A private storage cloud is usually built behind a company's firewall, using hardware and software owned or licensed by the company. All of a company's data remains in-house and is fully controlled by in-house IT staffers. Those staffers can pool storage capacity to be shared across different departments or used by different project teams within the company, regardless of their physical locations.

As with public clouds, storage capacity can quickly and easily be increased by adding servers to the pool. ParaScale Inc.'s Cloud Storage product and Caringo Inc.'s CAStor are two examples of applications that can be used to set up private cloud storage systems.

Engate describes the private cloud differentiation this way: "The user is still in the IT business, the software configuration business, the storage management and support business, and the data center business. You still have to have all of those resources."

There is one exception. When a private storage cloud is created by carving off a piece of a public storage cloud for one customer's exclusive use. Users pay a premium for private cloud storage, much like one pays a higher rate for a private room in a hospital.

Essentially, "the difference between public and private cloud storage comes down to the way you connect," says Mike Maxey, director of product management at ParaScale, a Cupertino, Calif.-based vendor whose software was designed to aggregate disk storage on multiple standard Linux servers to create a single, scalable, self-managing private storage cloud.