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What is IaaS? Definition, Examples & Comparisons

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What is IaaS?
IaaS is a cloud service where a cloud service provider (CSP) rents out highly scalable and automated IT infrastructure, usually over the Internet, to a small and medium business (SMBs) or individual developers. With Infrastructure-as-a-Service (IaaS), you no longer need physical IT resources like workstations, servers, and data centers. These resources are provided by the cloud service provider.

Cloud computing is the best thing to ever happen to the business world since the dawn of the Internet. Why? Because it has unlocked infinite possibilities, giving businesses access to technologies that, in the past, were reserved for large corporations. If you’re first moving from on-premise systems to cloud computing, perhaps you have lingering questions like what is IaaS? How does IaaS work? What are the benefits and limitations of IaaS?

In this post, we’ll dissect the techspeak related to IaaS. We’ll give you all the information you need to know about this cloud technology, from how it works to its practical use to its benefits and limitations. This way, it’ll be easy to determine whether or not IaaS is a perfect fit for your business.

Guide to IaaS

Cloud computing is a broad concept that encompasses an assortment of offerings, namely, serverless computing, Iaas, PaaS, and SaaS. SaaS remains the most popular cloud service. 89% of global enterprises were using SaaS cloud computing as of 2018. Today, nearly every startup has subscribed to at least one SaaS tool for small businesses. The same goes for big companies.

However, the other two cloud technologies are steadily gaining more ground. Actually, as of 2018, 73% of global enterprises were using IaaS, whereas only 61% had implemented PaaS.

These statistics paint a picture of a market that is rapidly growing. Based on the same report from IDG, the growth will remain unabated as businesses seem to have trained their sights on adopting cloud technology. Furthermore, the report predicted that in the next 18 months each cloud computing offering would record commendable growth; PaaS (+12%), IaaS (+10%), and SaaS (+6%).

Projected Market Share Growth of Cloud Services

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Source: IDG (2018)

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Overall, the global cloud computing market will hit $623.3 billion at a CAGR of 18% by 2023. This rapid growth is impelled by the need for speed in IT service delivery, increased agility and enhanced customer services. Also, increased ROI and cost savings are other factors driving fast adoption.

Moreover, IaaS holds the biggest potential for growth with a five-year CAGR of 33.7%. If you come across the term “IaaS” and want to learn more about it, relax.

Here the things you need to know about IaaS:

1. What is IaaS

So, what is IaaS? IaaS is one of the three fundamental cloud services, along with Platform-as-a-Service (PaaS) and Software-as-a-Service (SaaS). IaaS is a cloud service where a cloud service provider (CSP) rents out highly scalable and automated IT infrastructure, usually over the internet, to a small and medium business (SMBs) or individual developers.

Popular IaaS examples include Amazon EC2, Rackspace, Windows Azure, and Google Compute Engine.

With IaaS, you no longer need physical IT resources like workstations, servers, and data centers. These resources are catered for by the cloud service provider.

To achieve this, the provider operates multiple data centers where analogous IT hardware is secured, managed, and maintained. Then, the provider creates a virtualized environment and grants the consumer access to network structures (routers, firewalls, security systems) and computing power (memory, processor, and hard drive storage) on a pay-as-you-go basis.

As a result, IaaS is a highly flexible IT resource sharing model. This means you can easily scale up or down the usage as-needed and on-demand. Moreover, you have the freedom to decide the IT infrastructure you need; that is, the number of firewalls, servers, and routers. Better still, you’re in full control of the RAM and processor needed by each network element.

This flexibility stems from the fact that the scope of IaaS services is not tied to dedicated hardware. As a result, it’s easy for the CSP to distribute the IT resources to consumers or SMBs as optimally as required. On the other hand, as a consumer, you pay only for the resources you use.

The image below summarizes the difference between IaaS vs PaaS vs SaaS.

Different Cloud Services

2. How Does IaaS Work?

Now that you have a better understanding of the IaaS definition, it’s time to explore how this cloud service works. IaaS follows a shared responsibility principle model. The provider sits on one end of the model and the consumer on the other.

