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What is a virtual private cloud, and what are the benefits of using it?

A virtual private cloud offers the functionality of the private cloud while retaining the scalability of the public cloud — a smart choice for cash-strapped organizations that don’t want to invest in their own infrastructure. In this article, we explore what the virtual private cloud is and how it works.

What is a virtual private cloud, and what are the benefits of using it?

What is a virtual private cloud?

Virtual private cloud definition

A virtual private cloud (VPC) is a section of the public cloud infrastructure that has been exclusively reserved for a single user. The cloud infrastructure resources of one VPC are logically isolated from other VPCs, which means that different organizations can safely use services hosted on the same physical servers without any overlap.

How does a virtual private cloud work?

VPCs work by combining the resources of the public cloud with the exclusivity of the private cloud. Ordinarily, public cloud infrastructure would be shared by multiple users, while private cloud resources would be owned and operated by just one organization. In VPC setups, the public cloud provider can carve out multiple private clouds, creating securely isolated virtual networks within the broader digital landscape.

VPC infographic

Virtual private cloud vs. public cloud

While virtual private cloud and public cloud are both models of cloud computing, they serve different needs. A public cloud is mostly used to supplement the organization’s activities — for example, to store data or ease access to everyday resources. Public cloud tenants have less customization and security options, which makes it harder to create bespoke solutions or implement desired functionality.

Virtual private cloud vs. private cloud

A VPC is essentially a private cloud hosted in a public cloud, so it is a great fit for organizations that either work fully online or otherwise feature the cloud as a crucial component of their business. In this case, a VPC is a cheaper, more scalable alternative to setting up your own private cloud on the premises.

Isolating and securing virtual private clouds

VPCs often use three components to achieve isolation within the public cloud: subnets, virtual local area network (VLAN) tools, and virtual private networks (VPN). In addition, VPCs may make use of NAT and BGP routing for connections to other networks. There is no single universal setup — each VPC provider has its own methods for creating logically isolated networks.


A subnet is a logical division of an IP network. In a VPC, each subnet is assigned a range of private IP addresses that normally cannot be accessed from the outside — to access them from the internet or other public cloud resources, you need to use VPNs, security rules, or NAT configurations. In the Open Systems Interconnection (OSI) Model, subnets are OSI layer 3 (network) constructs.

Virtual local area network

A VLAN is a group of devices that form a discrete, logically isolated local area network (LAN) within a larger network. VLANs can be formed by linking up devices in different LANs or by isolating specific devices in a single LAN using a logical overlay. VLANs operate on OSI layer 2 (data link).

While VPCs can employ both subnets and VLANs at the same time, just one is enough to carve out a slice of public cloud resources. The chief difference between the two is that VLANs provide improved stability and more secure network access, while subnets are easier to set up and maintain.

Virtual private network

A VPN is a cybersecurity tool that creates a secure encrypted tunnel between the device and the VPN server. Because a VPC exists within public cloud infrastructure and must be accessed over the internet, VPNs prevent others from intentionally or accidentally accessing the user’s data in transit — without the proper decryption key, encrypted packets look like random gibberish.

Network address translation

Network address translation (NAT) is a method of associating private IP addresses with a public IP address, allowing local network resources to be accessed through the internet. NAT works by modifying the address information in the packet IP header when they pass through a gateway (such as a router or firewall). This way, the public can access services (such as web apps) mapped to resources hosted in a VPC.

BGP routing

The Border Gateway Protocol (BGP) is the protocol responsible for exchanging routing information and making routing decisions. BGP examines the available paths to the destination to determine the most efficient course. By customizing your route tables, you can connect your VPC to your existing infrastructure or external networks.

Benefits of using a virtual private cloud

By using a VPC, any organization can get the best of both public cloud and private cloud services. Here are the key benefits enjoyed by VPC customers.

Enhanced security

Through logical isolation, VPCs allow an organization’s data to exist safely within shared infrastructure. VPC users can further refine the access control settings of their virtual network by setting up security groups and network access control lists (NACLs). The VPN component of a VPC network also encrypts online traffic to protect data going in and out of the cloud.

