What Is Virtual Private Cloud (VPC)? Definition, Key Components, Best Practices, and Providers


A virtual private cloud (VPC) is defined as an isolated private cloud environment typically hosted and secured within another cloud, which is usually a public cloud. Companies leverage VPC environments to test and execute applications, create and maintain databases, host and operate websites, and for other operations that regular private clouds are used for.

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What Is Virtual Private Cloud (VPC)?

A virtual private cloud (VPC) is an isolated private cloud environment typically hosted and secured within another cloud, which is usually a public cloud. Companies leverage VPC environments to test and execute applications, create and maintain databases, host and operate websites, and for other operations that regular private clouds are used for.

Simply put, a VPC is a way to ‘reserve’ bandwidth within an otherwise busy public cloud environment. Users rely on VPCs to cordon off a certain percentage of the computing power of a public cloud for their exclusive use. VPCs offer data isolation typically seen in private cloud environments and combine it with the ease of use and scalability of public cloud infrastructure.

To understand the exact structure within which a VPC operates, it is important to first understand the operation of both public and private clouds. Public cloud infrastructure operates on the basis of multitenancy, i.e., multiple distinct clients access the same infrastructure, many of them at the same time. On the other hand, private clouds are single-tenant, i.e., exclusively used by one client. And finally, a VPC is a private cloud that is ‘virtually’ created within a public cloud, allowing clients to enjoy secure isolation and high availability.

So how similar is a VPC to either public or private cloud platforms?

Some people erroneously believe that a private cloud is the exact same thing as a VPC. However, private clouds are normally owned and operated entirely by an enterprise and can be hosted on-premise or at a dedicated third-party location. Conversely, as discussed above, a VPC is almost always a part of a public cloud. VPCs are hosted within multi-tenant environments where customer data is separated logically. With a VPC, clients can enjoy greater security within a traditional public cloud without compromising flexibility, availability, and affordability.

The advantages of a VPC are manifold. As VPCs are hosted on public cloud infrastructure, clients can scale bandwidth and other computing resources up and down as required. Easy-to-use VPCs can be connected to on-premise infrastructure using a VPN. Like other cloud platforms, hosting enterprise operations on a VPC typically allows for improved accessibility and performance than on-premise workflows.

From a security standpoint, VPCs are better than on-premise or private cloud environments, especially in smaller organizations. This is because public cloud vendors that host VPCs normally have many resources dedicated to updating, securing, and maintaining their infrastructure.

Also Read: What Is Cloud Data Protection? Definition, Importance, and Best Practices

Key Components of VPC Systems and Networks

Numerous components work together to enable the effective functioning of an overall VPC environment. Depending on the vendor and configuration, different VPCs feature different components. Outlined below are some of the key components of leading VPC vendor Amazon Web Services (AWS) to help gain a high-level understanding of VPC systems and networks.

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Key Components of VPC Systems and Networks

1. Internet gateway

This VPC component is horizontally scaled and features high availability as well as robust redundancy. VPCs use internet gateways to communicate with the internet at large. The two purposes of an internet gateway are:

  • Executing network address translation for instances where a public IPv4 address has been assigned
  • Setting a target in VPC route tables for internet-routable traffic

Internet gateways can support both forms of traffic—IPv4 and IPv6—without the risk of network traffic being affected by bandwidth limitations or availability fluctuations. Normally, VPC vendors will provide internet gateways to all clients without levying additional charges.

Egress-only internet gateways are a related component. Like an internet gateway, this component is also horizontally scaled, features high availability, and is redundant in nature. Egress-only internet gateways support IPv6-based outbound communication from VPC instances to the internet. At the same time, this component prevents the internet from establishing an IPv6 link with VPC instances.

2. Carrier gateways

Carrier gateways serve a dual purpose in a VPC setup of:

  • Supporting inbound traffic from a carrier network at a particular location
  • Supporting outbound traffic to the carrier network as well as the internet

Carrier gateways provide support for IPv4 traffic and work with VPCs that include subnets in a wavelength zone (a form of AWS infrastructure deployment). Carrier gateways connect wavelength zones with telecom carriers and the devices on their networks.

