There’s no shortage of commentary about “cloud” and how it’s revolutionising IT. It’s hard to ignore the buzz because execs are starting to get the message, and they’re starting to ask about the company’s “cloud strategy.”

So, we run around trying to figure out exactly what that means only to find out that cloud computing is defined differently by almost everyone. One thing that is becoming clear is that cloud is more than just virtualisation.

We’re all pretty familiar with virtualisation. It’s been a great tool to help us get more productivity out of our data centers and our computing resources. When we first started hearing about the cloud, many of us thought it was just a new marketing spin on virtualization, but it’s really a lot more.

Yes, virtualisation is at the core of the cloud – in a majority of cases, cloud couldn’t even exist without a hypervisor to add a degree of separation of our applications from physical infrastructure – but the real difference between a “simple” virtualised environment and a private cloud is management. Private clouds should be resource pools that IT provides and maintains with a degree of controlled self-service for end users.

Private clouds are potentially a great way to track the consumption of IT resources across different areas of the company. However, private clouds only work when they are managed well. Without the right tools in place, they can actually add a ton of risk. As with any virtualisation solution, you run the risk of over-provisioning or of hotspots suddenly appearing because of a change in usage patterns.

Even a little hiccup that degrades end user experience could blow the credibility of the whole concept of the cloud. It must be managed well with proper capacity planning, VM sprawl control, and performance management to proactively detect and troubleshoot bottlenecks and failures.

As if this wasn’t enough pressure, IT now has competition! A survey of my customers in December 2011 showed that 64% of respondents planned to invest in the “competitive analysis” of IT services relative to external service providers.

With a growing number of cloud outsourcing options like Amazon Web Services and Rackspace in the marketplace, organisations are beginning to forgo service from internal IT in favor of greater speed and flexibility offered by outsourcers. Private clouds can help internal IT compete by allowing IT to achieve new levels of speed and agility and make itself look more like a service provider to the organisation.

Private Cloud is as much about an operating model as it is about technology. The goal of a Private cloud is to enable IT to behave as more of an internal service provider by providing expected levels of quality, agility and cost to the business.

For example, if a department needs computing services, they should be able to provision those services and resulting resources from IT’s private cloud, and IT can report the cost of that department’s consumption back to the business. In some organisations, they’re going as far as actually charging departmental cost centres for IT resources. Creating this type of capability will enable transparency into IT costs and help keep internal IT competitive with outsourcers and external service providers.