Primarily, the provider is responsible for the physical environment. That is the operation, structure, and security of hardware resources. Put simply, the IaaS provider manages hard drives, servers, virtualization, networking, and storage.

Here is a detailed list of the responsibilities of the IaaS provider:

  • Create, maintain, and manage data center infrastructure
  • Provide storage space and computing power to the customer
  • Provide databases, servers, and network structures
  • Establish a virtualized environment where consumers can easily access the IaaS resources
  • Offer a solution or platform that enables customers to access, administer, and control the virtualized IT infrastructure

Once everything is set up by the IaaS provider, the ball goes over to the consumer’s court. The consumer is defined as the individual or business looking for the IaaS service. The consumer is then tasked with managing runtime, applications, OSes, data, and middleware. Here’s a more detailed rundown of these responsibilities:

  • Selecting and structuring the virtualized infrastructure
  • Install, set up, and update the application software and operating systems required for your IT elements
  • Configure the firewalls and operate the IaaS network
  • Provide security for installed applications and operating systems
  • Provide data encryption
  • Stipulating access controls, identity controls, and authentication strategies

Over the years, competition in the cloud computing arena has forced providers to step up their services. In so doing, many CSPs have ended up encroaching the responsibilities of the consumer. For example, today, many CSPs are offering tools that streamline the management of the virtualized environment and simplify the implementation of data encryption mechanisms.

How IaaS Works

3. Who Uses IaaS: Practical IaaS Use

So, who uses IaaS?

Thanks to its flexibility, IaaS is perfect for businesses that want to manage applications without having to deal with the cost and complexity of hardware administration. But even so, cost-saving attributes and flexibility don’t make IaaS a suitable solution for all companies or purposes. As a result, you should evaluate your scenarios to determine how effective IaaS will be for your business case.

Needless to say, if you are hosting a simple website, IaaS is much more expensive than classic web hosting providers. Also, if all you want is storage space, a cloud storage solution is a better option than IaaS. However, if you are dealing with operations that demand high capacity computing resources, then, you may have to consider IaaS offerings.

Popular IaaS Business Scenarios

  1. Hosting Demanding Websites: As mentioned earlier, IaaS is not worthwhile for hosting simple company websites. However, when you have complex web projects, say hosting an established online shop, IaaS can be the best option.
  2. Software Development and Testing: The high flexibility exhibited by IaaS makes it perfect for software development teams. With IaaS, your teams can quickly create and destroy development and test environments, thus expediting the time to market new applications. Besides, IaaS allows teams to scale the dev-test environment up or down as needed.
  3. Big Data Analysis: If you have numerous marketing campaigns, then you are most probably collecting huge amounts of data. As you know, collecting data is part of the long and tedious process that often requires enormous processing power. Having a well-structured IaaS setup can streamline and simplify big data analysis. This way, it can be economical and fast to use big data to understand customers.
  4. High-Performance Computing: Are you dealing with complex tasks that involve the use of supercomputers, a cluster of computers, or computer grids? Tasks like product design evaluation, financial modeling, weather forecasting, numerical analysis, and earthquake simulation usually require the use of batch computing. In such cases, a robust IaaS configuration can be of great help.
  5. Complex Storage, Backup, and Recovery Solutions: In some cases, setting up on-premise storage space is time-consuming and complex. Even worse, it leads to huge capital outlays and often requires skilled staff to maintain. That’s the reason why IaaS makes sense for businesses with rapidly growing storage needs.
  6. Web App Support: Additionally, IaaS is for you if you need to support multiple web applications with unpredictable demand for IT resources. The apps could be networking resources or web storage, applications, and storage servers.

4. Benefits of IaaS

Now that you know who uses IaaS and have the possible use cases, its time to look at the benefits to expect. There is no doubt, IaaS, like other cloud offerings, outranks the traditional IT infrastructure in terms of benefits delivered. If you are moving from on-premises systems to the IaaS setup, here are some of the benefits you can expect:


Everyone starts a business with sights set on exponential growth in demand for products or services. As you work towards this goal, you face many obstacles that can impede progress.

One such hurdle is the failure to adjust to the changing demand for capacity in IT resources. To stay on course, you should endeavor to scale your IT resources up or down, depending on the prevailing situation. However, this is only possible with a cloud service like IaaS.