Regulatory compliance

One significant advantage that VPCs have over private cloud setups is that there is less legal overhead — the bulk of compliance work is taken care of by the public cloud provider hosting the VPC. Cloud service providers can often provide certifications that their infrastructure meets regulatory standards and local data residency laws.

Efficient scaling

Unlike private cloud infrastructure, VPC resources are relatively easy to scale up or down based on demand. The organization does not need to add any new facilities, buy any new equipment, or train any new staff — it simply needs to request for more of shared infrastructure to be dedicated to its use. This arrangement eliminates the need for substantial initial investment and ongoing maintenance costs.

Hybrid cloud integration

VPCs do not need to be completely isolated solutions — with proper VPN configuration, VPCs can be seamlessly connected to the organization’s on-premises data centers, public cloud resources, or even the internet sites. The resulting hybrid cloud environments give organizations the widest range of options when it comes to data retention, security, and operation access.

Common virtual private cloud use cases

VPCs are nearly identical to private clouds in function, which means they are used for very similar purposes. Here are some common VPC use cases:

  • Hosting public-facing websites. VPCs let you securely host anything from blogs to web applications to e-shops. By using security groups (which act as instance-level firewalls), you can customize what types of traffic can reach your VPC resources from the internet.
  • Hosting multi-tier web applications. VPCs are a good choice for hosting applications with more than one operational layer — all the required functionality is already built into the VPC infrastructure, including the necessary access control and server communication settings.
  • Creating hybrid cloud environments. As we’ve discussed, VPCs are a common way for organizations to migrate some of their functions to the cloud while keeping sensitive data close to heart.
  • Disaster recovery. Like a public cloud offering, a VPC can be used to back up an organization’s data and provide access to critical resources when there is a critical failure. By hosting applications and data in more than one region or availability zone, the organization increases the chances that it will be able to continue normal operations while the issue is being resolved.

How to set up a virtual private cloud

Setting up a functioning VPC environment from scratch is difficult — which is why most organizations order VPC services from established cloud providers. Most businesses choose Amazon Web Services (AWS), Google Cloud Platform (GCP), Microsoft Azure, Oracle Cloud, and IBM Cloud VPC products for convenience and reliability.

Unfortunately, this means that the exact VPC setup instructions differ depending on your chosen cloud service provider. The steps only provide a general overview of what you need to do to set up a running isolated virtual network.

  1. Choose a public cloud provider offering VPC services. Your choice may depend on the regions that the provider operates in and the features it offers.
  2. Create a new network and choose an IP range using Classless Inter-Domain Routing (CIDR).
  3. Decide on the number of subnets (both public and private) and their regions.
  4. To allow your logically isolated network to communicate with the web, create an internet gateway.
  5. Define the paths for your network traffic, especially for any public subnets accessing the internet. This may involve creating custom route tables for the internet gateway and configuring NAT.
  6. Implement NACLs and security groups to increase your VPC cybersecurity.
  7. Depending on the tools offered by your chosen cloud provider, add any additional instances or instances to your VPC.
  8. If you want, you can use a VPN (or services like AWS direct Connect) to integrate on-premises data centers into a hybrid cloud environment.

Security considerations in VPC

A VPC itself should not be confused for a cybersecurity tool — while it can provide an isolated environment from the other public cloud tenants, it still needs to be protected from hacker attacks, malware, and other common cyberthreats. To keep your VPC safe, follow the best cloud security practices, such as applying the principle of “least privilege access” to access restrictions and segmenting your virtual network with subnets to prevent lateral movement.

Remember — some threats may not even target you. Your VPC could just become collateral damage in an attack against your cloud service provider. Cloud providers do not reveal the details of their infrastructure and may not share your security concerns. Be aware of your provider’s policies and downtime estimates, and always have a plan for what to do if you’re cut off from your VPC.