Infrastructure as a Service (IaaS) is the fastest-growing segment amongst public cloud service delivery models. Per Gartner, spending on cloud system infrastructure services is expected to grow by nearly 25% in 2025, totaling just under $212 billion.
While the COVID-19 pandemic shifted business operations toward the cloud, technologies like generative AI, containerization, virtualization, and edge computing are becoming more mainstream, which is also a catalyst.
“Organizations are choosing [cloud infrastructure and platform services offerings] because workloads of today are complex, and organizations are seeking integrated platforms to simplify development, deployment, and operations,” said Sid Nag, Vice President Analyst at Gartner.
IaaS frameworks need little CAPEX, are elastic, and enable a significantly sized remote workforce. That makes them appealing to CIOs, where efficiency is essential.
What is IaaS?
Infrastructure as a Service or IaaS is a cloud service delivery model where an organization rents from a third-party provider and receives on-demand access to managed compute, storage, and networking resources. Organizations can deploy IaaS via a private cloud, public cloud, or hybrid cloud environment.
Through an online platform or dashboard, an organization can define its infrastructure type needs and specific configurations. The IaaS system leverages virtualization, creating digital (or virtualized) models according to those specifications. The virtual models deliver the same performance as on-premises devices.
While the organization oversees the operating system, applications, data, and other elements, the cloud service provider is responsible for hosting the infrastructure and any resulting complexity.
Other names for IaaS include hardware as a service (HaaS) or cloud infrastructure services.
The Business Advantages of IaaS in the Enterprise
Using IaaS in the enterprise gives IT admins and developers freedom to architect, deploy, automate, and manage applications and VMs, building a veritable “data center in the cloud” without buying excess hardware. But that’s not the only benefit.
Scalability and flexibility: The biggest operational advantage IaaS brings to companies is the ability to deliver on customer-centric strategies while achieving new levels of flexibility and scale, according to Steve McDowell, chief analyst at NAND Research. “What the software-defined world has done is enable companies to start and scale very quickly. It allows you to deploy new services rapidly and enables businesses to leverage that technology to provide more tailored and customized services for customers.”
IaaS environments ensure workloads such as websites and apps can handle spikes in traffic and usage via automatic provisioning and scaling of resources. Further, when the business expands into new locations, there’s no minimum viable requirement for hardware infrastructure. Data and applications are delivered to employees anywhere, anytime, enabling hybrid VDI deployments and unprecedented enterprise mobility.
Reliability, security, and disaster recovery: Service delivery is a key business driver. For behemoths such as Uber and Doordash, which operate at the intersection of technology and services, being available and responsive to customers at all times of the day is as important as having a workable core product. As consumers become more demanding, a high-speed and efficient backend, database, and contact center are indispensable to business continuity.
IaaS greatly protects organizations from infrastructure failure. IaaS equipment is hosted in highly available, secure, and purpose-built data centers that have redundant data storage, servers, power, and cooling, plus network bandwidth and connectivity. Downtime and disruptions are minimized and backed up by service-level agreement (SLA) guarantees.
Regarding data security, IaaS providers have their reputation at stake as much as the enterprise does. They have fully enforced access rules, physical location security, multi-factor authentication, end-to-end encryption, data encryption at rest, and other security guidelines in place.
Cost optimization – OPEX over CAPEX: Another fundamental incentive for businesses to adopt IaaS is the shift from CAPEX to OPEX. Whether the organization is looking to improve IT performance, foster future growth, or close functional gaps in operations, a deep financial cost-benefit analysis is a critical first step.
Most IT infrastructure investments last three to five years before they cease to be growth drivers. Therefore, the price of dependability and performance that on-prem solutions or data centers offer must be weighed carefully against the savings in hardware purchases, infrastructure maintenance (including staffing), real estate, energy, and disaster management over this period. IaaS vendors and cloud MSPs might well turn out to be more qualified and experienced in managing the infrastructure with minimal to no disruption.
Beyond the immediate gains in cash flow and cost optimization, cloud infrastructure leads to considerable financial freedom and certainty for the business down the line. It also helps enhance cross-team collaboration.
Web app deployment and software testing: IaaS is a complete infrastructural solution for supporting app deployment, including storage, networking, and web/application servers. It also simplifies scaling infrastructure up and down when app usage is erratic or variable.
For companies wanting to migrate an application workload to the cloud, IaaS is a sensible choice. Operations and management tools can be ported from the existing data center to the new cloud IaaS with no major modifications and little use of cloud-native features.
Additionally, IaaS makes it quick and cost-effective to set up and strip down software development and testing environments, resulting in faster integration, deployment, and delivery of applications.
IaaS Business Use Cases
Businesses use IaaS to enable many operational tasks and processes, including software development, application testing, web hosting, high-performance computing (HPC), and big data analytics. Here are a few real-world IaaS business use cases and examples.
Retail: Online traffic and transactions often spike during the holiday or sales seasons. Retailers can quickly ramp up their infrastructure and buy additional capacity to handle peak usage during these times. Walmart built a multicloud architecture incorporating three IaaS platforms to enhance its operations; its cloud platform makes 170,000 back-end website updates monthly.