With IaaS, you get highly scalable IT resources that can be tweaked to match the current workloads. It allows you to use just as much IT infrastructure as you need to keep up with the demand.

Besides, you can respond promptly to shifting business conditions. For example, for retailers, it’s easy to scale up IT resources during special sales or holidays. Then, when the sales subside and holidays are over, and the demand for IT resources drops. You can easily scale the IT resources back to the usual levels.

Cost Savings

One of the major problems bedeviling businesses is the lack of funds. While sourcing funds is the best possible workaround, maximizing every cost-saving opportunity can be equally good.

One way of saving IT costs is by using cloud computing services. Outsourcing IT resources through IaaS sidesteps the cost of purchasing, setting up, and managing expensive hardware. Generally, the provider takes care of all hardware, so you don’t have large upfront expenses.

Even better, you save on operating expenditure. Also, thanks to IaaS flexibility, you pay only for the computing capacity you need. This way, you minimize the cost of underutilized IT resources.

Time Savings

Additionally, running and maintaining the data center can be tedious and time-consuming. IaaS takes this task off of you, allowing you to concentrate on other meaningful responsibilities rather than on managing IT infrastructure.

Most importantly, the task of manning the availability and functionality of the IT components is taken off your shoulders. This saves you a lot of effort, and cost as you don’t have to hire IT experts to keep things flowing.

Rapid Innovation

Launching a new product can be daunting, especially when it comes to preparing the computing infrastructure. With physical systems, readying the required IT resources can take weeks or months in some intricate cases. However, that’s not the case with IaaS.

IaaS allows you to prepare the necessary IT infrastructure in just a few hours. This way, you can innovate rapidly and shorten the time to market for your products. In some cases, you don’t even need to set up the IT infrastructure to develop and distribute applications. As a result, it’s easy to deliver apps to users with IaaS.

High Availability

IaaS provides a cloud infrastructure that is professionally architectured and operated. These often come with 24/7/365 monitoring. Consequently, this ’round-the-clock monitoring enhances your visibility, making it easy to know when things are right or when they are going south.

Even better, with IaaS, a lot of management operations are handled by the provider. This means as the customer; you need not upgrade or maintain hardware. Also, with the right agreement in place, you won’t be tasked with troubleshooting equipment issues. The cloud service provider will ensure that the infrastructure is stable and reliable.

As a result, once you set up your cloud computing space, things such as downtime will become a thing of the past. Consequently, reliability and availability will increase and in turn, enhance website performance.

Improved Security

Lastly, in an online world tormented by the increasing cybersecurity threats, security has become a top priority for providers and customers alike. Primarily, cloud service providers have to meet the stringent industry standards of the environment and data security.

Luckily, providers have stepped up security mechanisms. As a result, nearly all providers can guarantee top-grade security for your applications and data.

On the other hand, as a customer, you should subscribe to a robust cybersecurity software. This, combined with the level of security rendered by the CSP, delivers a higher level of security that is virtually impenetrable.

Benefits of IaaS

5. Risks and Limitations of Iaas

All that said, IaaS platforms come with their own set of risks and limitations. Some of the risks and limitations you need to address include:

Protecting Data in the Cloud

IaaS platforms deliver top-level security, that’s for sure. But, that doesn’t mean your data is completely safe. Your business will have to contend with cybersecurity threats, especially those emanating from the provider’s side.

For example, a compromised hypervisor can easily expose your virtual machines. Also, CSP’s employees with direct access to the cloud IT infrastructure can pose a security threat. System vulnerabilities and insider security concerns are the major threats you have to contend with. You can read our compilation of cybersecurity statistics to get a better understanding of the cybersecurity space.

Multitenant Cloud Architecture

Another risk comes in the form of a multitenant security threat. Remember, in IaaS, hardware resources are shared across different users. This leaves the provider with a monstrous yet very sensitive task of ensuring that a customer can’t access data stored by other customers using the storage assets. In case of any mishap, such as when VMs are not adequately separated within the cloud architecture, data can be easily compromised

Managing Legacy Systems in the Cloud

Another potential limitation is the complexity of managing legacy systems in the cloud. With IaaS, your IT environment highly depends on the cloud services offered by the provider. The CSP is in full control of ownership and maintenance of the infrastructure. As a result, monitoring and management of the resource become a tough task for companies.