Also Read: What Is Software as a Service (SaaS)? Definition, Examples, Types, and Trends

3. Network address translation devices

Network address translation devices support connections of private subnet instances to the internet, on-premise networks, and even other VPCs. These instances can establish communication with external services. However, they cannot receive connection requests that are unsolicited in nature.

Network address translation devices replace the original IPv4 address belonging to the instances with the devices’ own address. The addresses are then translated back to the source IPv4 addresses when transmitting response traffic to the instances.

AWS offers managed network address translation devices known as NAT gateways. These managed devices offer higher availability and better bandwidth when compared to NAT instances (NAT devices created by clients on EC2 instances). They also need less effort dedicated toward administration.

4. Dynamic host configuration protocol (DHCP) options sets

DHCP sets a standard for transmitting configuration data to TCP/IP network hosts. The DHCP message contains an ‘options’ field for configuration parameters, such as NetBIOS-node-type, domain name, and domain name server. Creating a VPC on AWS automatically leads to the creation of DHCP options that are then associated with the VPC. Users can configure their own DHCP options set.

5. Domain name system (DNS) support

DNS sets the standard for resolving the names used on the internet according to their associated IP addresses. DNS hostnames, which contain a domain name and a host name, are used to assign a unique name to a computer. DNS servers process DNS hostnames and resolve them to their preset IP addresses.

Private IPv4 addresses are used for communicating within the network associated with the instance, while public IPv4 addresses are used to communicate over the internet. AWS clients can use their own DNS server by creating a fresh DHCP options set for their VPC.

Also Read: What Is Cloud Computing? Definition, Benefits, Types and Trends 

6. Prefix lists

Prefix lists contain one or more classless inter-domain routing (CIDR) blocks and are used to configure and manage route tables and security groups with ease. Prefix lists can be created from frequently used IP addresses. They can be referenced as a set within routes and rules of security groups instead of being referenced individually.

Security group rules with varying CIDR blocks but having the same protocol and port can be consolidated into one rule that uses a prefix list. In networks that have been scaled and are required to transmit traffic from a different CIDR block, the relevant prefix list can be updated to update all security groups that use the prefix-list.

Prefix lists come in two types:

  • Managed by AWS: Sets containing IP address ranges that are used for AWS services and cannot be created, shared, modified, or deleted by users
  • Customer-managed prefix lists: Sets containing IP address ranges that are defined and managed by users and can be shared with other AWS accounts to enable referencing

Also Read: What Is Cloud Encryption? Definition, Importance, Methods, and Best Practices

Top 5 Best Practices to Implement Virtual Private Cloud in 2021

Leading VPCs such as AWS offer numerous benefits to enterprises, such as elastic network interfaces, static private IP addresses, options for DHCP, secure setup of bastion host, easy-to-predict internal IP ranges, robust cybersecurity, advanced network access control, transfer of NICs and internal IPs among instances, and VPN connectivity. However, to properly leverage these benefits, developers and other stakeholders must follow a few best practices. Here is a list of the five best practices that can help companies effectively implement a VPC environment in 2021.

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Best Practices for VPC Implementation in 2021

1. Choose a VPC configuration that suits the company’s use case

Companies need to create a sturdy and secure foundation before implementing a VPC. By choosing a configuration that suits its use case, the client company will be able to properly leverage all the advantages of having a VPC. For instance, AWS offers various VPC configurations as per differing enterprise needs, including public VPC, private VPC, and public-facing VPC.

  • Making the right choice can begin by creating an exhaustive list of the precise requirements of the company at all levels.
  • Next, all stakeholders must attempt to predict the organizational needs that are likely to crop up in the near future. For this, some experts advise basing the blueprint for a VPC implementation on the company’s expansion requirements looking forward at least two to three years.
  • Finally, management teams can consult an expert during the selection process to ensure that the VPC architecture they pick suits the organization’s needs. 

2. Identify a plan of action

Once the choice of VPC architecture is clear, all stakeholders must be brought on board to set a plan of action and realistic timelines for each milestone. This plan must address the requirements of all stakeholders, including cybersecurity personnel, application developers, and operations teams.

  • The plan must be dynamic and responsive in nature to ensure that the organization’s long-term needs are effectively met.
  • It is important to note that one plan does not fit all organizations. VPC implementation can vary vastly depending on whether it is for a project, a department, or the whole enterprise.
  • Finally, the plan of action must include imparting awareness and addressing the concerns of all impacted employees, vendors, and other stakeholders.

Also Read: What Is Multicloud Infrastructure? Definition, Components, and Management Best Practices

3. Group applications into limited subnets with wider address ranges

Enterprises generally separate their VPC networks into a large number of small address ranges. This may be done for numerous reasons, such as identifying applications, isolating them, or maintaining a small broadcast domain.

However, some experts recommend grouping applications that are of the same category into a smaller number of subnets for more manageability. These subnets can then feature wider address ranges in the operating regions.

Some VPC environments use a subnet mask, while others, such as Google, use an approach based on software-defined networking (SDN) to give end-users enhanced reachability among all virtual machines (VMs) on their global VPC network. In the latter case, routing behavior is not affected by the number of subnets.

In the case of Google, identity does not rely solely on the IP address of the subnet. It is also important to note that some Google VPC features, such as Cloud NAT, alias IP ranges, VPC Flow Logs, and Private Google Access, are configured per subnet. Fine-grained control of these VPC features can be achieved through the use of additional subnets.

4. Set limits on external access

Setting up a VPC network requires configuring access levels, including internet access. This must be done carefully to balance functionality and security.

For instance, users must choose a network and a subnet for the resource to reside in when creating a Google resource that uses a VPC network. An internal IP address from an existing IP range of the subnet will be assigned to the resource. Resources within a VPC network can transmit data among themselves using internal IP addresses, provided the firewall rules permit this.

Even resources that feature an internal, private IP address can still access many Google services and application programming interfaces (APIs) using Private Google Access. Such internal access allows resources to communicate with key Google services despite being disconnected from the internet. Organizational policies can be used to further restrict the resources that can use external IP addresses.

It is, therefore, a best practice to limit internet access only to those resources that truly require it to function properly. Before internet access is blocked, users must consider the effect of such a restriction on their VM instances. While restricting internet access might reduce exposure to the risk of data leaks and other forms of cybercrime, legitimate traffic may also end up getting blocked. This legitimate traffic can be in the form of essential traffic for third-party services and APIs, and software updates.

In some cases, infrastructure without public internet, such as VM instances, can only be accessed through an on-premise network connected using Cloud Interconnect, Cloud VPN, or Identity-Aware Proxy. VMs can use Cloud NAT to initiate egress internet connections for essential traffic without public ingress connections being exposed.

Also Read: Top 10 Best Practices to Manage Hybrid Cloud Security Challenges in 2021

5. Ensure VPC peering connectivity

VPC peering connectivity enables clients to link two VPCs and use private IP addresses to route traffic between them. Enterprises can uniquely benefit from VPC peering connectivity because it is neither a gateway nor a VPN connection, thus removing dependency on physical hardware. VPC peering connections are created using the current VPC infrastructure. 

There are numerous use cases for VPC peering:

  • Interconnected applications that require private, secure access. This use case typically presents itself within larger companies that require more than one VPC operating within one region.
  • Deployment of systems in different VPC accounts by varying business units needs to be privately consumed or shared. Larger enterprises often use different VPC accounts at the unit, department, or team level and face differing communication requirements for their VPCs among these levels.
  • Improved integrated access to company systems that enables stakeholders to peer VPCs with those of important suppliers.

Also Read: Cloud vs. On-premise Comparison: Key Differences and Similarities

Top 5 VPC Providers in 2021

Virtual private cloud infrastructure is rapidly gaining popularity in 2021 as companies prioritize digital transformation efforts to sustain and enhance their remote work environments. Here are the top five VPC providers in 2021.

1. Amazon VPC

Amazon’s VPC offering is one of the most popular VPC solutions in the market today. Enterprises use Amazon VPC to operate AWS resources in virtual networks that are logically isolated and user-defined.

