, get in touch today, and we can offer expert advice to help you make your decision.

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