What this means is that some legacy applications may require minor adjustments before moving them to the cloud. As you know, tweaking your legacy applications may open the backdoor for cybersecurity threats and interfere with their performance. Because of this, once you enhance your legacy apps, you have to test them for performance and security on IaaS.

Competition in the IaaS Market

Cloud service providers are subject to cutthroat competition in the cloud computing market. This may look like a superficial concern for customers. But, in reality, it can have a tremendous impact on your business.

As you may notice, Microsft, Google, and Amazon Web Services continue to dominate the cloud computing market. As the market revolves around these key players, some IaaS businesses have been forced to rethink their strategy. This could lead to significant changes in the current services offered by your provider.

IaaS Risks and Limitations

6. Popular IaaS Providers

Now that you have IaaS information at your fingertips, you are ready to connect with a reliable service provider. Here are some of the best IaaS providers:


Founded in 2011, DigitalOcean epitomizes the most reliable and successful IaaS providers today. The platform has more than 750,000 registered customers and has launched over 20 million droplets (DigitalOcean’s term for Virtual Machine).

In our DigitalOcean overview, we’ve mentioned that it adopts a “developer-first” strategy simplifying web infrastructure for front end users. As such, it can smooth out the complexities of cloud IT infrastructure, empowering software developers to achieve their goals with ease.

Why Choose DigitalOcean

  • Offers a minimalistic console with simple buttons and links
  • Boasts functionality to set up and deploy scalable web apps
  • Provides SSD-based VMs
  • Known as the first provider to offer IPV6
  • Delivers the best boot times via DigitalOcean droplets

Google Cloud Platform

The Google Cloud Platform is a flexible and affordable cloud infrastructure offered by Google. The platform focuses on providing serverless computing, PaaS, and IaaS to power end-user products. Google Cloud was initially launched in 2008 to deliver innovative cloud services on the same platform used by Google.

One of the Google Cloud Platform benefits is that it sidesteps the complexity of networking. Moreover, it makes IaaS straightforward, allowing customers to create business solutions that meet their company’s needs. Even better, when it comes to speed, Google Cloud Platform is a force to reckon with.

Why Choose Google Cloud Platform

  • Known for its speed
  • Offers one of the lowest billing usage times
  • Provides a user-friendly interface
  • Comes with a generous free trial
  • Provides live migration of VMs between host machines
  • Has a powerful data analytics feature

Microsoft Azure

This list can not be complete without Microsoft Azure. Microsoft launched the Azure Cloud platform in 2010 to help businesses create scalable and secure cloud infrastructure. Primarily, the Azure IaaS is designed to provide computing power for different workloads.

Besides, it helps businesses to create hybrid environments that align perfectly with the underlying on-premise infrastructure. Azure IaaS empowers businesses to develop, test, launch, and manage web apps. Above all, Microsoft Azure features are designed to reduce and optimize business’ infrastructure costs.

Why Choose Microsoft Azure

  • Has a Linux-friendly interface
  • Is available at reasonable rates
  • Is easy to deploy on a wide range of managed and provisioned infrastructures
  • Fits any business needs such as web hosting, networking, and storage.

Amazon Web Services (AWS)

Another provider that is driving the industry forward is AWS. AWS is a leading IaaS provider best known for its wide spectrum of customizable services. The platform was founded in 2006 as a subsidiary of AWS has made a name for itself in the industry as a provider of reliable hardware infrastructure.

Individuals, businesses, and governments alike rely on AWS infrastructure to build cloud-based web solutions. Whether you are looking for computing power, content delivery, data storage, or networking functionality, AWS has got you covered.

Why Choose AWS

  • Wraps flexibility, scalability, and reliability in one platform
  • Provides multiple layers of operational and physical security
  • Offers a generous free trial
Amazon Web Services Sample Dashboard

Amazon Web Services is one of the most popular IaaS providers on the market. It comes with a comprehensive dashboard where you can manage your infrastructure.

