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What is IaaS

it professional monitoring a server room
(Image credit: Getty)

What is IaaS?

IaaS, or Infrastructure as a Service, is digital infrastructure such as servers and storage, hosted by a cloud provider on behalf of consumers.

What does IaaS do?

  • Enables users to outsource their digital infrastructure to a dedicated provider
  • Facilitates scaling of digital infrastructure—if demand spikes, users can simply buy more storage. Conversely, if demand decreases they do not have to keep paying to maintain more infrastructure than they need. 
  • Eliminates the need for in-house setup of digital infrastructure. Rather than setting up their systems from scratch, users can store their existing data on infrastructure that is already up and running. 
  • Experts working for the cloud provider handle billing, monitoring, server log access, load balancing, and data backup on behalf of the user.
  • Ultimately, an IaaS solution is often cheaper than maintaining the same amount of digital infrastructure in-house.

How departments can use IaaS


The alternative to paying for IaaS is to maintain digital infrastructure in house. Purchasing in-house digital storage and performing maintenance on it is the responsibility of the IT department. Other associated responsibilities would include digital security and scaling the digital infrastructure up (or down) as needed.

If the business uses IaaS instead, IT teams do not have to spend the money or maintain the manpower required to deal with digital infrastructure setup and maintenance. Instead they can free up those resources for use elsewhere.


Financial reporting compliance requirements typically demand that sensitive data needs to be stored securely for several years. In the event of an audit, this data must be accessible for review. Since IaaS providers typically include data backup as part of their services, this provides an added layer of security to the finance team, who can rest easy knowing that important information from past reports is less likely to be lost due to a technological error. 

Sales and customer service

woman making an online purchase with credit card

Sales and service can use IaaS to safeguard personal information (Image credit: Getty)

Personal customer information is highly confidential, and companies have a legal and moral obligation to safeguard it. However, it must remain easily accessible for customer-facing employees so that they can communicate easily and effectively with their clients. Using IaaS can be a viable solution for secure but accessible storage of customer information. It can be especially beneficial for small businesses that might not have the budget to hire the specialists needed to maintain a server with enough security to safely store customer information.


IaaS web hosting is a specific form of IaaS where the host provides server space for the user to maintain their website. Unlike traditional web hosts, IaaS providers have larger data centers that significantly reduce downtime, and provide ease of scaling. While some businesses might have the infrastructure and expertise to host a website in-house, it is often much more economical to outsource it to a hosting provider. Marketing departments can use IaaS web hosting to maintain landing pages and e-commerce websites as part of their ongoing campaigns. 

Features and benefits of IaaS


Reduced costs through outsourcing

Building in-house digital infrastructure is often more expensive than purchasing that infrastructure as a service. For instance, small businesses are far better off paying $2-10 monthly for web hosting than spending tens or hundreds of thousands of dollars to purchase their own servers and pay IT professionals to run them. The same is often true for businesses with more complex digital infrastructure needs. Simply put, unless you are in the business of selling digital infrastructure, it is usually cheaper to outsource to a specialist than to set it up yourself. 


Access to experts

IaaS providers hire teams of experts that handle server monitoring, load balancing, data backup, and other specialized IT functions. It can be expensive, sometimes prohibitively so, to hire such experts in house. By entrusting the care of your digital infrastructure to an IaaS provider, you can benefit from the services of these experts without having to hire them yourself.


Data security

Digital storage media are at risk on two fronts—external attack (hacking) and damage due to an internal malfunction. Securing your business against these issues means handling data backup and recovery and employing dedicated security specialists, all of which can  be very expensive to do on site. However, IaaS companies bundle these costs into their subscriptions and are a more affordable way to achieve data security.


Ease of scaling

As a business grows, so does its need for digital infrastructure. Bigger businesses require more data storage capacity, greater bandwidth, and a larger IT staff. These expenses can snowball quickly—needs for a larger server room could require an investment in office space as well as new IT staff, for example. If the budget isn’t there, it can throttle business growth.

However, scaling up a business with IaaS simply involves upgrading to the next payment tier on the provider’s website: a process that takes minutes and requires no capital investment.


Ease of setup

Compared to setting up digital infrastructure in house, it is a lot faster to purchase an IaaS service subscription. Setting up a server in-house can take anywhere from a few hours to several days, depending on the amount of network traffic it is required to support. It is also important to budget extra money and time for physical and digital security, and for the specialists that you may have to hire to get the server up and running. Conversely, IaaS servers are immediately ready to go, and all you have to do is connect your system to the IaaS provider. This process can take minutes.

