Infrastructure-as-a-service (IaaS) is a collection of cloud computing and online services for high-level data processing, storage, and networking on-demand.
An IaaS solution is an alternative to on-premises infrastructure that needs to be maintained in house. Through APIs, users can remotely manage their cloud infrastructure, from available resources and location to security, scaling, and data partitioning.
While IaaS started as a cost-effective solution for small businesses and startups, more enterprises are using IaaS instead of on-premises infrastructure as the expertise required to handle them grows.
See below to learn all about the global IaaS market:
The IaaS market was valued at $38.94 billion in 2019. Projected to maintain a compound annual growth rate (CAGR) of 23.2% from 2020 to 2027, it’s expected to reach $201.83 billion by 2027.
Several geographic regions are driving growth in the IaaS market over the forecast period from 2020 to 2027.
- The U.S. has the largest share of the IaaS market, worth $9.1 billion in 2020
- China has the second-largest market, estimated to reach $18.2 billion by 2027 following a CAGR of 18.6%
- Japan and Canada are projected to grow at CAGR rates of 16.6% and 16.1% over the forecast period
- Within the European market, Germany is expected to grow at a 13.3% CAGR
- The Asia-Pacific market, led by Australia, India, and South Korea, is projected to reach $12 billion by 2027
By industry vertical, the IT and telecommunication sectors are expected to see the highest growth rates in the IaaS market by 2028, due to the increased implementation of cloud-based services.
Other notable sectors for IaaS demand include:
- Banking, financial services, and insurance (BFSI)
- Health care
- Media and entertainment
“While the overall public cloud services market grew 24.1% in 2020, consistent with the past four years, the IaaS and PaaS segments have consistently grown at much faster rates,” IDC says.
“This highlights the increasing reliance of enterprises on a cloud foundation built on cloud infrastructure, software-defined data, compute and governance solutions as-a-service, and cloud-native platforms for application deployment for enterprise IT internal applications.”
IaaS platforms offer customers building blocks that they can mix and match in order to recreate the cloud infrastructure they need. Behind the scenes, IaaS consists of physical and virtual resources that work in tandem.
A data center is one of the physical components of IaaS platforms. The IaaS provider interacts directly with the physical infrastructure where data processing and management occurs.
Object storage is the most common mode of storage used in IaaS offerings. It enables users to access their data over HTTP. Additionally, it is resilient and can be distributed at scale.
Software-defined networking (SDN) connects the various hardware components and data flows through switches and routers through APIs.
IaaS offerings are virtualized computing resources. When users access the IaaS platform, they’re provisioned virtual instances with the amount of CPU, GPU, and memory they need. This is often paired with load balancing and auto-scaling to maintain performance in the cloud.
IaaS solutions can be deployed in three different service models depending on cloud type:
Public cloud IaaS, also known as multi-tenant, is shared by and provisioned for multiple end users simultaneously. The IaaS provider owns, manages, and operates the physical infrastructure of the cloud.
Private cloud infrastructures are dedicated to one end-user client. Similar to public cloud, private cloud IaaS is owned, managed, and operated by the third-party IaaS provider, but the resources aren’t shared with multiple tenants.
Companies can choose to use both public and private clouds and on-premises infrastructure in a hybrid model. The two cloud models are kept as separate entities, but they’re connected through a standardized technology for data and application portability.
The main characteristics of an IaaS solution are:
- Dynamic scaling
- API-based access
- Internet and cloud connectivity
- Platform virtualization
- Automated admin tasks
“With IaaS, the customer is responsible for managing everything from the OS and middleware to the data and applications. The service provider handles other tasks, such as virtualization, servers, storage, and networking responsibilities,” says Lee Davis, a tech analyst at Forbes Advisor.
“Some businesses use IaaS as part of their ‘lift and shift’ strategy, wherein they migrate their data and applications to the cloud.”
Benefits of IaaS
Utilizing IaaS platforms as private, public, or hybrid cloud comes with numerous benefits for companies.
Benefits of IaaS include:
- Infrastructure flexibility and scalability
- On-demand access to resources
- Outsourcing of infrastructure maintenance
- Boosts ability to focus on business growth
IaaS use cases
IaaS platforms and cloud solutions can be used as a replacement for on-premises infrastructure and the related in-house IT support team.
The following case studies show how IaaS is being used by organizations in different industries to boost performance and productivity:
ActivTrades is an independent financial broker offering services ranging from foreign exchange contracts to spread betting. Founded in 2002 in Switzerland, ActivTrades grew into a global broker, enabling clients to trade in forex, shares, metals, commodities, and indices.
As ActivTrades’ client base grew in size, the company’s trading platform needed to prevent lags and delays. It is crucial for ActivTrades to offer its clients reliable access to the market in order to execute trades in real-time.
With a continuously changing demand, ActivTrades was looking to migrate its on-premises infrastructure to the cloud to increase speeds and rapidly scale operations. It decided to rebuild its environment from scratch on IBM Cloud, enabling it to optimize the architecture and minimize configuration errors from the previous system.
“The combination of vSphere and bare metal servers gives us full flexibility in managing the virtual servers, backed by the convenience of the bundled IBM services around networking, cloud security, storage, and VMware licensing,” says Sashko Lazov, IT manager, ActivTrades.
“In the past, we had to wait days to stand up a new service, and now we can do that within hours using VMware vSphere on IBM Cloud.”
ActivTrades was able to triple performance, secure its new cloud platform, and shrink the time to launch new resources from days to hours.
Current is a financial technology company based in the U.S. Their main offering is debit cards and finance apps aimed at teenagers. The company aims to give teenagers hands-on experience with finance tools and help them prepare for the financial responsibilities of adulthood.
As a company in the finance industry, operational and application and security are of major importance. Initially as a startup, Current developed and hosted its app on an on-premises infrastructure.
After Current surpassed 25,000 daily active users, the company’s IT team worked in particular to prevent performance bottlenecks and lagging performance. Using Google Cloud Platform (GCP), Current decided on building its own database cluster, the solution coming at half the cost of alternative providers.
“Since moving to Google Cloud Platform, we’ve been able to sustainably grow our user base 7x to more than 175,000 users, and we haven’t experienced any downtime for our services,” says Trevor Marshall, CTO, Current.
“We’ve also received a lot of collaboration and support from Google, which we weren’t getting from other cloud providers.”
Current was able to reduce errors by 80%, reduce costs by 60%, and improve its time to market for applications by 400%.
Chobani, founded in 2005, is an American food maker that started out specializing in strained yogurt products.
As the company rapidly grew in size, their IT infrastructure needed to keep up with the fast pace. Moving forward toward digital transformation, Chobani adopted SAP S/4HANA Cloud, looking to run its enterprise resource planning (ERP) on a single global instance from North America to Australia.
Microsoft Azure appealed as a cloud platform the most to Chobani’s IT team, due to its agility and pay-as-you-go cost model. The company was also using Windows 10, Windows Server, Microsoft SQL Server, and Azure Active Directory.
“We can build whatever we need without overbuilding. By running SAP on Azure, we’ve cleared away any IT infrastructure roadblocks,” says Shahid Khan, senior director of IT Infrastructure and security, Chobani.
“We can grow and scale up or down our infrastructure to support new business initiatives at a pace we couldn’t possibly have achieved before.”
By running SAP S/4HANA on Azure, Chobani was able to boost availability and produce live reports, directly from the ERP, without negatively impacting the performance of the production system.
Some of the leading providers in the IaaS market include: