Is IaaS Really a Good Deal?

Given that everything is spinning towards the cloud and sold “as a service,” it’s easy to automatically jump to the conclusion that infrastructure as a service (IaaS) is a good deal.

“It is easy to just assume or buy into the hype of amazing improvements to your TCO when moving to the cloud, but the reality is you may not be improving your TCO at all,” said Bryan Thompson, VP of Services at Tier 3, an enterprise cloud platform company.

“For many companies, the move from on-premise infrastructure to the cloud may simply be trading physical servers for virtual ones, and while you are trading capital expenditure for operational expenditure this may be without significant improvement to the overall TCO,” he said. “This is because, often times, migration to pure IaaS providers will still carry the same costs associated with managing that infrastructure if not more as additional skill sets may be required to learn and manage using new toolsets.”

It is important then to know when IaaS is a mega trend with actual promise and when it can be just another money pit.

Scale matters

With every technology known to man, scale matters. While the most attractive aspect of anything in the cloud (IaaS included) is the ability to scale up to meet demand and down again to save costs when demand is low, that alone is insufficient to fully evaluate its advantages or disadvantages in terms of scale.

“The economies of scale that are available in SaaS models and, to a lesser degree, in PaaS [platform as a service] models are nowhere near as attractive in IaaS,” said Alexander Pasik, CIO of IEEE, the world’s largest professional technical association. Pasik has held executive IT positions at a number of organizations, and is a former Gartner analyst who in the 1990’s predicted the rise of Web-based computing and coined the term services oriented architecture (SOA).

Using a SaaS application like Gmail for email or for CRM allows the vendor to leverage its entire technology stack to serve all of its clients. This approach produces vast economies of scale and those savings are shared with the client. “In contrast, IaaS only shares core data center services such as power and virtualized hardware, thus limiting the cost benefit,” he said.

Pasik isn’t the only one sending up a flare.

“For ROI, there is limited ‘I’ in infrastructure as a service,” said Jonathan Shaw, a principal at Pace Harmon, a third-party outsourcing advisory firm. “For total cost of ownership (TCO), it comes down to size and the anticipated utilization of deployment. It’s cliché, but it doesn’t make sense to ‘buy by the sip’ if you need a gallon.”

Shaw said that while any size enterprise can benefit from the deployment of IaaS, “the case for implementation will vary depending on the scale of the enterprise, available resource capacity, and the type of business service that the infrastructure will support.”

The pros

For SMBs, the pros of using IaaS are striking: quick and easy access to enterprise class capabilities, ability to buy only that which is needed as it is needed, and simplicity given that the provider is straddled with facilities management, hardware/software procurement, provisioning, patching, and all the other complex details involved with infrastructure.

In bigger businesses, the pros look a bit different.

“For large enterprises, which generally need ‘bigger’ services thereby reducing the benefits of ‘by the sip’ pay models and which typically already have sizeable internal infrastructure and operational capabilities, the benefits relate less to the financial case and more to timely deployment in supporting short term and unforeseen needs,” said Shaw.

The cons

Common obstacles that companies encounter with IaaS, said Shaw, include:

  • Performance commitments – Weak SLAs are prevalent; enterprises will not generally incorporate cloud computing into critical business services.
  • Business risk – Even with extensive diligence, ongoing audits and proactive management, IaaS still requires trust in the vendor infrastructure/operations for availability, data security etc.
  • Regulatory compliance – For companies with industry specific regulatory requirements, e.g., HIPPA and FDA regulation, the “one size fits all” cloud model may not be able to meet those specific needs.
  • Data security – Compared to internal deployment on standardized architecture, it is tough to incorporate cloud services into enterprise-wide data archiving, backup and recovery processes. The issue of obtaining data in the event of vendor termination (and, in particular, if the provider ceases operations) should also be addressed.
  • Contractual terms – Although the cloud model promises great flexibility and “on demand” pricing, volume commitments, change fees and minimum terms can significantly constrain the expected scalability and flexibility. Other problem areas include broad vendor termination rights absence of post-termination assistance, weak data security warranties, and ineffective SLAs.

    In many circumstances, material contract terms are not negotiable, with the providers maintaining that their shared delivery model precludes them from offering custom solutions. For example, many IaaS offerings have click-through licenses that the provider can unilaterally alter.

For smaller businesses with less to lose, fewer regulatory requirements, and not much money to spend, IaaS makes tons of sense. For larger enterprises, IaaS is better suited for non-critical workloads and temporary requirements such as unexpected peaks in demand or for test and development. However, that is likely to change as both the technology and the related business models mature.

Enterprises are “looking seriously at how to get the benefits of IaaS in-house, i.e., transforming their existing infrastructure to make it behave like a private cloud with the speed, flexibility and chargeback capabilities of IaaS,” said Chandra Rangan, senior director of Product Marketing, Storage & Availability Management at Symantec. “Then they can get serious about bringing cloud benefits to their core applications.”

A prolific and versatile writer, Pam Baker’s published credits include numerous articles in leading publications including, but not limited to: Institutional Investor magazine,, NetworkWorld, ComputerWorld, IT World, Linux World, Internet News, E-Commerce Times, LinuxInsider, CIO Today Magazine, NPTech News (nonprofits), MedTech Journal, I Six Sigma magazine, Computer Sweden, NY Times, and Knight-Ridder/McClatchy newspapers. She has also authored several analytical studies on technology and eight books. Baker also wrote and produced an award-winning documentary on paper-making. She is a member of the National Press Club (NPC), Society of Professional Journalists (SPJ), and the Internet Press Guild (IPG).