Customer service: By insourcing IaaS deployment, companies can enable flexibility and agility. For instance, NTT SmartConnect enhanced two of its IaaS infrastructures with secure network connectivity and public cloud connectivity, setting them up to handle more subscribers and experience a 5X improvement in service infrastructure performance speed.
Digital offerings: With companies collecting more first-party data on users, they can offer more personalized experiences. For example, Spotify uses IaaS to store and process its data, which it then uses to enhance music recommendations, build new features, and reach users in unique ways. The ever-popular Spotify Wrapped wouldn’t be possible without IaaS support.
DevOps transformation: Enterprises in the middle of planned digital transformation prefer an agile cloud migration approach. This strategy involves using cloud-native technologies and DevOps-oriented tools for better standardization, “sanitizing” existing workloads and processes to make them more resilient, secure, and efficient, and deploying infrastructure as code (IaC) to automate provisioning and management of infrastructure resources. We’re also seeing this transformation as more companies adopt AI agents.
Sustainability goals: GE Verona unveiled Proficy for Sustainability Insights, which pairs operational and sustainability data with AI-based software. IaaS serves as the foundation for these workloads, aiding predictive maintenance, analytics, and product development. These applications can also go beyond sustainability.
And what greater testament to the power of IaaS than Amazon being seen as a tech company more than a retailer? AWS contributed to more than half of Amazon’s 2024 fourth-quarter profits, even though it accounts for only about 15% of sales.
Challenges in IaaS Deployment
Despite the numerous benefits of adopting IaaS, as with any infrastructure deployment, reality doesn’t always live up to promises post-deployment. Pitfalls include the illusion of scalability, misconfiguration, and blind spots.
“It’s very difficult, in an automated way, to determine whether something is a spike in demand for your website or your application or whether something is a malfunction of the system,” explained Lilac Schoenbeck, Vice President, Business Transformation at Rocket Software.
For example, a DoS attack could appear to be a routine or sustained increase in resource usage. In this case, an automated mechanism for fast scaling would be highly counterproductive.
Also, immediate scaling of compute, storage, or network services might not always be possible. Even major cloud vendors need specialist teams and time to tend to change and support requests.
“In order to grow the footprint of your website or your app, you’re going to have to shut it down and move it to a bigger space,” Schoenbeck said. That results in unexpected downtime or disruptions for customers and staff members.
With the level of access and control that IaaS offers admins, it’s possible for both the customer and the provider to inadvertently overload their systems. An excess of VMs over-provisioned by one provider’s customer could potentially degrade performance for the whole customer base if the infrastructure isn’t adequate.
Another risk is improperly applying authentication or access policies while setting up a new server or storage bucket, leaving potentially sensitive data vulnerable to unauthorized access. Security is a shared responsibility between the client and the provider, and all settings should always be double-checked on both ends for optimal data protection.
With IaaS, the provider controls the physical data center, servers, storage, networking, and virtualization. The organization’s IT team will never have the visibility they can get in an on-prem data center, which is entirely under their control. Even the most transparent cloud vendors are reluctant to share details of their setup for security and business reasons.
That situation limits the organization’s ability to detect and respond to anomalies and threats, or even identify all the vulnerabilities created by a lift-and-shift migration and non-cloud-native applications. Consider asking IaaS providers questions like how many base servers they’re running and any clusters they have, gaining as much visibility as you can is valuable.
Infrastructure in a GenAI and Multicloud World
As GenAI becomes a higher business priority, IaaS is playing a key role. Most organizations (94%) agree that a combination of cloud-native architectures and containerization tools is the gold standard for deploying and supporting GenAI and other modern applications at scale.
“The reality of enterprise IT now is that it's a multicloud world,” said McDowell.” Workloads can live anywhere and often do, and they ping pong back and forth. Hybrid solutions are the way to evolve once business needs, budget, and functionality requirements are all accommodated in a complete vision.”
That vision will include more AI-centric cloud computing environments. In the latest Nutanix Enterprise Cloud Index, 54% of respondents said they’re prioritizing investments in infrastructure, with 52% investing in GenAI skills development.
“To successfully unlock ROI with GenAI projects, organizations need to take a holistic approach to modernizing applications and infrastructure and embrace containerization,” said Lee Caswell, senior vice president of product and solutions marketing at Nutanix.
Agility is critical as companies develop with GenAI. The flexibility and scalability of IaaS can help them focus their efforts on driving the biggest impact, both internally and for their customers.
This is an updated version of the article originally published March 13, 2020.
Featured image by Pxfuel
Dipti Parmar is a marketing consultant and contributing writer to Nutanix. She’s a columnist for major tech and business publications such as IDG’s CIO.com, Adobe’s CMO.com, Entrepreneur Mag, and Inc. Follow Dipti on Twitter @dipTparmar or connect with her on LinkedIn for little specks of gold-dust-insights.
Joe Held contributed to this update. He’s a contributing writer, author and podcaster based in Austin, Texas. Connect with him on Twitter or LinkedIn.
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