Table of contents
What is a virtual private cloud?BenefitsHow a VPC worksCommon use casesVPC vs other cloud networking modelsBeyond the basicsCommon misconceptionsWhen you want a private cloud FAQsNext stepsAdditional resources
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What is a virtual private cloud?

A virtual private cloud (VPC) gives you your own private slice of a public cloud provider’s infrastructure. It’s isolated, customizable, and secure—perfect for businesses that want the scalability of cloud computing without sacrificing control over their network environment.

Let’s break down what a VPC is, how it works, and why it matters.

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What is a virtual private cloud?

A VPC is a logically isolated virtual network built within a public cloud platform, such as AWS, Google Cloud, or IBM Cloud. Think of it as your own private data center in the cloud, but without the cost or maintenance of physical servers.

In a VPC, you define the IP address range, configure subnets, control routing, and set up security rules. While your infrastructure shares the same physical hardware as other cloud customers, your network and data remain fully isolated from theirs.

VPCs strike a balance between public and private cloud models. You get cloud scalability, availability, and cost-efficiency, but with the network control and isolation often associated with private clouds.

Key features and benefits of a VPC

A VPC gives you the flexibility and security you need for modern cloud deployments. Here’s what makes it so powerful.

Isolation and privacy

Every VPC is segmented from other customers within the same cloud provider. This network-level isolation prevents other tenants from accessing your data or resources—even accidentally.

You can also isolate different environments within your own VPC, such as development, staging, and production.

Network control

A VPC gives you full control over your virtual network:

  • Set your own IP address ranges
  • Create public and private subnets
  • Define routing rules and NAT gateways
  • Customize DNS resolution and DHCP options

This level of customization is ideal for businesses with specific architecture or compliance needs.

Private IP addressing

Resources in a VPC typically use private (non-internet-routable) IP addresses. This keeps sensitive services hidden from the public internet unless you explicitly expose them.

Private addressing is essential for internal databases, backend systems, or regulated workloads.

Integrated security

Security is baked into the design of a VPC. You can:

  • Assign security groups to control traffic at the instance level
  • Use network ACLs for subnet-level filtering
  • Enable flow logs to monitor traffic
  • Encrypt data in transit and at rest

These features help enforce a strong cloud security posture and meet compliance standards.

Scalable architecture

VPCs are highly elastic. You can start with a small footprint and expand as your needs grow:

  • Add subnets in different availability zones
  • Increase instance capacity on demand
  • Scale services using load balancers and autoscaling groups

Because you’re operating within a public cloud, there’s virtually no limit to how far you can scale.

Flexible connectivity

VPCs can be connected to other networks using secure, reliable methods:

  • VPN tunnels for linking on-prem systems
  • Direct Connect or Interconnect for dedicated fiber connections
  • VPC peering or transit gateways for inter-VPC traffic

This makes VPCs perfect for hybrid cloud and multi-cloud strategies.

How a VPC works

Here’s what goes into setting up and operating a VPC:

  1. Establish the VPC. Define your VPC’s IP address range (CIDR block), region, and availability zones. This is your foundation.
  2. Create subnets. Divide your VPC into public and private subnets. Public subnets can access the internet; private subnets can’t unless routed through NAT.
  3. Deploy resources. Launch virtual machines, databases, storage, and other services within the subnets. Each resource gets an IP address within the subnet’s range.
  4. Set up routing. Create route tables that define how traffic flows between subnets and external destinations (internet, VPN, etc.).
  5. Enable security controls. Apply security groups and ACLs. Set firewall rules and enable encryption where needed.
  6. Connect to other networks. Use a VPN, Direct Connect, or peering to link your VPC to on-prem or other cloud environments.

VPC use cases and examples

VPCs are used in almost every industry and workload type. Here are a few common scenarios:

  • Internal applications: Finance, HR, or compliance apps can run in private subnets with no external access.
  • Multi-tier web apps: Host a frontend in a public subnet and keep the database tier private and isolated.
  • Hybrid cloud: Extend your existing data center into the cloud while keeping centralized control.
  • DevOps environments: Isolate dev, test, and prod workloads in separate subnets or even separate VPCs.

