First a quick primer on private vs. public clouds… Private clouds are, in many aspects, similar to their public big brothers. However, a private cloud is essentially a pooling of resources within an organization. The limit to the economies of scale is limited to the size of the organization. But it is owned and operated locally.
Private clouds provide benefits to the cloud computing movement. First, they provide organizations the ability to get familiar with cloud computing concepts. This is important both technically and organizationally. Second, private clouds provide a migration path to public clouds. Private clouds provide a potential stepping-stone moving from a traditional infrastructure to a public cloud infrastructure. Movement to private clouds also provides the potential for better utilization of internal resources…therefore increasing efficiency.
Not everyone is ready to support private clouds. Microsoft stated that their Azure offering would not be available to run locally.
It is possible that Microsoft is simply focused on the public offering for now and will return to a private offering at a later date. However, it could also be a ploy to force Microsoft customers to move directly from traditional infrastructure straight to a public cloud infrastructure.
Financially, moving from traditional infrastructure to private clouds provides better efficiency of capital investments. Moving further from private clouds (or traditional infrastructure) to public clouds provides a move from CapEx spending to OpEx spending. To many companies, this provides greater financial flexibility in times when capital is tough to come by.