Key features:

  • Gives users complete control over their virtual networks, including IP address range selection, subnet creation, and network gateway and route table configuration
  • Supports both IPv4 and IPv6 for most VPC resources, thus ensuring simple and secure access to applications and resources
  • Being one of the foundational services of AWS, it offers easy customizability for VPC network configuration
  • Allows creation of public-facing subnets for web servers with internet access
  • Allows users to place their backend systems, such as application servers or databases, into private-facing subnets disconnected from the internet
  • Allows the usage of multiple security layers, including network access control lists and security groups

Pricing: The pricing for Amazon VPC depends on several factors, including region, scale, and configuration. For an accurate quote, client companies may check the AWS VPC pricing webpage or reach out to the AWS VPC sales support team.

2. Google Cloud VPC

Google Cloud Opens a new window VPC is a robust VPC solution for all organizational applications. At a time when managing VPC migration is a challenge for many enterprises, Google offers a simple and cost-effective alternative to other VPC providers in this space.

Key features:

  • Global, expandable, and shareable
  • Allows the isolation of teams within projects, separation of quotas and billing, maintenance of shared private IP spaces, and configuration of access for common services
  • One VPC can encompass multiple regions without having to rely on the public internet for connectivity
  • For on-premise setups, communication between on-premise resources and VPCs is possible across regions using a single VPC
  • Users can enhance subnet IP space as required without any downtime, thus ensuring growth and flexibility

Pricing: The pricing for Google VPC is tier-based and depends on factors like traffic type, region, and usage of VMs. Client companies can obtain an accurate quote by checking the Google VPC pricing webpage or reaching out to the service’s sales team.

Also Read: Top 10 Cloud Security Challenges 2021 Needs to Address

3. IBM Cloud Private

IBM Cloud Private is a scalable and reliable VPC solution built on open-source frameworks such as Kubernetes, Cloud Foundry, and containers. This VPC solution comes with a useful portfolio of data, analytics, and middleware for enterprise users.

Key features:

  • Offers common services for self-service deployment, logging, security, and monitoring
  • Allows administrative and development teams to share an elastic cloud environment behind secure firewalls
  • Supports the creation of new applications based on microservices, modernization of existing apps through cloud-enabled middleware, and secure integration between both
  • Complements IBM Cloud with services, consistent runtimes, and management capabilities to ensure a smooth transition to the public cloud
  • Certified for primary infrastructure (such as network, server, and storage) providers, including NetApp, Dell, Lenovo, and Cisco

Pricing: Factors such as architecture and services rendered play an important role in determining the pricing for IBM Cloud Private. Clients can check the IBM Cloud Private pricing webpage for their region or contact the sales support team for an accurate quote.

4. Microsoft Azure Virtual Network (Azure VNet)

VNet is a fundamental component for the creation of private networks in Azure. While VNet is similar to a traditional enterprise network within a data center, it features additional Azure-specific infrastructure benefits such as availability, scalability, security, and isolation.

Key features:

  • Allows secure transmission of data by different Azure resources (such as Azure VMs) among each other, over the internet, or to and from on-premise networks
  • Enables the filtering and routing of network traffic
  • Offers effortless integration with Azure services

Pricing: The pricing for Azure VNet is based on region, zone, client company type (U.S. Government/private), and other factors. Users can avail of a free trial or get an accurate quote by checking the Azure VNet pricing webpage or reaching out to the Azure VNet sales support team.

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5. VMware vCloud Air

vCloud Air is a robust VPC solution designed to meet the specific needs of enterprises. With vCloud Air, organizations can enjoy a safe and smooth VPC experience. The scalable and flexible products offered by this VPC provider serve industry leaders and smaller organizations, regardless of whether their infrastructure is on-premise, online, or hybrid in nature.

Key features:

  • Offers reliable disaster recovery features to ensure robust business continuity
  • A perfect solution for the extension of enterprise data centers
  • For organizations with a compatible use case, vCloud Air can replace existing data centers with ease

Pricing: To get an accurate picture of VMware vCloud Air’s pricing, users must first understand which service to buy and the features to include, among other factors. Client companies can get a clearer picture of their requirements and associated prices through discussion with stakeholders, consultants, and the VMware vCloud Air product support team.

Also Read: Top 10 Cloud Data Protection Companies in 2021


As companies across verticals continue to promote remote work as the preferred mode of daily operations in 2021, virtual private clouds are gaining rapid popularity. Organizations are increasingly leveraging VPCs for various benefits, thus enjoying unparalleled flexibility and accessibility without compromising cybersecurity. 

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