7. How to Choose an IaaS provider

We have mentioned some of the leading IaaS providers. This doesn’t mean that Google Cloud Platform, DigitalOcean, Microsoft Azure, and AWS are perfect for every business. There are a plethora of other providers, and you will be spoilt for choice when selecting one.

Now, if you have decided to move your business to the cloud, you need to pick the best available cloud infrastructure. What you need to know is that the decision you make will have a profound impact on your business performance and success. As a result, it’s wise to give the following factors a serious consideration before inking any deal:


Does the cloud infrastructure provide the basic functionality you need? Consider the computing power, storage, and networking capability provided. Weigh them against your cloud infrastructure needs to determine how fit the service is to your business. Also, take an in-depth look to determine if the infrastructure offers support for private, public, and hybrid delivery models.

Ideally, a reliable IaaS provider should offer nearly all the functionality you need. Most importantly, the provider should deliver excellent consulting and support services. Support comes in handy when you are migrating your applications or when you are embroiled in operational problems.

Lastly, consider the available development tools. Do the tools support the fast delivery of web apps and services?


Security should be a top priority. This is because the cloud arena is a violent space bombarded by threats from all corners. Generally, the onus of securing data and web apps is on both the provider and the client.

The provider is tasked with security, management, and compliance of the cloud infrastructure. So, the cloud infrastructure you choose should protect access to data via robust features like encryption, identity control, and access management. Moreover, go for a CSP that gives you a degree of control over data and IT resource management.

Lastly, it won’t hurt to perform a background check. Ideally, the provider should demonstrate a history of rigid security against cyberattacks. A taint of cyber intrusion and attack should be enough to make you walk away.


When it comes to cloud computing, the usability of a platform is of paramount importance. A cloud infrastructure that is not user-friendly increases operational costs. This is because, with bad usability, you will have to hire more personnel to operate your IT systems.

Preferably, look for a provider that offers an intuitively designed interface. Also, avoid consoles cluttered with switches, knobs, dials, and levers. The perfect interface is one that is easy to use and is consistent for all products and services.


Does the cloud infrastructure support the exchange of data between IT systems and other providers? Interoperability impacts the overall performance of your systems. For this reason, your ideal provider’s product and solution should integrate seamlessly with products from other providers.


When it comes to integration, you need to visualize the present workflows and take into account your operation trajectory. Ideally, the cloud infrastructure should integrate with the underlying workflows and be flexible enough to handle future changes.

Moreover, the IaaS solution shouldn’t complicate your operation. So, avoid solutions that require the use of different admin tools or different databases, as well as those with inconsistent consoles.

Factors to look in your IaaS provider

Here is a quick checklist for the perfect IaaS provider:

  • Does the provider offer basic IaaS functionality and other advanced features?
  • The provider should demonstrate SLA’s that cover high network availability. Preferably, the provider should guarantee a monthly compute availability SLAs of 99.995%.
  • Does the provider offer private, public, and hybrid cloud IaaS?
  • How does the provider bill usage? Many providers offer per-hour metering. Ideally, widen your net and always target providers offering shorter metering increments.
  • Does the provider guarantee high-level security?

Have You Selected Your IaaS Provider?

So there you have it; a complete guide to IaaS. By now, you know what IaaS is, who uses IaaS, as well as the benefits and limitations of this service. We have given you the most probable IaaS business scenarios and a list of top IaaS providers. The cherry on top, an IaaS provider selection guide to abridge your decision-making process.

Hopefully, this information will help you find your ideal IaaS provider, depending on your cloud needs. Ultimately, with a reliable cloud service provider, it will be easy to set up your applications and manage them in the cloud. For more information about this topic, you can read our article on IaaS and other cloud computing offerings to understand their similarities and differences.

Louie Andre

By Louie Andre

B2B & SaaS market analyst and senior writer for FinancesOnline. He is most interested in project management solutions, believing all businesses are a work in progress. From pitch deck to exit strategy, he is no stranger to project business hiccups and essentials. He has been involved in a few internet startups including a digital route planner for a triple A affiliate. His advice to vendors and users alike? "Think of benefits, not features."

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