How much does IaaS cost?

Most IaaS providers, including all five on our best IaaS round-up adopt a pay-as-you-go model. Since individual needs vary considerably, every piece of digital infrastructure is priced separately. 

To illustrate this, let's look at one specific service, a virtual machine (VM). Essentially, a VM is a fully functional computer provided to the user entirely over the cloud. Microsoft Azure’s B1|s VM with one core and 0.5GB of RAM costs users $0.0052/hour. A user that needs 10 of these machines will pay $1.25/day or $37.44 monthly. The overall cost of your subscription will vary greatly depending on how many services you need, and of what type.

What is IaaS

IaaS is priced on a per-service basis: only pay for what you need (Image credit: Elchinator, pixabay)

It is worth noting that most IaaS providers offer substantial discounts if you lock in for an extended period. The same B1|s VM costs just $0.0031/hour if the user commits to a one-year plan—a discount of 41%.

Additionally, most providers offer a volume discount. For instance, Amazon Web Services offers users a discount of $0.01/GB for clients that use over 50TB of storage.

In short, the default pricing method for IaaS is pay as you go, and pricing is highly variable based on usage. High-volume users, and those who are willing to give up some flexibility and lock in for 1 year or more typically receive significant discounts, sometimes greater than 50%.


Answers to the most frequently asked questions about IaaS.

What is IaaS, SaaS, and PaaS?

Together, IaaS, SaaS, and PaaS form the cloud SPI model. This model breaks down cloud computing services available to consumers into three categories. In addition to IaaS, cloud providers can also provide software development tools over the cloud (PaaS) and fully functional software over the cloud directly for consumer use (SaaS). Together, these three categories encompass most of the cloud computing services that are available to consumers.

What are some examples of IaaS?

What is IaaS container encryption?

IaaS container encryption is a way for IaaS users to protect their data. Specifically, it encrypts data held by an IaaS provider on behalf of the user. This service is often available for free either from the IaaS provider itself or via a partnership with a third party. For example, Amazon Web Services provides container encryption in-house, even to free plan users, and Microsoft Azure users can take advantage of Bitlocker and DM-crypt, which are security tools that work on Linux systems and encrypt data stored in Azure.

What is IaaS in AWS and Azure?

This question illustrates how the wide variety of terms, brand names, and acronyms in the cloud computing world can be confusing to consumers. To clarify, tech companies such as Amazon and Microsoft create brand names, such as AWS and Microsoft Azure, to sell IaaS (the product) to consumers. Some brands, such as AWS, sell more than just IaaS. AWS also sells PaaS and SaaS services (see above). 

What is IaaS

Save money, time, and manpower by outsourcing your digital infrastructure with IaaS (Image credit: ananitit, pixabay)

What is IaaS software?

This question illustrates another source of confusion regarding cloud computing and IaaS. IaaS is not software. Essentially, users of IaaS are renting the use of a physical piece of digital infrastructure. For instance, when a business hosts its data on a server provided by another company, they are making use of IaaS.

Main takeaways

  • IaaS is a business model whereby a cloud service provider makes digital infrastructure, such as servers or storage, available for use to consumers directly over the cloud.
  • IT teams can use IaaS to save money and time, while HR can use it to reduce hiring costs. Customer-facing teams can use it to securely store information.  
  • Compared to building up digital infrastructure in-house, IaaS is cheaper and easier to set up, and provides security and expert oversight
  • It is much easier to scale digital infrastructure according to your business needs with IaaS. 
  • Most IaaS is priced on a pay-as-you-go basis. High-volume users and those who are willing to commit to plans of one year or longer can see significant discounts.

Further reading

To learn more about Infrastructure as a Service, take a look at our list of the Best IaaS in 2021. To learn more about migrating your business from in-house digital infrastructure to an IaaS model, read these useful tips to migrate to the hybrid IaaS environment. To gain a better understanding of the cloud computing market and what it offers to consumers, read our guide to IaaS, PaaS, SaaS, and hosted appliances.

Serguei Solokhine

Serguei Solokhine is a freelance writer based in Vancouver, British Columbia. A digital nomad, he loves writing about finance, marketing, and travel. With degrees in finance and marketing, plus five years of experience in the financial services industry, Serguei particularly enjoys writing about personal finance and investments. Serguei’s work has been published in TechRadar, ITProPortal,, and MoneyVisual.