Does the Private Cloud matter for SMB's ?

A private cloud is operated solely for an organization. It may be managed by the organization or a third party and may exist on premise or off premise. To truly be a cloud, the capabilities available for provisioning must be virtually unlimited and available for allocation in any quantity at any time, so as you point out, the sheer scale of resources required is cost prohibitive to SMBs and they should instead consider hosted solutions.

Private cloud is NOT always the always correct answer for large enterprises either; an instructive example is the European Space Agency’s Gaia project. Gaia required processing of readings from 1 billion stars x 80 observations x 10 readouts. ESA estimated that processing the full 1 billion stars data set with 6 years of data would cost $463,929 on AWS and $972,147 in house, not including bandwidth, electricity, or storage, and ESA realized a savings of at least 50% by using a public cloud.

As far as compliance, if the U.S. Government civilian sector, Department of Defense, and Department of Homeland Security can develop common security criteria for cloud computing with their FedRAMP program (http://www.cio.gov/pages.cfm/page/Federal-Risk-and-Authorization-Management-P...) to meet their requirements, then I have to believe there are solutions to be found to meet private industry’s compliance requirements.

Vendor hype to the contrary, Cloud Computing is no different than any other IT deployment option you might consider. If you understand the needs, goals, and objectives of the business and derive an enterprise architecture to achieve those goals, you will have the basis for making rational investment decisions – including whether or not to build a private cloud.