Rumors of the death of private cloud have been greatly exaggerated, according to Nokia.

Surveys, such as a recent one from Interop ITX and InformationWeek, find that the use of public clouds is growing, while private cloud usage is dropping.

But Nokia posits that private cloud is an economical option for enterprises. And Mike Williams, head of enterprise cloud and financial segment marketing at Nokia, wrote a white paper outlining the cost/benefits of private cloud. His analysis, which was independently verified by IDC, forecasts that the total cost of ownership for an enterprise private cloud reaps a minimum of 25 percent savings — over five years — on overall IT costs for large enterprises versus a legacy IT environment.

The analysis also found that enterprises can expect to break even on their private cloud investment in less than three years. Nokia’s model applies to OpenStack-based private clouds built with off-the-shelf components from a range of vendors.

Many large enterprises, especially those that have acquired other companies, are often running a mishmash of data centers with independent environments. “They want to pull all those environments together,” says Williams.

It could be a good opportunity for them to move to a private cloud with a software-defined stack where they can automate everything, move workloads from data center to data center, and run everything with consistent policies.

Williams says one objection he hears from enterprise IT people is that setting up a private cloud will be too expensive, and they’re inclined to move everything to a public cloud. That’s why he wrote the white paper “Moving from a Legacy to a Cloud Environment” with the cost model.

The OpenStack Foundation is seeing some of the same concerns. 451 Research reported that public clouds are the most economical option for small companies, but beyond a certain scale, private clouds and OpenStack distributions are cheaper than public clouds.

Williams set out to quantify the cost of setting up a private cloud.

“I just wanted to answer the question: “If you take your legacy and use an SDN overlay approach and OpenStack for orchestration, what does that do to your cost?’” says Williams. “I found that even the most conservative analysis saw a 25 percent decrease.”

Williams says the best option for many enterprises may actually be a hybrid cloud — an OpenStack-based private cloud and use of a public cloud for some applications. “Why go to public cloud, destroy your environment, and then realize you have to come back for part of your operations?” he asks. “We say, ‘go straight to hybrid cloud.’”

As far as Nokia’s research methodology, Randy Perry, VP of business value strategy at IDC, said: “IDC has conducted an extensive analysis of the structure and operation of the Nokia Enterprise Private Cloud TCO Model. We are satisfied that the assumptions, all supported by third party references, are reasonable and comprehensive enough to establish a fair comparison of total costs of private cloud and legacy environments.”