VPC vs other cloud networking models

It’s easy to confuse a VPC with other private or hybrid options. Here’s how it compares:

ProblemSolution
VPS boots into ISO againDetach ISO from control panel and reboot
No SSH accessCheck firewall rules or SSH service status
GUI won’t loadMake sure you installed a desktop environment
Installer crashes or freezesUse the text installer instead of GUI

A VPC combines the best of both: control and isolation with cloud flexibility.

Beyond the basics: VPC peering and hybrid cloud

If you want to build more complex architectures, VPCs offer tools like:

  • VPC peering – Connects two VPCs directly using private IPs. Great for multi-tenant apps or business units.
  • Transit gateways – Centralize connectivity across multiple VPCs and VPNs.
  • Hybrid cloud tools – AWS Direct Connect, GCP Interconnect, and IBM Cloud Direct Link help bridge cloud and on-prem.

These features allow enterprises to scale and interconnect large cloud environments securely.

Common misconceptions about VPCs

Here are a few things people often get wrong about virtual private clouds:

  • My VPC is private by default. Not necessarily—security groups and route tables must be configured properly.
  • VPCs don’t use the public internet. They can, if you set up internet gateways or public subnets.
  • Using a VPC means I’m compliant. A VPC provides tools, but compliance depends on your full setup and security practices.

When you want a private cloud instead of a VPC

While VPCs offer many of the benefits of private infrastructure, there are cases where a true private cloud is a better fit.

You might choose a private cloud instead of a VPC when:

  • You want full control over the virtualization layer. With private cloud platforms like OpenStack or VMware, you manage not just the networking and compute resources, but also the underlying hypervisors and orchestration tools.
  • You have highly predictable workloads. If your usage is steady and large-scale, private clouds can be more cost-effective in the long run, especially when avoiding variable public cloud pricing.
  • You need to meet industry-specific regulatory standards. Industries like healthcare, finance, and defense may require infrastructure that supports FIPS, FedRAMP, or custom compliance configurations not available in shared public cloud infrastructure.
  • You already operate a large on-prem environment. Private cloud is often the next step in virtualizing and automating an existing data center, providing cloud-like capabilities without giving up local control.

In short, if your priorities include physical isolation, full-stack control, or long-term cost predictability, a private cloud may serve you better than a virtual private cloud.

FAQ

A VPC is a private network inside a public cloud. A VPN is a secure tunnel that connects networks over the internet. VPNs are often used to link your on-prem infrastructure to a cloud VPC.

An AWS VPC is a customizable virtual network. You can define subnets, routing, and security rules, then deploy EC2, RDS, or other AWS resources inside it.

  1. Virtual Private Cloud (VPC)
  2. Managed Private Cloud
  3. Hosted Private Cloud
  4. On-premises Private Cloud

A healthcare company might use a VPC to host a secure patient records database in private subnets, while allowing public access to a scheduling app hosted in a public subnet. A VPN connects the cloud VPC to the hospital’s local network.

Additional resources

What is a dedicated server? →

Benefits, use cases, and how to get started

Best dedicated server hosting Europe: Top 7 choices →

This guide aims to simplify your decision-making process by presenting a comprehensive analysis of the top seven dedicated server hosting providers in Europe.

Fully managed dedicated hosting →

What it means and what fully managed services cover on dedicated hosting

Liquid Web’s Product Innovation & Marketing Manager Ken Wallace got his tech start in college by building websites. He soon entered the world of web development and has spent the last twenty-two years working in the tech industry.Previously, Ken was the GM of WP Sandbox, a Stellar brand brought into the Liquid Web Family of Brands with the Events Calendar acquisition. In his current role, Ken is part of two teams at Liquid Web: Product and Marketing.

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